what if the real risk is distraction.

a stranger asks for a kiss outside a bar in montauk and suddenly the weekend’s noise turns into a clean signal. you can buy the table and you can certainly buy the story afterwards, but presence is harder. i watched a man spend an afternoon inside a roped-off vip section staring at his phone, surrounded by everything he’d presumably come to enjoy. that felt uncomfortably close to the age we live in, where the proof of having been somewhere can matter more than actually being there.

markets have their own version of the same mistake. composure matters when prices are moving against you, but there’s a cost to wearing the television face for too long, especially once conviction starts dressing up a guess as fact. certainty and position size aren’t the same thing. confuse them and you can end up watching the damage arrive in slow motion while still feeling unable to move.

the caprivi strip is what happens when intelligent people fall in love with a map and forget the terrain. boeing and bayer belong in the same conversation for different reasons, because the mistake isn’t always stupidity. sometimes the business survives and the glitch passes. sometimes the thing you thought was contained turns out to own the entire outcome. the useful part is admitting, early enough, that reality gets a vote.

this episode is about attention, conviction and the dangerous comfort of believing the story in your head has already become the world outside it.

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Transcript

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a letter, not advice.

SPEAKER_01 0:04

Oh la la, I'm doing it again. So I I write short stories at least one time a week, publish them on Substack and Patreon, and kind of blindingly obvious, but it would seem that it would be a good idea to narrate these essays and share them with you. So that's what I'm intending on doing. Intention, however, is anticipating the future. Um last night I I took the train from Montauk, which is literally the end of the line, um, and I came into Soho. I'm staying at the Soho Grant. And I had a little time to catch up. And yeah, without further ado, ladies and gentlemen, I am Hugh Hendry. I am the acid capitalist. And I gotta tell you, those damn Instagram reels, they disappear. The likes, sometimes the likes arrive, and then they don't. And I move in the summer, I move on to the next city. Today it's New York, the next trade, what would that be? The next thing, who would she be? Yes, it is another acid summer vacation. But this right here, right now with you. I mean, this is kind of where I return when when all of the silly business has settled. My Substack and Patreon pages. I call them my fountain head. Yes, I am thinking of Anne Rand. Yes, that is A Y-N. I'm thinking of the spot, Galt's clutch, perhaps, where the thinking happens after the performance is done. I call that again, I call that the gap in the curtain. Robert Buchanan. Go find that. It's a short little novel, and I believe it tells you more about finance and investing than than any great thousand-page text. Anyway, to me, the good days and the cus kus have I been castrated? No. The good days and the cat wow. Do you hear how I am struggling? The good days and the catastrophic ones. They all have the same texture at a distance. It's that distance that allows you to see them perhaps honestly. And what I write or what I speak to you here, it's I mean, this isn't a disclaimer, it just isn't advice. It's certainly not a portfolio update. I want I want, I hope, maybe, you would indulge me. And you could entertain the notion of it being closer to a letter. A love letter from a man who's been paying close attention and is still gazumped, is still surprised by what he finds every day. There are messages maybe in him what I'm about to say. Messages about markets, which I mean for me they remain the longest, the most beautiful game ever invented, ever played. Every morning the prices change. Every afternoon, every evening. I find that extraordinary. One great sports contest running continuously, no off season, no friendly matches. The sticks the sticks are real and the score is always visible. And the joy, the joy is we just never really know what's gonna happen next. I love that. And then there are messages messages from me about how to live not extensively, not with confidence, just messages about things that you notice when you've been wrong enough times to stop defending the decisions. So my brothers and my blessed sisters, you are you're not an audience. No, you're the people helping me work it out. And I offer you my love, the bizou, the French kisses, to my comrades. Are you a comrade in curiosity? Anyway, that was preface preface. Shall we do this?

general admission and a kiss.

