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"We Have Front-Row Seats To An Imminent Market Shock", Hedge Fund Billionaire Warns
Having previously noted that "this is the best shorting opportunity since 2007-9," Billionaire hedge fund manager Cripsin Odey warns that (just as Goldman has noted) the global economy is h"eaded for recession and central banks will not be able to able to come to the rescue because they have exhausted the arsenal of policy weapons." No matter what happens, he chides, the market shrugs it off as they are "kind of relying on central banks pulling a rabbit out of a hat." They will not, "Central banks are not all singing and all dancing," and cannot avoid the consequences of what they are doing, concluding, "you and I have got grandstand seats here [to an imminent market shock]," and investors are about to "find out just how illiquid it really is out there."
One of the world's leading hedge fund managers has warned that global economies are headed for recession and central banks will not be able to able to come to the rescue because they have exhausted the arsenal of policy weapons. As The Sydney Morning Herald reports,
Mr Odey is best known for his big macroeconomic calls, including foreseeing the 2008 global credit crisis; piling into insurers in the wake of September 2001 attacks; and picking the recent oil price rout. He famously paid himself £28 million in 2008 after shorting credit crisis casualties, including British lender Bradford & Bingley. Mr Odey's fund returned 54.8 per cent that year.
"The market's reaction to all of this is leave it to the professionals, leave it to those great guys, the central bankers, because they saved the day in 2009," he said. "These guys are kind of relying on central banks pulling a rabbit out of a hat."
The risk is that this time, monetary policy may be ineffective: "We need the crisis to reformulate policy. Central banks are not all singing and all dancing, they cannot basically avoid the natural consequences of what we are doing."
An inadequate supply-side response to the plunge in commodity prices as the resources industry declines to reduce production was in effect stimulating supply into falling demand.
"The trouble is today the players, whether they are the miners or the oil companies or the Saudis or anybody else, they are not doing the right things. This is the first time in my career where economics 101 doesn't work at all."
But it was also true that the world has not had a major recession for 25 years and thanks to frequent interventions, "there is a sensation we don't have a business cycle". Stocks are enjoying a six-year bull market but he also hinted at liquidity issues bubbling under the surface.
"I just think that you and I have got grandstand seats here [to an imminent market shock] and my point is having found myself in the second quarter of last year selling a lot of equities and starting to go short, I found out just how illiquid it all was. You never actually see it until people try and get out of these things."
It was unclear to Mr Odey what central banks could do to prevent a crash.
"I find it intriguing that we are so dependent on these central banks who are expected to do great things and yet what can they do? They start with interest rates pretty well at zero."
He believes the US Federal Reserve will be motivated to begin the tightening cycle.
"You're going to be very tempted to raise interest rates simply because you want to normalise," he said. "There is a sense in which these guys are longing to try and stop some of this activity taking place as well as getting the situation back to some kind of normalcy.
"My view is hey look, if they do raise interest rates, I don't even need it to happen but I do think that will put a bit of pressure on the sharemarket as well... Everything points to it being a bubble. You can never know the height of a bubble but by the time it gets to here you haven't got much time."
Mr Odey's fund in Australia is called Odey International Fund (OIF) and employs the same investment strategy as his flagship global long/short hedge fund, which has a 22-year track record and has returned approximately 14 per cent per annum net of all fees. OIF has returned 22.9 per cent since inception on July 29, 2014.
Odey Asset Management is identifying short opportunities amid the fervour of the six-year rally and huge currency fluctuations are factoring in to the fund's positions.
"For me, what I find very interesting is given the risk of recession, how is it the West stockmarket can be hitting all-time highs? History tends to be not very generous in this regard. If you get a recession in a low inflation environment it tends to impact the ratings of stocks dramatically."
It was akin to "watching the markets take drunken bow after drunken bow".
"It's amazing that nobody else is on the same page."
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As he previously concluded, we are in the first stage of this downturn. It is too early to see what will happen – a change of this magnitude means the darkness and mist is very great. We will make some mistakes but with our thinking we won’t make the major mistakes. The problem is where you stand – I am amazed to see so many are fully invested given that equities are already fighting the downtrend.
