Hedge-Fund Manager Crispin Odey Says It's Lonely Being BearishBy and
Odey says reflation trade faltering, cites threat of subprime
He predicts the Fed is done tightening U.S. monetary policy
Crispin Odey, whose main hedge fund lost almost 50 percent last year as his wagers on falling asset prices failed to pay off, says he feels “lonely” in betting against growth.
“A year ago it was easy,” the 58-year-old wrote in an investor letter seen by Bloomberg News. “China was slowing, world trade was creaking, Europe was not recovering and the oil price was hitting new lows. A year later, to be bearish feels lonely, despite the fact that the reflationary story of the past year looks difficult to sustain and auto-loan lending has joined a long list of risks, along with Trump and Brexit.”
A spokesman for his firm Odey Asset Management, which manages $6.5 billion, declined to comment.
Despite Odey’s feelings about being bearish, there’s growing evidence the market gains seen at the beginning of this year are starting to falter. The assumption that President Donald Trump will kick-start growth through investment and tax reform is looking shaky since his failure to overhaul healthcare, while rising geopolitical tensions are both weighing on asset prices and diverting the attention of the U.S. government.
U.S. equity funds saw almost $15 billion of outflows in the week ended April 5, the biggest withdrawal since the third quarter of 2015, and money barely returned the following week, according to EPFR Global data.
“Equity markets feel vulnerable,” Odey, who has been a vocal critic of global central banks’ easy-money policies, told investors. “The Great Reflation was responsible for a re-rating of stock markets. If all we have left is the central bank’s bond bubbles, that may not generate enough growth to support prices.”
The London-based billionaire also flagged a “growing crisis” in U.S. subprime auto lending -- joining Steve Eisman, the Neuberger Berman Group fund manager who featured in Michael Lewis’s book “The Big Short”, in expressing concerns about this market.
Odey’s main hedge fund is said to have lost 4.8 percent in the first quarter, following its worst-ever annual decline in 2016. The Odey European Inc. fund managed 322 million euros ($346 million) as of the end of February.
Turning to U.S. monetary policy, Odey predicted an end to interest-rate increases, just as falling benchmark bond yields show he’s not the only one to expect a pullback in tightening from Federal Reserve Chair Janet Yellen.
“No more rate rises,” Odey wrote. “The government bonds have already guessed Yellen’s mind.”