Odey Cites Hitler's Russia Debacle, Minsky for Bearish View

(Bloomberg) -- Crispin Odey, whose main hedge fund lost almost 50 percent last year through failed bets on falling asset prices, says he’s sticking with a bearish outlook because of the number of people borrowing money they can’t pay back.

Explaining his views, Odey cited Adolf Hitler’s armaments minister Fritz Todt, who predicted the German war effort would stall in Russia in 1942. “What he could see was that the lines of supply were at breaking point,” the fund manager wrote in an investor letter seen by Bloomberg News. “Success was the necessary ingredient of failure.”

A spokesman for his firm, Odey Asset Management, which manages $6.5 billion, declined to comment.

Odey warned in October that U.K. stocks could slump 80 percent as the economy suffered a recession and higher inflation following the Brexit vote. This month he wrote that investors should watch out for the “Minsky moment,” referring to the term inspired by economist Hyman Minsky to describe a sudden market collapse that follows the exhaustion of credit. The U.K. benchmark FTSE 100 index has risen 7.5 percent since Oct. 1.

“It will not just be subprime that undermines this cycle,” Odey wrote. “Disruptive technologies will do their bit too.”

Odey’s OEI Mac fund lost 9.9 percent during the first four months of this year after losing 49 percent in 2016, according to the newsletter. Hedge funds have gained about 3 percent on average through April this year, according to data compiled by Eurekahedge.

To contact the reporters on this story: Nishant Kumar in London at nkumar173@bloomberg.net, Macarena Munoz in Madrid at mmunoz39@bloomberg.net.

To contact the editors responsible for this story: Neil Callanan at ncallanan@bloomberg.net, Ross Larsen