SPEAKER_01 5:25

This paper was called General Admission. Sunday night, and she asked if she could kiss me. We were standing outside at the bar at the Montauk Project, and she just said it. And I said, Yeah, sure. It was the most direct conversation I'd had all weekend, which is either evidence that Montauk brings out honesty in people, maybe, or evidence, more likely, that I've been talking to all the wrong people all weekend. I'm sure it's a mixture of both. Earlier, earlier that day, we're talking Sunday, I'd been in the cheap seats. Yes, the I said capitalist had got the logistics messed up. Montauk is not saying bars. I am not the mayor, I'm not the president. I fucked it up. Yes, the hottest ticket on the East Coast on a Sunday with summer rapidly running out, and I get a general admission entry to the surf lodge. Hmm. And that means something in Montauk. Let me tell you what it means. It means you're broke or you're interesting, or you're both like if you get the general admin entry. I mean, it costs like 85 bucks. Actually, mind, mind note. My host actually got me the ticket. The wonderful. Anyway. Names are not for shooting.

phantom at the VIP table.

SPEAKER_01 7:06

But anyway, at the surf lodge, across from me, in the roped off section, in the terrace that I was denied entry to, there was a man. No older than I. And I'm, let's call him the Phantom. Because he'd committed 10, a minimum, of $10,000. Remember, that's before you tip. For the table on the terrace, and he arrived with six. I I have to say spectacular.

SPEAKER_00 7:42

I have to say younger. I have to say ladies.

SPEAKER_01 7:47

But somehow, the magic had gone. Something seemed absent from this guy's afternoon. The bottles they kept coming. But he kept staring at his blasted phone, not occasionally and not guiltily, but continuously, with the concentration of a man waiting for waiting for another life to begin. I mean here you are in the midst of heaven. And he's waiting for another life to begin. How sad. And around seven in the evening, a chauffeur at SUV, Fancy Black, it arrived. And he pocketed the phone. He nodded at really nobody in particular. And he left he left for Manhattan. I don't think I really don't think he spoke a a word all afternoon. It was it was the most expensive silent movie I've ever watched. And I, you know, I'm not saying this to mock him. It made me think. I say it because I recognize the move. I fear I've made it myself. I was gonna say in trading rooms, I'm never in a trading room. I wouldn't know what to do in a trading room. But I've made it in love. And I have to say, love costs more. You build the position, and then you don't know what to do with it, her. So you you hold it or you you hug and look longingly in her eyes anyway. Shut up, me. Which is to say you wait for the chauffeured resolution. You know, the guy in the surflodge, the woman to his left, she said she I saw, I mean, it wasn't obsessing about this table. I promise you. But she said something to him around five or six, something light, something requiring almost nothing. And nothing is what she got. He looked up, he looked at her, smiled, and then immediately he looked back at his phone. And you know what? When I walked away from this, I walked straight into my ex-girlfriend, which I want to say confirmed everything I'd been already thinking about.

the ex and the exit smile.

SPEAKER_01 10:07

She was with a group of people, she was on the terrace as well. Everyone was on the terrace except me. She was on she was with a group of people that looked handpicked by her mother, so that the poor girl might have some friends, imagine. And she had that specific happiness of someone who needs you to notice they're happy. And yeah, we had one of those conversations that consists entirely of subtext. She was on the she was on the way to the loo. She had her back to me, and I was like, what the fuck? Our conversation was delivered through weak, strained smiles. It must have lasted no more than 90 agonizing seconds, and it covered a considerable amount of ground without mentioning anything at all. You know, there's a particular physics to running into someone, someone that you loved and cared for greatly, in a place where you came to forget them. The my body, it does something the mock would call like a limit down. You absorb the shock of their physicality, their presence. You try and keep poised to keep the face neutral. You say something that sounds like small talking, but really it functions as an exit. So I ordered another drink. What was a boy to do? The bartender, God love him. He didn't ask what had happened. Bartenders are better. I think they're better at this than most people I've ever paid professionally. And maybe it felt like a maybe it felt like closing a position. A position that I should have closed. Hey, a position that I've been trying to close for months.

closing positions outside markets.

