- A coronavirus-fueled recession and resulting hit to global gross national product will most closely mirror the Great Depression, notoriously bearish fund manager Crispin Odey said, according to a Bloomberg report.
- Virus-induced lockdowns and the oil-price conflict place massive pressure on global markets and will push the world economy into a "different era" of weakened growth, he wrote in a note to clients.
- Odey's hedge fund posted a 21% gain in March amid heavy selling activity, according to Bloomberg. The fund posted several consecutive annual declines in recent years as the bull market surged onward.
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The all-but-certain recession set to arrive in the coronavirus's wake will resemble the Great Depression, notoriously bearish fund manager Crispin Odey said, according to a Bloomberg report.
The upcoming economic downturn "is not like 2008-9, nor 2001-2, nor even 1989-92," Odey told clients in a letter seen by Bloomberg. The virus-induced shutdowns and global oil-price war will push the world into a "different era" of stifled economic activity, he added.
"The fall in global gross national product for this year will echo 1931-2," the hedge fund manager wrote. "That was a terrible time when countries and institutions disappeared and characters like Adolf Hitler seized their chance to take over Germany."
Odey's pessimism hasn't failed his fund amid recent market sell-offs. Odey European posted a 21% gain through March's chaotic sessions, its biggest monthly win since the financial crisis, according to Bloomberg. The fund manager's gains follow years of losses as the bull market surged through early 2020.
While central banks and governments around the world have issued trillions of dollars in relief measures, restrictions attached to emergency loans threaten to curb a swift market recovery, Odey said. Multiple governments require firms tapping into relief pools to cancel dividend payments and buyback programs until the debt is repaid.
Wiping out the powerful drivers of shareholder value places the onus of economic recovery on banks, which still need to maintain profits and appease investors, Odey said.
"The idea that shareholders should be sacrificed to allow banks to make unprofitable loans to the private sector to help them through a difficult period shows just why governments have no idea how to incentivize the right behavior to get the right outcome," the fund manager wrote.
A long-dated government debt issuance with a 1.5% yield would have served as a more effective way to encourage bank lending, he said. Firms would buy government debt and issue emergency loans without cutting into corporate profits, Odey added.
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