(Bloomberg) -- Stock markets are “now starting to go hyperbolic,” a sign that time is running out and a bubble is developing, London-based hedge fund manager Crispin Odey said in a letter to investors.
Odey, whose bearish bets led to a near 50 percent loss in his flagship fund last year, cited expensive stock valuations, narrowing market breadth and greater participation of individual investors to back his latest warning for potential market chaos.
“Having called these markets down in 2015, my record on such calls is not good,” Odey wrote in the letter. “However, the idea that we will continue along the lines of the last 10 years looks a dangerous starting point for strategic thinking.”
A spokesman for Odey Asset Management, which manages about $5.5 billion, declined to comment.
Odey, 58, has long been a critic of central bank policies since the financial crisis and quantitative easing. Earlier this year, he warned traders that their bullish bets could face troubles, while in May he told investors to watch out for a sudden market collapse following the exhaustion of credit. In October last year, the money manager said U.K. stocks could slump by 80 percent because of a potential recession and higher inflation.
But his bearish bets have so far led to losses. His Odey European Inc. fund lost 5.4 percent in September, extending losses in 2017 to 15.4 percent, according to the letter.
Quantitative tightening in the U.S. means money printing that has inflated asset prices globally is about to pause and savings need to be used to support bond prices. “Is it not like a burglar asking you to buy back your stolen possessions at an expensive price?” wrote Odey, who founded the firm in 1991.
The onset of tightening poses a risk to bond markets, he said. “When they last tried it in 2014 it nearly pulled the roof down.”
To contact the reporter on this story: Nishant Kumar in London at nkumar173@bloomberg.net.
To contact the editors responsible for this story: Neil Callanan at ncallanan@bloomberg.net, Josh Friedman, Vincent Bielski
©2017 Bloomberg L.P.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
