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"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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Sat, 03/14/2015 - 21:42 | 5890130 MarketAnarchist
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."

Sat, 03/14/2015 - 21:47 | 5890142 Harbanger
Harbanger's picture

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

Sat, 03/14/2015 - 22:01 | 5890154 Kitler
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

Sat, 03/14/2015 - 22:57 | 5890281 Pairadimes
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.

Sat, 03/14/2015 - 23:43 | 5890373 macholatte
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

 

Sun, 03/15/2015 - 02:12 | 5890536 Midas
Midas's picture

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

Sun, 03/15/2015 - 07:37 | 5890678 negative rates
negative rates's picture

I hope it includes some old schoolin, old fashion aint nothin w/o it but talk, which is, well you know.

 

That's why the jonnies don't have any water, swirrlograph.

Sun, 03/15/2015 - 12:21 | 5891224 WhyWait
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?

Sun, 03/15/2015 - 18:16 | 5892213 Austrian Peter
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.

Sat, 03/14/2015 - 21:53 | 5890156 Greenskeeper_Carl
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

Sat, 03/14/2015 - 22:03 | 5890175 Harbanger
Harbanger's picture

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

Sat, 03/14/2015 - 23:13 | 5890320 Bastiat
Bastiat's picture

And the bakrupt banks.

Sun, 03/15/2015 - 01:59 | 5890524 OldPhart
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.

Sun, 03/15/2015 - 02:04 | 5890530 farmerbraun
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.

Sun, 03/15/2015 - 08:12 | 5890709 Winston Churchill
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.

Sun, 03/15/2015 - 10:06 | 5890851 Mike in GA
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.

Sun, 03/15/2015 - 11:08 | 5890998 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

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

Sun, 03/15/2015 - 14:40 | 5891683 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.

Sun, 03/15/2015 - 11:10 | 5891006 TheReplacement
TheReplacement's picture

Pride goeth before the fall.

Sun, 03/15/2015 - 08:58 | 5890753 SWRichmond
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.

Sat, 03/14/2015 - 22:33 | 5890232 Escrava Isaura
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

 

 

Sat, 03/14/2015 - 22:53 | 5890274 disabledvet
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....

Sun, 03/15/2015 - 02:08 | 5890533 OldPhart
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.

Sun, 03/15/2015 - 08:18 | 5890718 Winston Churchill
Winston Churchill's picture

Did you get the full SWAT team ?

Sun, 03/15/2015 - 23:11 | 5893189 OldPhart
OldPhart's picture

No just a single agent.

Sun, 03/15/2015 - 12:53 | 5891306 Dragon HAwk
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..

Sun, 03/15/2015 - 01:44 | 5890499 blowing winter
blowing winter's picture

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

Sun, 03/15/2015 - 02:11 | 5890534 OldPhart
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.

Sun, 03/15/2015 - 18:09 | 5892198 Prometheus Unbound
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

Sun, 03/15/2015 - 05:32 | 5890609 BaghdadBob
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.

Sun, 03/15/2015 - 05:54 | 5890626 Your guess is a...
Your guess is as good as mine's picture

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

Sun, 03/15/2015 - 07:35 | 5890685 BaghdadBob
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.

Mon, 03/16/2015 - 00:25 | 5893301 Your guess is a...
Your guess is as good as mine's picture

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.

Sat, 03/14/2015 - 21:42 | 5890133 One And Only
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.

Sat, 03/14/2015 - 22:10 | 5890189 Harbanger
Harbanger's picture

The newborn would look just like Ruth Bader Ginsburg.

Sat, 03/14/2015 - 22:52 | 5890273 remain calm
remain calm's picture

Whatever it is, it better be a hermaphrodite.

Sat, 03/14/2015 - 21:46 | 5890139 Kirk2NCC1701
Kirk2NCC1701's picture

I thought that Australia had a Fed and DOD dependency.

Or am I confusing dependency with colonial subservience?

Sat, 03/14/2015 - 23:14 | 5890324 Wild Theories
Wild Theories's picture

yes

Sat, 03/14/2015 - 21:55 | 5890159 European American
European American's picture

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

Sat, 03/14/2015 - 22:01 | 5890173 Abrick
Abrick's picture

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

Sun, 03/15/2015 - 10:11 | 5890860 Mike in GA
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.  

Sat, 03/14/2015 - 22:41 | 5890243 Prometheus Unbound
Prometheus Unbound's picture

Nah.

Fuck em.

 

https://www.youtube.com/watch?v=SqsNYQ4ssWA

 

(Note the EyE behind him)

Sat, 03/14/2015 - 22:45 | 5890261 joego1
joego1's picture

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

Sat, 03/14/2015 - 23:09 | 5890308 farmerbraun
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.

Sat, 03/14/2015 - 23:20 | 5890337 Wild Theories
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.

Sat, 03/14/2015 - 23:27 | 5890349 farmerbraun
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.

