Crispin Odey had a rare good month in October, according to an investor letter seen by ValueWalk. The outspoken investor’s flagship Odey European, which has struggled to hold on to assets this year, produced a positive return of 2.3% for investors, beating its benchmark (MSCI Daily TR Net Europe) return of 2% for the month.

Unfortunately, these gains have hardly made a dent in the year-to-date losses. The hedge fund has lost 13.4% year-to-date, underperforming its benchmark by 25.1% and taking losses over the past three years to 55.2%, an underperformance of 81.4%. Still, since the fund’s founding in 1992, Odey European has beaten its MSCI benchmark by 0.6% annualized.

Bearish Odey Bearish Odey

These losses have lead to investors withdrawing funds from Odey’s stewardship at an alarming rate. According to the October fund tearsheet, the size of the fund had fallen to just €182 million at the end of the month, down from €2.5bn at the start of 2015.

Total assets managed by Odey Asset Management have fallen from $11.7 billion at the start of 2015 to $6 billion at the end of August and $5.4 billion by the end of October.

Bearish Odey Continues to Wait for the Market Crash

Despite his losses, Odey continues to run a bearishly positioned portfolio with notional exposure of 144% short UK and Japanese soverign debt. He also has a short in Apple although unclear if that is a hedge or a bet against the tech giant.

And in his manager’s report section of the monthly update, Odey once again attacks central banks and policymakers’ decisions to increase spending at a time when interest rates remain at record lows:

“Evidence is growing that not only investors but borrowers and governments are moving away from austerity in favor of borrowing and spending. And this comes just at a time when the world economy is booming. Usually, at this point in the economic cycle, central banks would be raising interest rates to avoid inflation, but Carney is talking about ‘welcoming wage increases and a rise in inflationary expectations.’”

As investors take their lead from central banks, Odey wonders if, with ” central banks happy that QE can live much longer,” investors are taking an excessive risk by chasing asset prices even higher:

“But are they right to ignore the changes in behavior, both by individuals and by governments? Populism and general borrowing increase the chances that demand will outpace supply across the board. It is quite a risk to meet these changes, with assets now yielding less than they have in the last two hundred years. What faith we all have.”

Odey’s argument against central banks was reinforced by the managers of the Odey Odyssey Fund earlier this month. Odyssey’s managers are worried about the impact central banks’ balance sheet unwind will have on the market, particularly interest rates.  As I covered earlier:

“The broad point is that the Federal Reserve’s balance sheet unwind represent a sizeable increase in the call on savings, domestic and global. At the same time, it is very likely that the ECB will be reducing the volume of its money printing, which has the same impact as a reduction in the flow of global savings. Real interest rates are the equilibrating mechanism for matching the supply and demand of savings. The unknown from hereon is how large an increase in real yields is needed to balance this market. To put the changes into a global context, the $600 bill balance sheet reduction that the Fed proposes for 2019 is equivalent to 2.9% of IMF’s calculation of the flow of global gross savings. A shift of this magnitude is going to leave an impression on asset prices. Real yields will rise to attract the necessary funds and switches out of other asset classes will push their yields higher as well. Ultimately, an increase in savings from somewhere will be required, which is the same thing as saying a reduction in spending will be needed. If the US were a closed economy, the increased call on savings would pose a significant risk of recession. Because the US can, in fact, tap the global pool of savings, the downside impact on spending will be diffused across the world.”