It has been a… volatile year for Crispin Odey. After a less than stellar 2015 in which his flagship fund loss 20%, Odey was delighted when his bearish strategy worked during the selloff in early 2016, resulting in a 14% profit in the first two weeks of the year, leading to his mid-February prediction that “This Shorting Opportunity Is As Great As 2007-2009“.
What followed next was the most brutal short squeeze in history, pushing US stocks in a near-straight line to just why of all time highs with global stocks going along for the ride. By late March, Odey’s head was spinning when as we reported citing his investor letter, his $11 billion fund was being rocked by unprecedented 5% daily swings, lamenting “It’s No Longer A Market But A Battlefield.”
By mid-April it was carnage: according to the FT, “the value of the €729m Odey European Fund had fallen 31.1% YTD, dragging it back to its lowest level since January 2012. His large bets against currencies and equities have gone awry, making his stockpicking fund one of the worst performers among large vehicles this year.” And yet, Odey refused to stop fighting the central banks:
Losses in the banking sector at this point in the cycle are really bad news because banks are already suffering from weakening margins. They need rights issues to deal with these losses, but why should anyone subscribe to a rights issue when zero interest rates promise no let up to a fall in profits? The only way that banks could become attractive to underwriters of the shares are if profits are rising and the only way that profits can rise is if their loan book gets repriced. Yes, only higher interest rates would make banks attractive, but higher interest rates would bring on the recession that has been kept at bay by QE and zero interest rates. Less QE and more QED.
Impressive conviction, even more impressive that it came at a time when Odey was down over 30% for the year.
Well, after a truly hair-raising first half to 2016, if not so much for billionaire Odey as for his LPs, he appears to have finally hit a home run with Brexit. According to Bloomberg, Odey’s “winning run continued with the flagship Fund up 21% in just two days.” The days in question: Friday and Monday, when the market’s reaction to the Brexit vote was nothing short of surreal (it does, however, make one wonder what his loss would have been had Leave won).
In any case, congratulations to Odey. Here are the details:
Odey Asset Management’s boost from last week’s vote for Britain to leave the EU continued into a second day, with the flagship Odey European Inc. (OEI) fund recording a total gain of ~21% over Friday and Monday, according to an e-mail to investors seen by Bloomberg News.
Fund performance on Friday June 24:
- OEI +15.7%, OEI Mac +15.7%, Swan +12.4%, Opus +3.66%
Fund performance on Monday June 27:
- OEI +5.3%, OEI Mac +5.4%, Swan +5.1%, Opus +0.2%
Still, despite this impressive 2-day surge, Odey is likely still down for the year as the flaghsip fund was down 24.8% through June 15, which is still an improvement from the -40.7% through the end of May.
So has he changed his dramatically bearish outlook? Not at all. According to Bloomberg, his positioning remains little changed as Odey thinks there is no change to the global outlook; in his email he notes that GDP growth is slowing worldwide, EU banks are still in serious trouble, China’s credit stimulus is ending with no boost to GDP and adds that monetary stimulus and the banks’ transmission mechanism has failed.
Finally, for those curious what Odey’s top positions are, here are his biggest holdings as of May 31; we doubt these have changed much in the past 4 weeks.
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