Sat, 03/14/2015 - 23:29 | 5890354 farmerbraun
farmerbraun's picture

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

Sat, 03/14/2015 - 23:58 | 5890390 Wild Theories
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

Sun, 03/15/2015 - 00:36 | 5890443 farmerbraun
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.

Sat, 03/14/2015 - 23:14 | 5890323 fascismlover
fascismlover's picture

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

Sun, 03/15/2015 - 08:20 | 5890720 Wahooo
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?

Sun, 03/15/2015 - 08:38 | 5890739 Dickweed Wang
Dickweed Wang's picture

When will America tired of paying for these bankers' sociopathic lifestyles and their wives' pedicures, breast enhancement surgeries, and vacations?

When they get their heads out of their asses and stop watching the MSM "news" and get off of their handheld I-gagets.  Don't hold your breath . . . .

Sun, 03/15/2015 - 00:09 | 5890402 q99x2
q99x2's picture

Photos of two targets that 7 billion people will soon be coming after. Arrest the financial perverts now and redistribute their stolen wealth.

Sun, 03/15/2015 - 08:35 | 5890734 Dickweed Wang
Dickweed Wang's picture

7.62 full metal jacket

Sun, 03/15/2015 - 11:20 | 5891045 TheReplacement
TheReplacement's picture

The question, and it really does matter, is x39 or x51?

Sun, 03/15/2015 - 01:05 | 5890467 Youri Carma
Youri Carma's picture

So what's the old-fashioned part about it? The fraud, the derivatives, the QE?

Sun, 03/15/2015 - 04:53 | 5890595 theliberalliberal
theliberalliberal's picture

Fmg will be alright. We are working on their 5th berth now and it is nearing completion. Twiggy has been handing out money constantly as he has been upgrading capacity to his 5th and final outgoing ore loading circuit.

He has cut all the fat already with the last iron ore price scare (mostly safety jobs I was told (accuracy unknown). ..which DID need to be cut coz shit can be ridiculous up there).

All his wages are in Aus $ which has just got 25% cheaper, and diesel costs will be lower on the mining end. FeO probably isn't looking so cheap prices in aud.

Now that he is not spending so much on capital expenditure, I think he will get through any further dips, coz the Aus weakness which will occur concurrently will be a buffer. Not that I've seen his balance sheet, but he has been expanding constantly which will soon be over coz there just isn't the space in the port Hedland harbour to push out further

Sun, 03/15/2015 - 04:53 | 5890596 peterk
peterk's picture

The key for Australia is DEBT. I fear a long period of stagnation in the economy as the  RBA's  "we'll follow the US"  policy gets unwound.

What policy makers here  dont understand is that no one  can follow the US as the US in the worlds  reserve currency.

Australia  was able as long as there was  demand for the $Au,  now china s collapse will see an end to that.

They  RBA will kill the  $Au, complete debasement, before it ever raises rates. Only a huge SPIKE down in the currency will  cause them to raise rates.

Just like the US is the worlds reserve currency, artificially creating  demand for the  worthless  greenback, so to  do exports of resources create a demand for the $Au

Untill now the RBA has been able to pump the economy with quasi-QE and no inflation resulted . This only happened because  we exported  resources out to china but with that  demand for the $Au gone, inflation will pick up in this country. This will force a currency crsis  in which we are in now, and bring an end to  monetary pumping and higher interest rates.

After all this we are left with MASSIVE consumer  mortgage  debt.Either we get inflation to pay it off in which  there is a long  japan like period of stagflation, or  a short deep recession.

I think the former.

Peter

Sun, 03/15/2015 - 07:44 | 5890690 Big Cox
Big Cox's picture

As an Australian, I’m not worried! We’ll just need to get Kevin Rudd back into office to borrow and spend us out of recession! We can leave the debt to our children as inheritance!

Sun, 03/15/2015 - 08:15 | 5890713 bentaxle
bentaxle's picture

Even as recently as yesterday someone I was speaking with said the bailouts weren't necessarily correct in every case....but "avoiding all out collapse was essential!"

 

Sun, 03/15/2015 - 09:18 | 5890785 Youri Carma
Youri Carma's picture

That one is speaking for the banks not for the real economy which IS collapsing.

Sun, 03/15/2015 - 09:52 | 5890827 GreatUncle
GreatUncle's picture

Bailout - the poorest got hammered and they did the wealthiest maintained status quo.

Collapse - everybody gets hammered so we all lose together.

Is no other options on thise one and notice how in both cases the poorest get hammered which is a dam fine edxample of Greece for the last 5 years the poorest Greeks got hammered and the elite because the system STILL EXISTS using wealth can avoid the consequences.

All for collapses now / defaults it is fair to all but just to make sure it has to be a total collapse so no elite can move anywhere to negate it.

Capitalism rules after that.

Sun, 03/15/2015 - 09:58 | 5890837 fremannx
fremannx's picture

It's actually an old fashioned deflationary depression. The largest debt (credit) bubble in history has burst. The results will be catastrophic...

 

http://www.globaldeflationnews.com/anatomy-of-a-bubble-how-the-federal-r...

 

 

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