A Spectacular Turnaround Awaits?

The apocalyptic hedge fund manager Crispin Odey has warned in his latest newsletter that the stock market will be ruined. The hedge fund manager has 12 billion dollars under management and also correctly predicted the crash of 2007-2009, together with the boost of the central banks that have pushed stocks up since then.

Crispin Odey warns that large economies are on the brink of a recession that they will remember for another 100 years. The manager also added that the short opportunities will be just as good as in 2007-2009. He expects all of this to be kicked off by the quarterly earnings reports of Q1 of 2015. If this is the last bull that throws in the towel, Odey says, a spectacular turnaround awaits.

Big themes Odey has been pointing out since the second quarter of 2014 are now starting to take form. Disappointing growth in the Chinese economy, possibly back to 3 percent, a tough landing for countries who are betting on Chinese growth (like Australia, South Africa, and Brazil) and dropping commodity prices.

The Market Will Go Down

Odey stated that, although no one can predict how hard and long the commodity markets will fall, no one will have seen this coming. Many will say that the consequence of lower commodity prices will be countered by lower costs. The point is that, in Odey’s view, people who lose income to that are often faster to react than those who profit from them. In that situation, the odds of a recession are only higher.

Time will only tell how this will all work out. According to Odey, we are dealing with the first downward business cycle since 2008 regardless. Many investors do not believe that we can be going through this. They trust central banks to solve everything.

We have used all our monetary weapons to prevent a downturn, however, which put us in a very vulnerable spot according to Odey. If economic activity does not flourish or not even picks up, a painful round of defaults might be coming our way.