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Despite "Bloody" October, Billionaire Hedgie Says "It's A Good Time To Be Short"
After earlier in the year exposing "the greatest shorting opportunity since 2007-2009" and trading it profitably through September with "front row seats to an imminent market shock," Billionaire Crispin Odey's flagshipfund has suffered recently. As Bloomberg reports, the fund plunged 16.8% in the first 16 days of October, after the fund profited in August and September from Odey’s negative view of the Chinese economy. Odey believes that the only way economies will be able to work their way through the next downturn is by writing off capacity. Therefore, with credit tightening as well, according to Odey, it’s a good time to be short...
As Bloomberg details, it's been a tough month...
The loss by Odey European, a $1.4 billion fund betting on rises and declines in stocks, brings the drop for the year through Oct. 16 to 17.4 percent, said the person, who asked not to be identified because the information is private. The fund profited in August and September from Odey’s negative view of the Chinese economy.
A 7.6 percent increase in September cut the fund’s 2015 loss to 0.7 percent, said the person. Odey European posted a record monthly loss of 19 percent in April -- described as “bloody” by Odey in an investor letter -- before recovering in the following five months.
Short positions, or bets that shares will fall, against five companies -- ArcelorMittal, Las Vegas Sands Corp, Anglo American Plc, Volkswagen AG and Sands China Ltd. -- were the strategy’s five most profitable positions last month, according to an investor letter.
Odey, 56, founded Odey Asset Management, which has about $11 billion in assets, in 1991, according to its website. The firm’s Odey European strategy rose 5.5 percent last year and 26 percent in 2013.
But, as excerpted from Odey's letter to investors, Odenyt remains negative on China and questions central bankers' ability to save the world this time...
On China
Crispin Odey went on to talk about the state of China’s economy in his September letter to investors. Odey concludes that China is only getting worse, and the country’s deteriorating economic situation has changed investor sentiment for the worse:
“Something has happened between last year and this, to convince those who are brave enough to catch falling knives, that something had changed for the worst.
For me that something is China. China’s problems are going global. The authorities will not be able to solve their four bubbles – in housing, the bank lending market, the stock market and their own currency – with current policies. This is a $29 trillion problem area and current policies can only exacerbate overproduction and further price falls in anything connected with Chinese output. Ultimately the currency will have to fall and by at least 30%.But China is only following a version of QE which is being played out by others. Their version is unusual because their QE is not attended by immediate currency devaluation. However QE is now a force for deflation. Whilst the spigot of credit remains open, capacity in all industries remains, and prices of products and profits fall. Equally zero interest rates after five years has meant that a zero cost of capital is also undermining technology companies as new competition is free to spring from nowhere.”
On the next recession
Odey notes that major scams, like the Volkswagen emissions scandal, Petrobras scandal, and Valeant pricing issue only come to light only happen in bear markets. This leads him to conclude that we’re heading into a major crisis.
With interest rates already at their lowest levels in decades, Odey believes that the only way economies will be able to work their way through the next downturn is by writing off capacity. With credit tightening as well, according to Odey, it’s a good time to be short, although, after a rough start to the year, Odey’s stance on risk management is notable:
“Bad things happen in bear markets. The Volkswagen saga, which has only just begun in terms of repercussions, only happened as car sales globally have peaked. The Petrobras scandal could only come to light once the oil price had halved. The Valeant pricing and Enron-like behaviour could only happen in a world which is suddenly looking for price gougers.
In the world that we are going into, only those companies that are offering more choice and greater value for money can prosper but the headwinds will be great.
Whereas the crisis in 2007/8 was solved by low interest rates ultimately, this downturn will only be solved by capacity getting written off. That is still somewhere far away, but watch corporate credit spreads reveal that there is a credit tightening taking place, which is wholly not what the central banks want to happen.
* * *
As Odey previously concluded, it is unclear at this point 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."
...
"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."
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. Mid and smallcaps have moved into bear markets and much relies on large caps to keep the whole thing going and they are very exposed to international trade.