So, where am I placing my money?
- Firstly, I think equity markets will get devastated. Unannounced business cycles ensured Japan’s stock market rating fell by two thirds over 20 years.
- Equities are priced for perfection, pushed up by SWF and high yield investors looking for higher yields and better covenants than high yield bonds.
- Commodity-related sectors look unappealing and dangerous.
- International consumer companies look overexposed to EMs.
- Fund management companies look overexposed to the wrong assets, especially EMs.
- Volatility is rising. Not every trade will work.
- Australia is still to see rates down to 0.5% at the short end, 1.5% at the long end, down from 2.5% currently.
- Currency trading is still to make the money. It made money last year as it was where the ‘tyres hit the road’ – equities are just the residual.
- Equity markets will struggle to understand the quarterly translation and transaction effects of these currency moves on corporate profits, starting with Q1 2015.
We have seen though some strange things, with economics 101 turned on its head. We’ve seen that falling prices produce more supply, as the biggest producers see that they can take market share and use the opportunity by reducing average costs through excess production. We’ve seen that in the oil, minerals and iron ore industries. We have also seen in the last couple of years that as bond yields fall, governments are able to issue more debt.
But this time round the problem we have as well is that politics will start to rear its head and we are left to deal with politicians who are increasingly critical of the capitalist system’s ability to allocate capital and provide for society.
For me the shorting opportunity looks as great as it was in 07/09.
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Something really big and bad and incendiary is going happen!?! Oh sweet Jesus, it's the zombie banker freaking apocalypse! Run for the hills with bullets, bullion, beans, broads and band aids!
(Ahem)
Is going to happen!?! No, it IS happening... It's BEEN happening in slow, controlled and centrally planned motion since NAFTA, since the dot-con bubble, since September 2001, whatever the reality/actors behind that 'Project for a New American Century' report foretold "required new Pearl Harbor like event". Problem. Reaction. Solution.
The coffers have been squandered or looted by companies now long beyond the reach of impartial 'justice', the country divided, Jefferson and Washington made out as mere slave owning villains, Agenda 21 propaganda become irrefutable social programming/engineering and economic doctrine, the media co-opted, Common Core teaching that finite mathematic equation answers can be summarily changed if enough of the class thinks it should, the FSA created and enabled, the blue-agent goon squad legally entitled to feel up grandma, the wages long frozen while inflation is denied, the long unemployed forgotten, military veterans abused and vilified, SkyNet long online and now just a part of 'life', all while the two party illusion of GOP/DEM politics has perfectly merged into a single, openly anti-Constitutional bad checkwriter for the oligarchs.
Correlation may not equal causation, but then it's sure as shit one hell of a lot coincidences.
Keep stacking.
You forgot ugly, lazy and disrespectful.
When the going gets wierd, the wierd turn pro.
Man- just got your Breakfast Club quote... Brav-fucking-o!
Go fix me turkey pot pie.
QE TO INFINITY ...or until WIIII...
BTFD if this guy is talking sell you know he's buying.
Is he saying that Central Banks buying up assets plus all the stock is going to have consequeces?How can you determine real price dicovery now?I thought The U.S.Treasury Department Trading Desk had an unlimited margin account backed by the Government in order to keep manipulating markets forever?Is Central planning going to fail like the Soviet Union?
FYI; with the Duma at 47% communuist, is communism and central planning really dead in Russia. Go ask Putin.
Ok genuis, when?
I'm going to tell you a story. It's true, but you won't believe it.
There's people who work the markets whose job it is to curb what we like to call... rampant mimetic spread (or LOA action, or if you're much older, tulip rush). Their job isn't to limit the market, nor is it to limit what people working in the market do. In fact, it's not even to have a moral stance on how the market functions.
They have a single job: when the bubbles and fervour and spunk get too flightly, they destroy the market. It's a talent, and the worst enjoy it, the best see it as a necessary evil. They're paid very well, but they hate their job (the majority).
