A Recession That Will Be Remembered for 100 Years
A hedge fund manager who made millions after correctly predicting the credit crunch has warned major economies are entering a recession that will be ‘remembered in a hundred years’.
In a letter to his well-heeled customers, Crispin Odey predicted that ‘equity markets will get devastated’ and described it as the best time to bet on shares slumping in value since the recent financial crisis.
Citing the current turmoil in the markets, including a dramatic slump in the oil price and a ‘faltering Chinese economy’, he said: ‘This downcycle is likely to be remembered in a hundred years, when we hope it won’t be rated for ‘How good it looks for its age!’.
Oxford-educated Mr Odey is the founder of Odey Asset Management, which runs more than £7.6billion for investors around the world.
As one of the most successful hedge fund managers in the UK, he has made a fortune from betting on shares in companies plunging in value.
This is known in the industry as ‘shorting’, a process which involves borrowing shares and selling them in the hope that the price will fall and they can be bought back at a profit.
Mr Odey, 55, was one of the earliest to forecast that the borrowing binge that fuelled the economy would trigger a financial crisis.
But he came in for criticism when he was outed as one of the fund managers shorting the struggling Bradford & Bingley during the summer.
The tactic was hugely profitable for Mr Odey, who paid himself £28million after his company enjoyed a bumper year in 2008.
Despite the strong economic recovery in the UK, Mr Odey has grown increasingly gloomy over the last six months.
In his newsletter to clients he warned of problems further afield, with the slowing Chinese economy dragging down growth in Australia, South Africa and Brazil.
He said the fall in commodities such as oil, which has plunged from $115 a barrel in June last year to under $50, is ‘bringing with it pain to those heavily exposed’ – such as the Middle East, Venezuela, Argentina, mid-west USA, Canada, Norway and Scotland.
Closer to home, he warned the European Central Bank’s drastic efforts to revive the eurozone by printing £45billion a month through quantitative easing, would fail to prevent a damaging downturn.
He compared the combination of QE and negative interest rates to ‘pushing on a string’, and warned huge levels of debt to build up.
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