SPEAKER_01 12:00

The thing about Montauk is that it functions also as kind of like a live demonstration of, you know, that gap between the plan and the trade. Because I'm sure everyone arrives here with a narrative in mind. And it usually involves the bloody ocean, some form of liberation. I was gonna say libation, but that comes later. The specific quality of the light and it's beautiful at that golden hour. The ocean, my friend, still honest. But the thesis of the many, always way more complicated than it needs to be. I swear I watched three separate people photograph the same gorgeous sunset at the Mantocket. It's a popular bar. Look straight at the sunset. And they took these people, they there were more than three, they took these people they took these pictures without once looking at it directly. The phone gripped between their face and the thing. Was it gripped? You can't do you grip a phone for your face? The phone was held between their face, that's better. And the thing, the thing they'd come to see. Oh, that's the sun. Yeah, so the oh my god, the phone between their face. Yeah, like so. The phone was helping or obfuscating. Again, it's not a criticism, it's a question. It's the dominant trait of the age. Experiences bought and immediately shared with a worldwide audience of zero as evidence of that you actually had that experience. How sad. Which reminds me, the most the most instructive morning I ever had, it wasn't in Montauk, it was on live television, which I think is worse. In 2006, the bozos at the European Commission, they'd just blocked again the almighty sensible plan for Warner music and EI EMI music to merge. And there I was sitting in CMBC's London studio live with 20% of my funds net asset value split across both stocks, which weren't being pummeled. 20%. That's not a rounding error. That's a conviction so large it bordered on certainty. It's not a good thing. And the floor, the floor didn't move in the studio, but I swear something in my chest, dude, my heart was thumping as the share price crumbled. But again, brothers and sisters, you know what? I held my TV poise and I finished the segment. I nodded thoughtfully, whilst inwardly I was doing the kind of maths that makes your vision go slightly white at the edges. It's like, oogie, oogie, oogie, what have we done? Yeah, that that morning became my baseline test for composure. Can you fake it? Can you smile at people who are watching you calculate the damage done? Not by the needle, but by the bloody European Commission. And I found out that morning in 2006, I think it was June. I found out that the answer is yes. I could smile at people who were watching me as I calculated the damage done. But I gotta tell you, it's not cost-free. Um, there's something, there's something you never get back. Oh well. The farmer trade, the farmer trade costs something different.

certainty is not position size.

SPEAKER_01 16:03

I blew it up around the same period. I had a brilliant young Turkish analyst, and he convinced me of his omnipotence. And foolishly, I had 300 basis points of NEV, not 20 percentage points, but three percentage points resting on trial drug data. I had no edge, none whatsoever, except the kid. And when the results eventually came came out and they came back, they came back, are no, they came back, are you listening? They came back W-R-O-N-G wrong. This one of those moments, let me say this deliberately. The stock didn't fall, it disappeared, cratered, gone. And the lesson isn't about the analyst, the kim was doing his job. The lesson is that certainty and position size, they're not the same thing. And confusing them only produces a specific kind of slow-motion disaster where you can see exactly what's happening, and you can't stop any of it. It's the same feeling as watching a conversation with an ex last 90 seconds when it should have taken four years, it should have taken a lifetime. The timing is impeccable, it's the arithmetic which is brutal. Now I think about the German Empire a great deal.

bad maps, big claims, boeing.

SPEAKER_01 17:44

I do. I went to the Caprivi Strip in November 2008. I was fresh from navigating and profiting from the bankruptcy of the global banking system. Heavens, that was was that a modest gloat? Modest? I think I was just gloating. But I felt the need to visit a thin ribbon of Namibian desert that the British traded Zanzibar for in the 1890s. Zanzibar back then it was a spice trading powerhouse. And the strip, the plan, see Germans, Namibia was their only African colony. And the idea was to link it with the Zambezi River via the strip, open a route into the African interior. And I swear to God, on the map, the logic was impeccable. But what nobody at the negotiating table had thought to mention was that bloody Victoria Falls. On one trip. Back in the day, with a group of commodity investors, I found myself in a helicopter in the front seats with a mad Belgian, Belgian Navy pilot Ace. And he took us down the Zambezi River, and we were like it felt like the blades were inches away from the edges of that wonderful waterfall. And and I mention it because the Caprivi strip now sits almost as a monument, at least to me, to the quality of confident reasoning in the absence of objective truth. Smart men with good maps, but a fatal misunderstanding of the terrain. Anyone, anyone, do I hear it? The conceit, the arrogance of a well-formed argument. Boeing, not boring, maybe it is boring, but Boeing is the same story with a different body count. Boeing built an aircraft that didn't want to fly. They shifted the center of gravity. They wrote software to compensate for the physics that they changed. And when the software inspired, the plane fought the pilot. There were two fatal crashes. 346, desperate souls lost. Then the narrative machine from the press arrived and converted engineering failure into corporate villainy and incompetence. Incompetence, certainly, there was a lot of. Villainy, less sure. Villainy is the cleaner story. Easier to televise. Anyway, you can imagine. The stock collapsed. And actually, if you ever look at I look at these things, I like 20 and 40 days, months, quarterly. I use quarterly stock price candles so I can get all of the data. It is remarkably rare. You are in the dog shit house if your share price at mean, these are mean reversion points. If you if your stock price mean reverse to the 40 month or the 40 quarter moving average, you are expensive. Let's hope we're experiencing a glitch. I'm gonna talk about glitches. But any but that that boring price on the correction, it went 50% below the 40-quarter moving average. Very rare that you see that. It's now back at the averages, so it's recovering.

