Don't Mention the Brexit

Don't expect Crispin Odey or Tim Martin to change their minds.

Brexit's wealthy business supporters are waking up to the fact that there's economic pain ahead for ordinary Brits.

Whether they will change their minds about leaving the European Union is another matter. Expect them to keep blaming outside forces beyond the vote -- even if the economy takes a turn for the worse.

Hedge-fund manager Crispin Odey, who backed Brexit as a way of escaping a Europe that was "mangling" the U.K., this week warned of a recession, inflation and a stock-market slump that could wipe 80 percent off the FTSE 100.

Riding for a Fall?

Crispin Odey is warning stocks could fall by 80 percent

Source: Bloomberg

And if that's not enough to drive Brits to drink, it turns out the humble pub will get a whole lot pricier as well: shares of JD Wetherspoon, founded by Brexit cheerleader Tim Martin, fell on Wednesday after the publican warned of rising cost inflation and the risk to supplies of French wine and German lager.

If you're looking for remorse or an admission that Brexit might not be all it's cracked up to be, though, look elsewhere.

Odey's recession warning makes no obvious mention of the vote itself or whether the oft-highlighted economic risks of Brexit are coming to pass. His note to clients mostly attacks the Bank of England, which is keeping monetary policy ultra-loose to avert a credit crunch or excessive capital flight.

Pain For You, Gain For Me

Odey Asset Management's top U.K. short bets by market value

Source: Bloomberg data

Footnote: Short positions don't necessarily reflect overall net exposure to those companies. The fund may have long exposure using options, for example.

Put it another way: the hedge fund manager is criticizing the central bank for doing its job. Over at Wetherspoon, Martin is showing a similar knack for warped logic. He blames the negotiating tactics of Jean-Claude Juncker, Angela Merkel and Francois Hollande for the growing threat to tariff-free trade -- as though it were possible for Brexit to happen in a vacuum.

The pub industry is also being squeezed by the falling pound, which is raising the cost of importing spirits. But sterling's decline after a leave vote was entirely predictable.

Now, it's fair to say that the financial world also likes to blame Brexit for a lot -- too many -- of its problems. We've said before that an overheated housing market and a banking sector in decline have bigger problems than the EU.

But there's a large dollop of self-preservation here as Brexit's backers try to explain why there may be trouble ahead. Odey hasn't done well out of Brexit -- while he netted 220 million pounds in the immediate aftermath of the vote, his fund, which has been shorting U.K. stocks, is still down 42 percent this year. The benchmark FTSE 100 has gained 10 percent since the vote.

Bad Bets

Odey European Inc total monthly returns

Source: Bloomberg data

Hence the bitterness toward Mark Carney: Odey's fund has $929 million of short positions in companies including Tullow Oil Plc, Legal & General Group and J Sainsbury Plc. If a recession did hit and if those stocks slumped, Odey should profit. But would he say with a straight face that central bankers were to blame rather than the Brexit vote he backed? 

Martin has done better: his 30 percent stake in Wetherspoon is up some 14 percent since the referendum, even taking into account Wednesday's fall. But those gains are vulnerable to a correction, should drinkers be put off by the price of a post-Brexit tipple.

Pub Bore

Shares of Wetherspoon have gained since the EU referendum but are now losing their lustre

Source: Bloomberg

Yet you do wonder what kind of pain would have to be inflicted on the economy before Brexit backers stopped blaming everyone else. One October consumer-confidence indicator is already pointing to signs of disquiet. Perhaps the pain Brits are feeling in their pockets has yet to reach Brexit's cheerleaders.

(Corrects Bad Bets chart)
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Lionel Laurent in London at

    To contact the editor responsible for this story:
    Edward Evans at

    Before it's here, it's on the Bloomberg Terminal.