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Pride comes before a fall….

Updated: Mar 7, 2019

Hello traders,

I wanted to draw your attention to this rather surreal interview on Bloomberg last week. Former celeb fund manager Hugh Hendry was on there talking about him closing down his Eclectica fund after 15 years. Having made a fortune, and a name for himself shorting banks during the GFC he’s found the going since then rather tougher. His fund was at one time approx. $1.3bn AUM, but he’s managed to whittle that down to his last $30 million. That will no longer allow him to cover his fees and other commitments so he’s shutting up shop and handing the pennies back (whilst presumably keeping his fees.)

The clip below is a shortened version of the full interview, but personally I think it’s TV gold. It gives us some great insight into how hubris can get us into trouble. How believing your own bullshit leads you down the path of eventual ruin. How easily it is for us to become euphoric and over-confident after a period of success. And why demonstrating humility, and good grace for your successes, is always the right path.

A few points that annoyed me about this….

“I died in active combat…” No you didn’t chumpy. You f**ked up, quite spectacularly, that’s what you did. As a Veteran I take umbrage at this. Watching numbers on a screen, is not active combat, its nothing like it at all. It’s disrespectful to use such words, and shows me how out of touch you’d become.

“The markets are wrong!” No buddy, they are not. They maybe irrational, they maybe totally outside of your comprehension, but they’re never wrong. To think that your view and bias of the markets is the correct one is the kind of page 1 mistake I expect from a complete beginner, not from a seasoned professional. Another example of believing your own bullshit. The map is not the territory. As Keynes said “The market can stay irrational longer than you can stay solvent.” That’s a perfect quote for what happened here.

“If I succeeded at anything, I succeeded at being idle.” Listen up Hugh, perhaps if you’d put a shift in, then maybe you wouldn’t be sat on huge losses and having to close your fund. I know that success is a personal thing, however if I was one of the investors in Hendry’s fund I’d be livid at that comment. I’d be getting ready to sue him for professional negligence! Anyway after this debacle Hugh is, I suspect, going to be spending a lot more time being ‘successful’ at home on his own.

Absolutely no contrition – for a man who has just spunked $1 billion up the wall you’d think he’d be somewhat contrite or at least humble? I saw no evidence of this – filled with his own hubris he blamed North Korea, Trump, Governments, Central banks etc for his woes. Not once did I catch any real admission of guilt. There was to be no mea culpa.

I felt not one ounce of sympathy for the man after watching that. I wondered why he’d go on TV and be like that? Maybe he’d become accustomed, or even addicted, to the celeb status he’d acquired? To the attention of fawning finance sycophants around him? Who knows – but he’s going to have a lot of time to reflect upon that from now on.

One of the reasons I started trading and investing for myself was for characters like Hugh. In an earlier role and life I used to spend time with fund-managers, and analysts, and was so often left underwhelmed by the experience. Lots of plummy talk, lots of fake bonhomie, lots of grandiose ideas, and bragging. All to cover up for having very little talent. As the Americans would say, all hat and no cattle.

I remember thinking to myself “If you can’t join them, beat them.” And so it became not about beating the market (a term I’ve never liked) – but about beating the cheesy, talentless players who filled up lots of fund-management roles back then. In many ways it was the worst decision I’ve ever made. In many ways it was the best decision I’ve ever made.

So what can we take away?

You’re only as good as your last trade/month/quarter – never get complacent thinking you’re the bees knees.

Stay learning – the moment you think you know it all is the moment you’re about to get smacked in the face. Stay humble, and stay addicted to learning. Stay curious about markets.

Your biggest drawdown is the one you’re yet to have – having that sort of mindset will help you focus on risk management and minding your business.

Have a good network around you that keep you grounded and level-headed. It’s easy to surround yourself with people who share the same view as you (this could be about every element of life: trading, relationships, politics, whatever) but this is fatal. Make sure you have friends from all side of the spectrum. Engage in good constructive debate about your ideas with these people. Enjoy it, learn from it, hone your ideas and sharpen your edge upon them.

Youre only human – during the time of the Roman Empire whenever a general or leader won a great victory or had a great prize bestowed upon them they would have a lowly servant ride in the chariot with them at the victory parade. The servants job was to whisper in their ear “you’re not a god, you’re merely a mortal human-being.” This was to remind them of the vanity of honours and for them to be vigilant about their behaviour lest it destroy themselves. It’s pretty clear Hugh never had that slave in his chariot. Who’s the slave in your chariot?

When a major bear is routed and throws in the towel to join the bulls….is that the sign of a top? Discuss.

Anyway, rant over – I hope you can take some learnings from my words. By all means let me know what you think – perhaps you disagree? That’s ok, I’m happy to hear that – (see point 4 above!)

I’m going to be touching upon Hugh, and markets in my presentation at the London Traders Forum this coming Saturday in London. Come along if you want to hear more of my rants!

Trade well,


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