SPEAKER_00 22:28

I called it the glitch.

SPEAKER_01 22:30

Forgive me, I try and get my mind focused. As I look outside, beautiful sunny weather. 3 p.m. I'm in soho. I haven't even had breakfast. Okay, so we what what do I want to say? I want to say we all pretend. Wouldn't it be wonderful we could see the future? Mostly we're guessing. We're dressing the guess in conviction, spreadsheet bullshit, hoping the price moves before the thesis falls apart. I say to you, what is asset capitalism? You have to elevate the mind to see the future. Let's elevate our mind. Let's elevate our mind. Boeing is one of those rare cases where the future is arguably legible to us mere motos. I want to say to you, in 20 years' time, there will still be only two companies building commercial aircrafts, uh aircraft jets at scale. And there'll still be Boeing and the Europeans, Airbus. This, I don't want to call this a forecast. This is aerodynamics and 60 years of precedent in your supply chain and governments, governments being the mode. Who made Boeing? Who made Airbus? Airbus. Who made Coca-Cola? Governments. Who made Tesla? Governments. Anyway, with regard to the commercial jets, no one's building a third company. Boeing still makes Air Force One. The backlog runs into the next decade. It's the kind of visibility that's almost ever available. And when it is, and when the stock is weighed down, sitting on the ass of mean reversion, you kind of want to be curious about buying the glitch. Not yet. The chart hasn't quite sent the invitation. But soon this is the preparation. I want to say ex-girlfriends. Tricky. Tricky, believe me, tricky. But glitch, a glitch in a great business that's considerably easier to forgive. Talking of which buyer. They chose

bayer, monsanto, and the bill.

SPEAKER_01 24:58

it freely and with ziglit enthusiasm. Forgive me if you're German. 63 billion dollars spent acquiring Monsanto. You know, at the time it was run by a Scotsman, and he was called Hugh, not Hugh Hendry, not, but he was called Hugh Grant. He was not the actor. But there was much in the way of comedy from what followed because Bayer paid four times revenue. No visible hesitation. Yeah, oh, we're in, we're in. We own the chemistry that feeds the world. Monsanto was, you know, the genetic engineering of the crops and how we deal with population growth. Roundup was something, something not so good, something you don't want to eat. So the Germans they already knew this was moving through the American court system. What they were less hot on was this theory that about Roundup, this weed killer. And the specific legal principle that a company, so this is very woke. The company ought to have, they should have known, could have, could have, should have, could have, should have known about possible carcinogenic properties contained within Roundup. So they should have known, they did know, but they didn't warn the customers. And that should have, that turned out to cost considerably more than the deal. $18 billion in litigation, and we're still, sadly, we're still counting. The enterprise value of what buyer paid for Monsanto is gone. Boom! Boom! Boom. Eviscerated it. I'm using that word after after I'm gonna stop talking. I'm gonna look that word up. Just you hold on a second. Yeah. Destroyed completely. Completely fucked. Just wanted to check because people use this word decimated. Do you know where that comes from? That um was when the Romans were on the rampage and and they were were not as being they were not as ruthless on the battlefield as they cared for or as is their norm. And so the centurion, centurion, a man who leads 100 men, a unit of 100 men, he would select every tenth member and chop the heads off. That's where the term decimate it comes. It's a reduction, it's a one in ten. Just like the job losses at HSBC. Boom, boom, all links together. Right, buyer, buyer, buyer, buyer. Um what are we saying here? We are saying that um these should have costing a great deal of money. And and literally everything like all the money they paid for Monsanto literally just been wiped out from the market cap of buyer. But I've been walking through this wreckage recently. Again, there's no invitation from the chart to start buying yet. But the agricultural charts are beginning to make a sound. And you buyer and Boeing both begin with B. They ran the same program, a competent thesis, the arrogance and conceit, one might say, of a well-formed argument, and then a liability that arrived in a language that nobody at the table had been reading. You bloody fools. The difference is Boeing still has has the government and no real alternative competitor or new alternative approaching competitor. Whereas Bayer has a glyphosate and it has a great many lawyers. I'm gonna look at the chart now. I'm gonna pause, hold on. Yeah, I just checked. I was looking at the ADR. The ADR fell from like 90% from 40 bucks to four bucks. And recently being on a tear to 14. So both of these stocks have now rallied back to well, the remarkable thing was the the crash took them way below the most extreme form of mean reversion that you uh typically experience in in the stock market. That would be either 40 months or 40 quarters. 40 quarters, what's that? 10 years. It fell 50% below those levels, but now it's it's rallied. So buyer and Boeing are trading at their 10-year moving average, one could say. No invitation to buy just yet, but you know, we're we're we're now thinking about it. Just like the man at the surf lodge on Sunday, the Boeing Board of 2017, and my German friends made the same mistake on very different exchanges. What is

