(Bloomberg) -- It’s hard to be a bear these days.
Take Crispin Odey, whose main hedge fund has tumbled by two thirds in three years because of bets against the market. He blames his losses partly on banks that helped troubled companies to keep their own investments intact.
“As a bear, this market has been so painful,” the fund manager wrote in a letter to investors after his Odey European Inc. fund declined more than 20 percent last year in its third successive annual loss. “Every occasion in which a company gets caught between a squeeze in margin and an inability, because of competitive conditions, to pass on cost increases, banks have come to the rescue.”
Odey has been a persistent critic of central banks pumping money into global economies and has warned of a developing bubble in stock markets. He’s now extending that criticism to what he calls the application of “fairy dust” by banks to ailing companies.
“Loan covenants have been waived, lease obligations relaxed -- fairy dust has been applied," Odey wrote, citing Tullow Oil Plc’s rescheduling of loan repayments. Odey is among the short sellers of the London-based oil and gas producer.
Spokesmen for Odey Asset Management, which managed $5.4 billion at the end of October, and Tullow Oil declined to comment.
In 2016, Odey said U.K. stocks could slump by 80 percent because of a potential recession and higher inflation. Last year, he warned traders that their bullish bets could face trouble, while in May he told investors to watch out for a sudden market collapse.
The S&P 500 share index, meanwhile, surged 22 percent last year with dividends reinvested, with hedge funds gaining almost 9 percent on an average, their best performance since 2013, according to Hedge Fund Research.
Odey is hoping for a correction in these gains, which have left his fund needing to make 190 percent just to recover its losses since 2015.
While acknowledging the optimism in global growth and emerging consumer confidence, Odey reissued his warning against rising stock valuations and increasing risks. He estimated surging oil prices alone will add 1.2 percentage points to global inflation by the end of the first quarter -- potentially acting as a brake on investment.
“For now, all the excitement is around the fact that fear no longer guards the forest,” Odey said. A conscious policy by central banks to keep interest rates low “is ensuring that the global boom has nothing to slow it down.”
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