They do it because the other options (hello Zimbabwe and Germany 1929-1933) are worse than the common (wo)man losing it all.
The problem is: 0% interest. (And another set of meta-issues, but let's not go there, involving the consolidation of Banks, Auditors and other companies).
This time, we're not sure it'll work. And if you're wondering about "PLAN B", you need to see who bankrolled the recent Hollywood disaster film - "World War Z". It's.. gallow's humour if you strip the science fiction elements.
https://www.youtube.com/watch?v=JvaTjJpoQlg
p.s.
Laughingly, I hope everyone caught the Bio train 4? 3? years ago. I did flag it out to y'all, t'was a freebie. Be Seeing You.
the global economy is h"eaded for recession
I wish!
What is this like the 3rd or 4th time this squawker has been yelling this the past few years? You do know, Odey is related to Barclays management by marriage yeah?
I think we've all learned by now that the Fed will step in and take any measures to prop up the stock market, no matter the consequences. They will print to infinity if that's what it takes. If the markets behaved rationally and without intervention, we would have already had a massive downturn by now.
Those who know don't speak, those who speak don't know. In other words, this dude has been shorting and the tide doesn't look remotely as what he had hoped for. Folks, sell now and that's what he wants to say.
I don't think this is new. One of the triggers for The Depression was that corn suppliers decided that, since prices were so low, they needed to ramp up production in order to make enough to balance the books. Sounds like a quirk of central planning to me.
i,ve got reset fatigue
More warnings... sick of listening to this crap... get on with the CRASH. please.
"These guys are kind of relying on central banks pulling a rabbit out of a hat."
They were only able to do that because this whole charade is unwritten by taxpayers.
GIve people true freedom (with all the responsibilities that entails) to be free NOT to pay tax and the crook thin air banks would have failed years ago.
Givce this guy the DUNCE cap.
For one interests will never rise -- because if they did the world would collapse in a heaping pile of bankruptcy
The money printing is going to end - really - in case he didnt notice the trilllions the US printing is still surging around the world --- the Japanese are upping the ante every so often with more QE --- and the ECB just started a 60 billion Euro per month print
This guy is a clown. Put him on cnBS asap
"you and I have got grandstand seats here [to an imminent market shock],
Well, this SOB has profited so not really just grandstand seats. This SOB and most like him have profited from the mess. The Mom and Pop on fixed retirement are in the Grandstand seats, not WS Prostitute Fucks
Retirement accounts must be seized before we have a crash.
solution: they can't seize it if its not in one of their "institutions"
I invest like Warren. In companies with good dividends and excellent fundamentals.
I welcome a market crash, it gives me the opportunity to add to my positions.
You are picking investments that wont be effected by a market crash? I think that crystal ball you gaze into is a rock of meth.
if your working, paying your taxes, and bills, trying to make a living for you and your family, and don't see the hand writing on the wall, get informed.
your hardships taking place now, is the plan, and it's going swimmingly.
for as long as I can remember the savings of the middle-class has been a target of politicians, your ability, (freedom), to save was a personal power, and they despise that.
never has so many assets been forced out of the middle-class hands, their savings being depleted, just to pay everyday expenses, for themselves, and subsidize, (taxes), 50% of the rest of the population, that don't pay taxes.
when the govt. offers better pay not to work, for 50% of the population, and subsidizes hiring of illegals, that should awaken you.
please believe these aren't normal times, and conduct your finances accordingly.
Feudal Society - kings & peasants - same as it ever was - why is anyone surprised? - pick up a history book and read about your future
The banks are now the 'Barrons', the FED is king and government has to follow the dollar (but they don't).
LMFAO!! yet another Nostradamus
anyone who thinks the oligarchs are going to stand by and watch their empire crumble are morons
they will print as much shit as they need to keep the game going FOREVER!
does anyone really think they get together and say "yeah, its going to end, lets just give up the printing press" ???
You heard it here for the 6 hundredth time. Time to duck and cover, again, this time. Oh, and buy gold.
Funny thing about hate, you believe what some hate filled propaganda site tells you to keep you hating, for profit.
excellent