Odey Blasts Brown And Regulation, Defends Hedge Funds

Date: Friday, June 26, 2009
Author: FINalternatives

The head of Odey Asset Management is warning that the U.K. is in danger of becoming little better than impoverished Zimbabwe.

In an interview with the Daily Mail, Crispin Odey—newly appointed co-treasurer of Britain’s right-leaning Conservative Party—blasted the Labour Party government of Prime Minister Gordon Brown. He also colorfully expressed his distaste for the proposed hedge fund regulations offered up by the European Union and the United States.

“We have got a budget deficit which aims to be 12% of gross domestic product and we have a savings rate of 4%,” Odey said of the British economy under Brown.

“It means you need to attract foreigners to buy 8% of your bonds every year, and you are offering them a tepid drink,” he told the tabloid. “Foreigners have been busy selling gilts and the Bank of England busy buying them. The answer is that if you carry on, that is called Zimbabwean and that is monetization. Probably, we are going to have a visit to the [International Monetary Fund].”

But he saves his greatest fury for the regulatory fervor seizing lawmakers in Brussels and Washington.

“We are resistant because it is a lot of rubbish,” he said. The European Commission directive that proposes strict rules for hedge funds “is borne of the Germans hating Deutsche Börse and the ‘locust’ attacks, the French hating Madoff and what he did, and the Danes hating private equity because they took over TeleDenmark and turned it into a junk bond.” And he warned that “visceral legislation is a dangerous thing to do.”

In particular, he took aim at the idea that hedge fund are overlevered.

“If your fund is two-times leveraged, you are not allowed to have that. But if the company you invest in happens to be five-times leveraged, that is fine,” he said. “You cannot say lending to a company is a good thing, but lending to a hedge fund is a bad thing.”

He, like many of his peers, also objects to the idea that hedge funds are responsible for the global economic crisis. He is especially peeved by the blaming of short-selling for all of the market’s ails.

“What hurt the banks is what the banks did to themselves,” Odey said. “Not what we did to them.”

“The idiotic thing is why did anyone want to own a bank share before?”