take to the water, not the story.

SPEAKER_01 30:06

the mistake? It's let me pretend I'm a Japanese salary man having a cigarette. Um they they confuse the position with the outcome, they confuse the entry with the thing itself. You can have the 10,000 minimum for that VIP table. You can have the supermodels and the brand. But none of it converts to anything if you're not actually in the water, if you're not actually present. Smile, my friend, smile. The sufferers, my sufferer. I do know I used to call myself a sufferer. I I think I'm I'm beating a retreat. I I tried, you know, that 10,000 times for competency. I got stuck on 1673. I think I I think I took to the water, took the board, took to the water in St. Bart's. The water was pleasantly warm. The waves were terrifying. But it was a shelter, it was a safe place when quite frankly, I was feeling very sad because you know, I was getting divorced, and the before the divorce, I didn't realise, but yeah, I was having to spend a lot more time on my own and and the and the water and the waves gave me that. But I just the writing's my passion. It's it's likewise I wish I could spend more time learning to play the bass. Oh my god, bass guitar and lessons, the best meditation I've ever done. Anyway, surfers are never at the surf lodge. Because they're out they're out there where the water corrects you directly. No need for lawyers or press releases or a chauffeur waiting at 7 pm. And I'm hesitating because also the surfers could not friggin' afford the surf lodge. But do you know what? In a great form of the universe being your friend, the universe finds a way to get those kids in. There definitely was a few, a few of the the surf kids. I know them and I love them. So where are we? We got lawyers, press releases, chauffeurs, surfers. Where did we begin? The girl, the girl at the bar. She understood this entire epiphany of mine. She understood it the same way. She didn't know who I was, which is probably why she asked. Probably why she asked. Yeah. She didn't ask who I was, just asked to guess. Zero positioning, zero performance of asking. The ex-girlfriend. She knew exactly who I was. Which is why 90 seconds seemed to cover everything and nothing. The Montauk Lighthouse. It sits at the end of the point, and it's watched thousands of us idiots arrive with our stories and our minimum spends and our X's and our very considered indifference to the thing we came to see. The lighthouse keeps its mouth shut, unlike me. The water does the same. The water, the water, the water. You know what? I got in. The essay is The Essay is over. I

reach out and touch me.

SPEAKER_01 33:31

am Hugh Henry. I am the Acid Capitalist. I hope you find something in these uh talks of mine. I wish you would all reach out um and say hi. Um you can say hi on Instagram, Hugh Hendry Official, on YouTube Hugh Hendry Official, on ZTwitter XXON at Henry underscore Hugh Hendry. Like think of a hen being dry, a dry hen, a hen dryer Henry. Oh my god, what am I talking about? And of course, this all started as a payenne, as a as a love letter to the fountainhead, to the wonderful folk who subscribe to my Patreon and Substack pages. Uh don't be a stranger. Uh I hope I'll be able to publish one or two more of these. Um I have to warn you, there is um a cloud of madness descending my way, uh, which is Burning Man, um, which will occupy me um for most of next week. Anyway. Over and out. I love you all, my fellow acid capitalists. Until the next time. It's goodbye from the acid capitalists. Bye bye, bye bye, bisous, bisous, bisous.