Eurodollar Matrix Masterclass with Hugh Hendry I Mar 14, 2025

6 snips

Mar 14, 2025

Hugh Hendry, an asset capitalist and former hedge fund manager, dives deep into the Eurodollar system's critical role in global liquidity, suggesting Japan is the real liquidity engine. He warns of a potential yen collapse and outlines shifting dynamics in collateral impacting markets. Hendry critiques the Fed's recent rate cuts as attempts to prevent a refinancing surge rather than curbing inflation, advocating for a prepared mindset amidst predicted market resets and increased volatility. His unconventional views challenge investors to rethink consensus.

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ANECDOTE

St. Barts Investment

Hugh Hendry's best investment was a property in St. Barts.
He bought it as an FX trade and likened it to Bitcoin due to limited land and strict building codes.

INSIGHT

Contrarian Investing

Hugh Hendry's investment approach involves formulating contrarian views that have the potential to become widely accepted.
His pre-2008 mantra, "if you think the future is inflationary, buy the long bond," exemplifies this.

INSIGHT

Eurodollar System's Impact

Quantitative Easing (QE) is largely ineffective because it's merely a balance sheet transfer.
True market driving force is the Eurodollar system, where Japanese banks leveraged JGBs for dollars, fueling asset inflation.

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In this episode of Pro to Pro Live, 42 Macro's Darius Dale and Hugh Hendry explore the hidden forces driving global markets. Hugh breaks down the Eurodollar system’s role in asset inflation, arguing that Japan—not the Fed—is the true source of global liquidity. He warns of a potential yen collapse and market dislocations driven by shifting collateral dynamics. They discuss the Fed’s recent policy shifts, with Hugh contending that rate cuts were aimed at preventing a refinancing boom rather than fighting inflation. Looking ahead, he sees a major market reset as U.S. policy shifts toward fiscal conservatism and protectionism, potentially triggering a deep asset price correction. The discussion highlights the need for investors to challenge consensus views and prepare for an era of heightened volatility.

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