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Maybe it's because Murica is about to send ships into Chinese waters? Within 24hr BTW.
http://www.businessinsider.com/the-us-navy-is-sending-a-destroyer-within...
i see .... looks like they're sending the brightest there:
On 15 February 2009 at 12:25 pm, Lassen collided with a Japanese 14-ton pleasure boat in Yokosuka harbor. Four people fishing on the pleasure boat, which was at anchor, were reportedly uninjured.[2] On 23 March 2009 the Japan Coast Guard filed a case against both the destroyer's and the fishing boat's captains with local prosecutors for professional negligence that endangered traffic
watch out china, they might accidentaly collide with your sandcasttle ! ;-)
or more on it : The Arleigh Burke class of guided missile destroyers (DDGs) is the United States Navy's first class of destroyer built around the Aegis Combat System and
they want to check if the chinese have the same jaming system the russian showed them in the black see
The acceleration of the Austrian True Money Supply's (TMS) velocity to private GDP:
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2f8R
Acceleration is contracting at the deepest level since 2008, 2001, and the early 1980s, as the annual change rate of the US$-adjusted Wilshire 5000 turns negative.
Bear market.
A resumption of Fed QEternity is on the way.
Liquidity trap. Deflation.
NIRP.
Nominal GDP per capita to decelerate below 2%.
Housing bust (especially high-end, buy-up houses this time).
Wage growth decelerating below 2%.
1% or lower 10-year Treasury yield.
Fed printing to overtly buy bank and insurer stocks, equity index futures, munis, corporates, student loans, subprime auto loans, and bad bank loans to the energy sector.
Hyper-financialization means that the stock market is now "the eCONomy". The SPX can't be allowed to fall 10% or more that persists for a few months or risk blowing wide open the term structure for the MASSIVE levered carry trade.
The Fed will print "whatever it takes" to prevent a bear market and nominal GDP from contracting, even if they have to print an equivalent of market cap and GDP over time.
As long as the reserves remain primarily circulating between the Fed, TBTE primary dealer banks, and the US Treasury (with some leakage to non-bank financial firms), accelerating general price inflation will remain muted to periodically deflationary.
Meanwhile, Portugal is pulling a Syriza https://portugueseinsurgent.wordpress.com/2015/10/26/whats-next-for-port...
if he says it, BE LONG
it only means more QE's coming and he knows it (and got to buy from some dope head doesn't he ?!)
Crispin... I wonder if he got beat on much in school...
The short side has hurt lately, but every bear maret has short, sharp rallies. When the serious pullback starts there should be plenty of time to load up on SPXU. ZeroH and others have gotten us hurt by trying to pick the exact top. Nobody does that as you all know. A massive blow up is coming. Be ready with your shorting plan and make up for all those little losses from false starts to the dowbside.
Maybe a good time to be buying a few OTM SPX puts every week to dollar cost average into a modest short position that one can still afford to lose if the unreality of the last 7 years re-asserts.
No worries, NIRP and WWIII will fix everything.
What ever happened to Hugh Hendry?
http://www.eclectica-am.com/
is this short just been nano`sized?
i mean come on, WFT!
apple, intel, samsung, qualcomm,... etel will beat earnings just as amzn, msft, goog,fb did!
hopefully this is enough convincing to put this short to bed for good!
It's good to be short when you're an insider and you know it's coming. Right now being short means you're going to be raided by the big boys and the Federal Reserve who gives the hat tip to their friends.
These guys dont like being ass raped by Yellen and Draghi? Gert used to it, they dont care if you go under so long as JP Morgan and Goldman suceed.
Yea sure it's a great time to be short. Short metals and miners, short volatility and short FED credibility on raising rates.
Since you are uncertain how they will prevent a crash I will let you in on a little secret but don't tell anyone (they will print more money). You see, they can print unlimited cash and buy the entire float of every market if they want to.
On a serious note, they are fucked and everyone knows it. It is all over for the Bulls but for the crying.
