Clark, whose firm oversees $1.2 billion, wrote that the current market patterns remind him of 2008, a year his hedge fund surged 31 percent. Margins and valuations are high, while commodities and interest rates are rising. Momentum strategies and exchange traded funds are herding ever more money into assets that worked up to now, such as technology, even as the fundamentals begin to deteriorate, Clark wrote in his letter for May.
‘Against Consensus’
“We are so against consensus in so many areas, I am more excited than worried at this point,” he wrote, adding he is sticking with his bearish positions despite two months of losses.
Odey, a vocal critic of central bank policies, cited this evidence for possible troubles ahead: The stocks investors bet against most heavily have risen by almost 30 percent in two months, according to Odey. The correlation between this happening and a market correction within six weeks is more than 80 percent, the hedge-fund manager wrote in his May letter. Odey has made money every month this year.
“The last five years of quantitative easing has floated all assets and all strategies. Investors were rewarded for both inactivity and buying the dip in everything,” Coffey wrote. “That approach will be challenging this year.”
This article was provided by Bloomberg News.