"An 'Old-Fashioned' Recession Is Spreading Across The World," Billionaire Hedge Fund Manager Warns

Tyler Durden's picture

The bust of Aussie boom-towns, collapse of the mining industry, dramatic capital outflows, and a bursting housing bubble all have one thing in common, according to billionaire hedge fund manager Crispin Odey - "China is everything to Australia in lots of ways." Simply put, he tells The Australian Financial Review, economies dependent on China for income, including Australia, 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. "We've got a very old-fashioned recession which is spreading across the world," and Australian banks face a tough time ahead too because there are indications bad debt risks are rising.

Confirming Goldman's view that with 9 of 10 components negative in February, Goldman's Swirlogram has collapsed from expansion to contraction within just 6 months...

 

First negative print since 2012 - indicating global industrial production is set to contract...

What is the GLI: The Global Leading Indicator (GLI) is a Goldman Sachs proprietary indicator that is meant to provide an early signal of
the global industrial cycle on a monthly basis. There is an Advanced reading for each month, released mid-month, followed by the Final reading, released on the first business day of the following month.

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One of the world's leading hedge fund managers has warned that economies dependent on China for income, including Australia, 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.

Crispin Odey, who is the founder of London-based Odey Asset Management, has taken a number of short positions on Australia since adopting a bearish view of China's growth outlook.

He is short stocks Genworth Mortgage Insurance Australia and Fortescue Metals Group, indicating that he expects the share prices to fall, and he believes the Australian dollar is headed for further losses. He said Australia's banks could have a "bad time time ahead of them".

"China is everything to Australia in lots of ways," Mr Odey told The Australian Financial Review.

The world's second-largest economy was eroding its competitiveness and its capital accounts were vulnerable to outflows as Chinese policy becomes more accommodative. "We've got a very old-fashioned recession which is spreading across the world."

The first impact was the hit to income, followed by the decline in capital expenditure and rising unemployment. All three trends are already evident and have prompted the Reserve Bank of Australia to cut interest rates to a record low 2.25 per cent this year. Australian banks faced a tough time ahead too because of indications bad debt risks would rise.

"The only thing you can do in those countries as you're seeing in Australia is you're cutting interest rates," Mr Odey observed.

"Frankly, it's a demand problem."

This is complicated by the prevalence of quantitative easing (QE), or large monetary stimulus, elsewhere in the world which has pushed share prices to record highs in spite of worsening economic conditions in many economies outside of the United States. The competing forces of QE and the threat of recession could set up a crash as "we're in the midst of a wonderful bubble".

Mr Odey is one of several high-profile hedge fund managers to bet on Australia running out of luck.

Jim Chanos, one of of the world's largest short-sellers and a prominent China bear, has shorted shares Fortescue Metals and several local other iron ore and coal miners, a position he confirmed last year.

George Soros' Soros Funds Management is also understood to have considered betting on a downturn by shorting mining services companies while in April 2010 Jeremy Grantham of GMO branded Australia's property market a bubble, sparking interest in shorting Australia's banks that has remained ever since.

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Things are betting uncomfortable down under (as we have explained here, here, and here recently)

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MarketAnarchist's picture

Soros can kill himself.  Furthermore, saying that central banks are not going to be able to help because they have exhausted their monetary arsenal, is like saying "they won't be able to put out the fire because they ran out of gasoline and matches."

Harbanger's picture

Soros is the "neocon" behind Obama and the Ukraine.

Kitler's picture

Once the smell of the blood is in the water Soros and the sharkmen are going to speedily gang-short the global economy into the abyss and make a fortune

Pairadimes's picture

There is nothing 'old fashioned' about what is happening to the global economy. The dead cat bounce that marked the beginning of the end of the debt-based fiat monetary system is finally over. The central banks and their captive governments have ignored moral hazard for so long that they have destroyed the rules by which markets behave, hollowed out the world's largest economies through financialization in an attempt to replace the loss of productivity, and sealed the world's economic fate in the meantime. When we look back at this, these will be the good old days.

macholatte's picture

 

How about some tin foil hat write a story about China crashing the global economy so it can

- buy Australia cheap

- fuck the USA in the ass

- rape Africa

- fuck the EU in the ass

- double cross the Arabs

 

To fight and conquer in all our battles is not supreme excellence; supreme excellence consists in breaking the enemy's resistance without fighting.

Sun Tzu

 

Midas's picture

You, of all people, should know that the chinaman is not the issue here.

WhyWait's picture

macholatte, you're projecting the US M.O. onto China. Indeed if they are like us this is what they would do. 

So we get a great experimental test of that question: how much like us have they become?

Austrian Peter's picture

A well said piece and fully agree. The slowdown is already here and confirmed by the BDI which I watch like a hawk - it's never let me down yet.  It's so obvious, raw materials are fundamental to any growth senario and certainly a forward indicator.

I am preparing to short the DOW next week, might be premature, but with a reasonable stop-loss I feel the runes are in, it is time, the time is NOW.

