Crispin Odey bags a fortune shorting gilts UK government bonds.
Crispin Odey is well-known in the investment circle as a British hedge fund manager who has made his fortune shorting UK assets.
Crispin Odey’s big wins come from making in the money bearish wages short bets that profit from a decline in asset prices.
His big break came during the 2008 subprime financial crisis, where he opened short positions in banking stocks.
His 2008 bearish wages against banks made him 28 million pounds that year, and Times newspaper named Crispin Odey a “Business Big Shot.”
So a gambler, backed by the infamous George Soros, who produces and invents nothing, makes millions betting on the demise of a system, then gets titled business big shot.
Could this be why the west is in free fall?
When those in the upper echelons of society derive fortune and fame from a crisis, that encourages ongoing crisis and no solutions.
George Soros, who previously provided Crispin Odey’s fund with seed capital, has been deemed a national security threat by a growing list of countries. George Soros is even persona non grata in Israel.
“Crispin Odey is well-known in the investment circle as a British hedge fund manager who has made his fortune shorting UK assets”
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Crispin Odey bags a fortune shorting gilts UK government bonds is history repeating itself
The recent collapse of GBP in September 2022 is similar to that in September 1992, exactly three decades ago, which came to be known as black Wednesday.
September 16, 2022, was the day that came to be known as the day when speculators broke the Bank of England. George Soros made one billion dollars that day shorting, profiting from the GBP crash.
On Black Wednesday, three decades ago, the UK Government was forced to withdraw sterling from the European Exchange Rate Mechanism after a failed attempt to keep its exchange rate above the lower limit required for ERM participation. The Bank of England attempted to defend the pound by raising interest rates, to no avail, as the pound kept losing its value. Moreover, the higher interest rates sent mortgage rates spiraling, which triggered a housing market crash.
The crisis damaged the credibility of the government’s handling of economic matters. The ruling Conservative Party suffered a landslide defeat five years later at the 1997 United Kingdom general election and did not return to power until 2010.
But the recovery of the UK economy, following Black Wednesday, led to a reassessment of the legacy of the crisis, as John Major’s government adopted inflation targeting policy as an alternative to the ERM and set the foundation for a prospering economy in the years before the financial crisis of 2007–08, then the British public turned increasingly Eurosceptic.
“On Black Wednesday, three decades ago, the UK Government was forced to withdraw sterling from the European Exchange Rate Mechanism”
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Crispin Odey bags a fortune shorting gilts UK government bonds is eerily similar to three decades ago during black Wednesday
Crispin Odey’s main fund is up 145% in 2022 after shorting long-dated UK debt.
Betting against the price of, or shorting, government bonds has been one of the trades of the year as soaring inflation forces central banks to hike interest rates more aggressively than was forecasted.
Rising inflation makes fixed income investments, such as government bonds unattractive, particularly when real yields are negative.
So the UK Consumer Prices Index (CPI) rose by 10.1% in the 12 months to July, and the current Uk 10-year gilt yields 4%, at the time of writing this piece. In other words, real yields on the UK 10-year is negative 6.1% investors are losing 6% of capital due to inflation holding UK gilts.
If inflation remains high, yields on gilts will also have to rise, making it challenging for the Uk treasury to finance its ballooning public deficit. So Uk Gilts could keep falling, bearing in mind yield and price move in opposite directions.
Moreover, to make matters worse high-income tax cuts are being proposed. So with the UK economy in recession and tax revenue dwindling the UK will need to go to the bond market to finance its public deficit. But investors will want higher yields.
GBP is not a reserve currency, in fact since Brexit GBP is performing more like an emerging currency.
“Odey, whose firm Odey Asset Management manages 4 billion pounds ($4.52 billion) in assets, believes higher inflation is here to stay” – Ray Dalio
In light of the above Crispin Odey bags, a fortune shorting gilts could continue to be a profitable trade
The UK economy is in a perilous situation, Exiting from the world’s largest trading bloc, with a GDP of two trillion dollars has already made it unattractive to foreign investors who would rather invest in a country that has access to the EU market.
It would be naive to think the new UK PM Truss can negotiate a favorable economic trading deal with the EU.
If the UK were to succeed outside the EU then other EU member countries would also want to exit.
So it is a pipe dream to expect the UK to negotiate a favorable economic trading term with the EU.
So in light of the above, we see a potential steep recession in the UK and GBP parity with the USD, falling even lower.
UK manufacturing is virtually nonexistent. However, the defense sector still exists, BAE Systems is the largest defense manufacturer in Europe, then there is finance.
Crispin Odey bags a fortune shorting gilts, and he believes the trade has millage
Odey, whose firm Odey Asset Management manages 4 billion pounds ($4.52 billion) in assets, believes higher inflation is here to stay and central banks will need to raise rates faster, according to one of the sources, who asked not to be named because of the sensitivity of the matter.