Just means those guys are so underwater and are finally AS PREDICTED going long.
2 shortsqueezes people, and be out if your long then.
Be short is good advice!!
By the time his hedge going DoDo?? All that his left is short pants!! Hmmmm... yummy! for federal's prison old inmates...
Here are some signs of a coming recession.
1. Business loans for M&A not CAPEX.
http://www.zerohedge.com/news/2015-10-15/there-goes-final-pillar-us-recovery-loan-growth-paradox-explained
2. Factory orders continue to drop
http://www.zerohedge.com/news/2015-10-02/us-factory-orders-flash-recession-warning-drop-yoy-10th-month-row
3. Default risk spikes
http://www.zerohedge.com/news/2015-10-02/us-financials-default-risk-spikes-2-year-high
4. M&A set record
http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record/
5. Fed sees 2 bubbles
http://michaelekelley.com/2015/02/20/fed-warns-of-two-bubbles/
Here is how to prepare.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Here is how to get your mind off this stuff.
http://michaelekelley.com/category/humor/
Good luck!
I hate to see essentially rational people get trashed. BUT... that is quite possibly what will happen in the coming months. Why?
Because the predators-that-be, especially the central-banksters, want to destroy every honest, ethical, productive, benevolent human being on the planet. That is one of their primary goals, because those are the folks they consider their primary enemies.
Why so?
Because the billions of sheeple wandering around aimlessly present no challenge, and present no resistance.
However, by their nature, honest, ethical, productive, benevolent human beings tend to dislike and resist their opposites/nemeses, namely the predators-that-be (who are dishonest, unethical, destructive, malevolent).
The predators-that-be want to put everyone in a situation where they cannot resist, counter or thwart the coming mass culling and enslavement of the human population.
The sheeple are no problem for them... the sheeple are clueless, have no idea what is being done to them (or by whom), and have very few if any resources to resist, much less fight back.
Who in principle might be a problem for the predators-that-be is... those few humans who are alert enough to know what's going on, who know who is causing the destruction, who know how they should be able to profit from the destruction, and who might be able to turn those gains into an effective ability to resist and avoid [some of] the plans of the predators-that-be, or perhaps somehow even stop the predators-that-be before it is too late, or retaliate against them after the massively destructive consequences to come.
-----
The predators-that-be can see:
#1: Their enemies can see the world economy is on the verge of massive collapse.
#2: Their enemies intend to become rich and/or safe/secure by betting via "markets" that the collapse will happen when it should happen.
#3: If they manipulate their fake "markets" higher for a few months (when all rational judgement would assume the markets should collapse along with the world economy), they can drain enormous resources from their enemies.
AND SO THEY MIGHT.
-----
To be sure, reasonable (alert, smart, realistic) people can disagree about whether the predators-that-be have the power to delay a market collapse for several months. That should be sufficient to greatly damage their enemies... or at least those enemies who still imagine they can "win" by playing in these massively rigged "markets".
However, the fact is, nobody knows how much fiat, fake, fraud, fiction, fantasy, fractional-reserve debt-bits are being created every month by central-banksters, because nobody monitors the central-banks. Their operations are totally opaque.
And so, no limit exists on how much fiat they can shove into these "markets" to keep prices high... or make them rise dramatically into a classic bubble blow-off top.
And so, nobody except the predators-that-be know for sure.
-----
However, we do know the predators-that-be are predators, and absolutely take delight in royally screwing everyone... especially those they consider their enemies and/or potential adversaries at some point in the increasingly near future. So we certainly know they are capable of such actions, and have no scruples whatsoever to hold them back.
All the above is just my way of saying "be careful" to everyone who is their enemy, because I want as many of their enemies to have the ability and resources to survive and retaliate when the time comes. Which increasingly seems certain to be within months, not years.
Are you praying to people, here, for some man/woman to actuaize your scenarios?
I don't do dice. They fail.
Unless you have inside information, its always a good time to be short.