This is my first post, so a bit of a 'flyer'.  I am in UK and follow USA as the prime leader in most economic and geopolitical respects.

Greenskeeper_Carl's picture

@marketanarchist i believe when they say the central banks have run out of ammo, they really mean they would finally lose their credibilty wit hthe markets. Sure, they can print moar, and they can push interest rates into negative territory, but  I don't know how much of a merket reaction they would get out of it. Pushing on a string. I feel like when they eventually start going full retard on the money printing after having nothing to show for it but new market highs, people would finally see that the emporer is, in fact, naked

Harbanger's picture

Central banks the world over are printing in order to keep their bankrupt Govs solvent.

OldPhart's picture

Next step is the bail ins where the banks (aka goobermint) seize your cash from every account possible, banking, 401k, pension, walled street).

People of Cyprus will be laughing for years over our gullibility.

farmerbraun's picture

Yeah that bothers me a bit, although Rabobank may not be so exposed. I've got about 0.75m sitting in an account and the missus wants to leave it  till it's a round mill;just so she can say she once had a mill in cash. I dunno.

NZ has the same bailin legislation as the other robber states.

Winston Churchill's picture

Are you nuts ?

Spead that out across mulitple banks in multiple countries, stat.

Keeping money is harder work than making it ,from my personal experience.

Mike in GA's picture

Yeah, it'll be a lot safer and look a lot better to see the "total" column on a spreadsheet showing one mill than a single entry in one account.  Keeping money can sure be harder than making it.

MASTER OF UNIVERSE's picture

Put the .75m into real estate PRONTO before you learn a very painful lesson about Central Banksters, farmerbraun.

farmerbraun's picture

I'm fully loaded on real estate , and nothing else. That is , productive farmland that produces good profits year in , year out. Sure , I still have to work it , but it's not losing value.

So the consensus  on here is that Rabobank is no more secure than any other?

I'm not sure about that. All the other banks  here , but one , are Australian owned. And I get 4% on deposit in a zero inflation environment.

 

But in any case , the plan is for the million to go into further farmland purchase; adjoining land  most likely, at the first opportunity.

SWRichmond's picture

...they would finally lose their credibilty wit hthe markets. Sure, they can print moar, and they can push interest rates into negative territory, but  I don't know how much of a merket reaction they would get out of it. Pushing on a string. I feel like when they eventually start going full retard on the money printing after having nothing to show for it but new market highs, people would finally see that the emporer is, in fact, naked

And they will keep printing anyway, because it is all they can do, because the alternative would be to do nothing, which would be admitting powerlessness, which they cannot do.  If MOAR printing fails, then some other solution will be found, like a global thermonuclear war, rather than have the psychopaths who run this place forced to admit they are not really omnipotent, in charge, and capable of actually running things.  This kind of exposure cannot be permitted at any cost.\

And if they DO implement the global war solution, then it is up to those of us who survive to make sure they DON'T survive, wherever they may be.

Escrava Isaura's picture

 

 

By Chris Hedges:

in 2008 financial collapse, Wall Street was terrified. They thought they'd been found out. They thought they would have to pay a price for their criminal activity.

 

The professionalism demanded in the classroom, in newsprint or in the arts of political discourse is code for moral disengagement. Because what you end up doing is paying deference to institutions like Goldman Sachs which are criminal

 

1933 Glass-Steagall act didn't tear down the firewall between commercial and investment bank. in short it didn't allow gamblers and hedge funds to take over the banking system.

 

I'm critical of them in death of the verifiable fact and with the rise of so-called media outlets that discard fact where opinion becomes interchangeable with fact, then you enter a kind of totalitarian state, because people are allowed to believe whatever they want to believe or whatever they are made to believe.

 

http://www.c-span.org/video/?c4049795/clip-depth-chris-hedges

 

 

disabledvet's picture

Not so sure about this.  Good argument can and indeed has been made that Wall Street saw 2008 coming from a mile away.  Melissa Francis at CNBC in fact did a lot of "implying" of this back in the crisis days.

 

Obviously she no longer works for CNBC.

 

A more interesting take is that Wall Street is impeding the recovery as well in an attempt to create a "perma crash mentality"... certainly this site (in my view not intentional) promotes this " theory of instability."

 

This is very good for professional traders and "stock jockeys" since there is simply an infinite amount of liquidity available under such a psychological condition.

 

"War against the Taliban" morphing into war against Putin is something I have a very hard time wrapping my mind around.

 

What I am certain of is this is no game.  This is a real war...the one I think a lot of people thought we would fight starting in Vietnam.

 

The peace of 1973-1989 does stand out to me.  Lot harder to fight for peace than World War Z.

 

Of course history will never know if Putin was provoked....

OldPhart's picture

Ok, Open invitation for another personal FBI Visit by using the same rhetorical question.

"Who should we kill first; bankers or politicians."

(Yes, same question brought an FBI agent to check me out, so, FBI, you already have my address, come on by.)

The bank bought Politicians eliminated Grass-Stiegal and unleashed the ongoing bank frauds.

