Great Depression Is Closest Parallel to Pandemic, Warns Odey
A spokesman for London-based Odey Asset Management declined to comment.
(Bloomberg) --
The global economy is slipping into a “different era” as the devastation in industries from oil to services roils markets, hedge fund manager Crispin Odey cautioned his investors.
“This is not like 2008-9, nor 2001-2, nor even 1989-92,” Odey wrote in a letter to clients seen by Bloomberg. “The fall in global gross national product for this year will echo 1931-2. That was a terrible time when countries and institutions disappeared and characters like Adolf Hitler seized their chance to take over Germany.”
The warning follows a 21% gain in his flagship Odey European Inc. fund in March, the biggest monthly increase in 11 years, according to the letter. Odey, known for his bearish views, is recovering from sharp losses over the past five years as bets that markets would fall misfired.
Odey is among a small number of bearish investors profiting from the market crash last month. His fund, which has shrunk over the years and now manages only about $800 million, lost money in four of the five years from 2015 to 2019, according to the letter.
A spokesman for London-based Odey Asset Management declined to comment.
The services industry faces defaulted customers and no revenues for months as the spread of the deadly coronavirus continues to lock-down countries across continents. The outbreak’s impact was exacerbated by the oil war, Odey wrote.
The money manager, who has long been a vocal critic of central banks and government policies, also turned his attention to decisions by some of Britain’s biggest lenders to cancel dividend payouts. Regulators pushed them to free up more money for loans to counter the fallout from the pandemic and withhold cash payouts for top staff.
“The idea that shareholders should be sacrificed to allow banks to make unprofitable loans to the private sector to help them through a difficult period shows just why governments have no idea how to incentivize the right behavior to get the right outcome,” Odey wrote.
Rather than another round of quantitative easing, the U.K. government should have issued debt at the long end of the bond market and paid a 1.5% yield, the hedge fund manager said. The banks would have bought the debt and then been invited to lend in ways that could have not cost them any profits, he added.
©2020 Bloomberg L.P.