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UK Hedge-Fund Star Odey: Coming Recession Will Be 'Remembered in 100 Years'

By    |   Friday, 30 January 2015 01:08 PM

U.K. hedge fund heavyweight Crispin Odey, founder of Odey Asset Management, warns that current global economic weakness will lead to a recession that will be remembered for the next century.

Major economies are on the precipice of another financial crisis, he wrote in a letter to shareholders obtained by the (London) Daily Mail.

"‘This down-cycle is likely to be remembered in 100 years, when we hope it won’t be rated for ‘How good it looks for its age!’"

And that, of course, is bad news for stocks.

"Equity markets will get devastated," said Odey, who added that this is the best time to short equities since the 2008 financial crisis — betting on shares in companies slumping in value.

Turmoil in financial markets, including oil's plunge to 5 ½-year lows, and China's "faltering economy" will help spark the global downturn, said Odey, who made millions after correctly predicting the 2008 global credit crunch.

But Odey doesn't expect the European Central Bank's quantitative easing program to save the eurozone economy.

"My point is that we used all our monetary firepower to avoid the first downturn in 2007, so we really are at a dangerous point," the Daily Mail quoted him as saying. "If economic activity far from picks up, but falters, then there will be a painful round of debt default."

Meanwhile, Mohamed El-Erian, chief economic adviser at Allianz, sees two risks to the global financial system.

"One is you have companies that are unhedged" when it comes to currency moves, he told CNBC. The dollar has hit multi-year highs against multiple currencies in recent weeks.

U.S. companies already are suffering hits to their earnings. "But that's nothing compared to emerging market corporations that are unhedged." El-Erian said.

"The second issue is this notion of lower volatility, the ability of central banks to repress volatility. They're battling. Look at the Russian central bank today. Look at the Swiss central bank today."

Russia's central bank is toiling to buoy the ruble, which has dropped by almost half over the past six months. And the Swiss Central Bank dropped its ceiling for the franc earlier this month.

"If we shake this low volatility paradigm, then we're undermining a main element of policy," El-Erian said.

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U.K. hedge fund heavyweight Crispin Odey, founder of Odey Asset Management, predicts the current global economic weakness might trigger a recession likely to be remembered in 100 years.
Odey, recession, 100, years
Friday, 30 January 2015 01:08 PM
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