Odey Sees `Terrifying' Mix in MiFID, Tapering, Asset Values

(Bloomberg) -- Crispin Odey, the London-based hedge fund manager known for his bearish outlook, says new European rules on research will result in less trading, less price discovery and less efficient markets.

MiFID II should cause the cost of capital to rise because it will give different levels of information to people in the market, resulting in those with less access to analysis trading less, Odey wrote in a letter to investors. The revised Markets in Financial Instruments Directive starts on Jan. 3. and forces firms to separate the cost of research from trading-related expenses incurred with investment banks.

At the same time, the Federal Reserve plans to start divesting the huge pile of financial assets it acquired through quantitative easing, the program unleashed to stimulate the global economy that has since boosted everything from stocks to real estate to record highs.

“For asset prices, a change to QE would be far from a happy solution,” he wrote in the letter to investors in his Odey Swan Fund for August. “What is terrifying is that MIFID II is arriving when, thanks to QE and the sight of endless cheap money, companies’ shares are at their most expensive. Hindsight is going to have a field day.”

Odey is known for his bearish outlook and criticism of central banks for quantitative easing. He has maintained that the credit cycle fueled by loose monetary policy has peaked as the Federal Reserve embarks on a path of tightening.

A spokesman for Odey declined to comment.

To contact the reporters on this story: Nishant Kumar in London at nkumar173@bloomberg.net, Neil Callanan in London at ncallanan@bloomberg.net.

To contact the editors responsible for this story: Elisa Martinuzzi at emartinuzzi@bloomberg.net, Jon Menon, Jurjen van de Pol