Odey:Enjoy the bubble in equity prices
CRISPIN Odey, the veteran hedge fund manager who founded Odey Asset Management, has told his investors to enjoy the rapidly growing bubble in the stock market as it is being “sponsored” by the government.
Odey has told clients to jump in and take advantage of the runaway markets, which are being underpinned by the Bank of England’s £175bn quantitative easing programme.
Many analysts have warned of a correction on equity markets, but Odey has suggested the bubble will continue until the end of the year.
“Individuals and institutions are stampeding into real assets – eager to have anything but cash or government bonds,” said Odey in a note to his clients.
“At some point the quantitative easing will have to come to an end but, until it does, this bull market is sponsored by HMG (Her Majesty’s Government) and everyone should enjoy it.”
The Bank’s quantitative easing programme involves creating money that did not previously exist and using it to buy ultra-safe government-issued bonds.
This increases the supply of money in the economy, but Odey has said the massive purchasing programme had pushed bond prices too high.
This is putting investors off of bonds, which tend to deliver very low yields due to their relative safety compared to other types of asset.
Odey says that investors are therefore storming into equity markets in search of greater returns, creating the market bubble.
The FTSE 100 index of the biggest UK companies last week broke through the 5,000-points mark, after hitting a low of 3,512 back in March at the depths of the financial crisis.