So we're at the equivalent of the chicken and the egg.

Who actually instigated this should be first to be hung.  Those complying second.

Oh, and fuck you, FBI.

Winston Churchill's picture

Did you get the full SWAT team ?

Dragon HAwk's picture

Government can Jail Bankers. Bankers can not Jail Politicians, there in lies your responsibility chain.. but hey we got lots of Rope..

blowing winter's picture
blowing winter (not verified) MarketAnarchist Mar 15, 2015 1:44 AM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://goo.gl/ezLA00

OldPhart's picture

BLOWING winter 

pretty much have a pretty good idea of how you're making money.  Personally the only dick I'm a fan of is my own.  But you hang in there dude.

Prometheus Unbound's picture

In respect to this, I suggest viewing every comic of Oglaf containing the Winter Queen.

It's funny.

 

http://oglaf.com/snowqueen/

http://oglaf.com/snowbound/

http://oglaf.wikia.com/wiki/Snow_Queen_%28character%29

BaghdadBob's picture

Without checking up on google or Wikipedia, I bet there aren't many posters on here (especially the geographically challenged Americans among you) that can even guess at how many people actually live in Australia (it's a lot less than you think). Contrary to popular belief, Mining, although admittedly a large export provider to the Aussie economy, isn't the vast employer that you fuckwits are led to believe. Yes, a complete failure in mining exports would no doubt hurt the Australian economy, but it wouldn't collapse. Do some fucking research.

Your guess is as good as mine's picture
Your guess is as good as mine (not verified) BaghdadBob Mar 15, 2015 5:54 AM

It's 'fewer' not 'less' people. You calling others fuckwits is irony of the highest irder. Fuckwit.

BaghdadBob's picture

Less - Multiple, Fewer - Singular. Hardly irony. You're obviously American. You wouldn't know irony if it fucked you in the ass. Fuckwit.

Your guess is as good as mine's picture
Your guess is as good as mine (not verified) BaghdadBob Mar 16, 2015 12:25 AM

It's 'fewer' for countable nouns (like IQ); 'less' for uncountable (like intelligence). I don't know why I'm bothering, even if you do grasp this simple piece of logic you'll still be a fuckwit. Moron.

One And Only's picture

If George Soros and Sheldon Adelson had a baby together I wonder what that would look like. You'd probably get a bleached raisen.

Harbanger's picture

The newborn would look just like Ruth Bader Ginsburg.

remain calm's picture

Whatever it is, it better be a hermaphrodite.

Kirk2NCC1701's picture

I thought that Australia had a Fed and DOD dependency.

Or am I confusing dependency with colonial subservience?

European American's picture

An "Old Fashion" catastrophic collapse is spreading across the world. 

Abrick's picture

Charts aren't supposed to move from right to left. I guess that explains the new rules.

Mike in GA's picture

I'm not a big fan of the new rules, either.  I've never felt like I understand what I'm reading with the swirlogram.  

joego1's picture

Yeah and they have nasty spiders and crocs and stuff like that.

farmerbraun's picture

It's a China story though isn't it?

Many suspect that China is close to a major  "re-orientation" as it sorts out the mess that it has got itself into.

But it's not just Australia that stands to have to make a significant adjustment to the new China reality , when it is realised.

NZ has become heavily reliant , on both China and Australia.

And when the US starts another QE , as it appears that  it must , then the strong $NZ will just about screw us in the medium  term.

As a farmer , my strategy is to sell only domestically , and to trust that the strong $NZ will lower some of my input costs, plastic packaging mainly, but also diesel, and transport.

Wild Theories's picture

A NZ farmer that only sells domestically? you are a strange one

I thought everyone wanted to export their stuff to Asians and earn big bucks, like Australians.

farmerbraun's picture

I've been turning down opportunities to export for about 20 years. i sold in Aus for a while , and also a little dabble in california.

But now , why would I bother to take the risk? Maybe I'm just too comfortable on what is a really good wicket.

By anyone's standards I'm making big bucks year in year out , right here at home.

farmerbraun's picture

I have recently taken the precaution of installing a start-of -the-art micro-brewery , in case things get really tough :-)

Wild Theories's picture

things will only get really tough if a bunch of American preppers fleeing the "endgame" start heading your way

that's still a long way away yet

farmerbraun's picture

Well , if they don't mind a quality craft beer , and they can handle their piss , there should be no problem.

Here at least.

 

But seriously , you can rent a seaside house in the off-season for bugger-all . and live like a king if you know how to fish and forage.. Then there's the wild pigs and deer, and goats for the taking.

Your average US prepper might be a bit light on bushcraft though ; the bush is no place for beginners.

fascismlover's picture

Anyone listening to a billionaire about anything other than the best golf courses or yachts is a sucker.

Wahooo's picture

Let me guess - this brilliant hedge fund manager is short the S&P. When will America tired of paying for these bankers' sociopathic lifestyles and their wives' pedicures, breast enhancement surgeries, and vacations?