The high CPI numbers being reported in the UK and other Western nations are “meaningless”, Hendry says, because in today’s economic environment, it does not translate into wage growth. (In the 1970’s, it did).
He sees society’s current mood as “dark” (Tea Party, Occupy Wall Street, and social unrest in Europe to name a few), and believes this makes bailouts and money printing very hard. The only environment that makes hyperinflation possible is “the mother of all depressions” he says.
In keeping with his anticipation of paradox, he quipped that if you believe in hyperinflation, then you should be levered up long on 10 and 30-year Treasuries…because in order for hyperinflation to become a political reality, deflation must arrive first.
He loves Japan – as a culture and place to visit – but is especially bearish on several Japanese sectors. He’s long credit default swaps with respect to cyclical, leveraged Japanese businesses. He’s also bearish on Japanese utilities, which have issued tremendous amounts of debt since the Fukushima disaster.
Hendry’s favorite sacred belief – which he’s betting against, of course – is the fact that no one believes the ECB will ever cut rates below 1%. He’s made bets that he says will deliver a 40-to-1 return if the ECB cuts rates below 1% next year.