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Tory donor makes huge profits from falling pound

‘It’s been helpful’, says Crispin Odey on his bets against Sterling amid market turmoil

Adam Forrest
Tuesday 27 September 2022 13:21 BST
Bank of England should consider emergency meeting, former deputy governor says

Conservative party donor Crispin Odey is among those enjoying huge profits from the fall in the pound amid the market turmoil sparked by Kwasi Kwarteng’s mini-Budget.

Electoral Commission records show that the hedge fund manager – who once employed Mr Kwarteng as a consultant – has donated more than £350,000 to the Tories.

Odey Asset Management’s European hedge fund is said to be up about 145 per cent after Mr Odey’s firm bet against the pound and government bonds in the gilts market.

“It’s been helpful,” Mr Odey told the Financial Times on his short position on Sterling, while describing his bets against gilts as “the gifts that keep on giving”.

The Tory donor dismissed that idea that he had any kind of trading advantage because Mr Kwarteng previously worked for his firm.

“There’s a mad idea that one’s behind every twist and turn,” he said. “All I can do is catch the wind now and again.”

Mr Odey and other economists believe Sterling could slump to parity with the US dollar for the first time. “I don’t think you can start getting bullish on sterling,” said the hedge fund manager – adding that it would continue to “bounce around”.

The pound steadied at about 1.08 on Tuesday, as it recovered slightly from the record low of 1.0327 against the US dollar the previous day. British government bond prices collapsed on Monday their highest in over a decade.

Former US Treasury chief Larry Summers said the markets were treating Britain like a developing country where “credibility” is lost after Friday’s borrowing-fuelled tax cut plan.

JP Morgan economist Allan Monks told Reuters that Mr Kwarteng would have to “reverse or reconsider” their strategy to stop things getting worse.

“There is still no clear sign that the source of the problem – the government’s fiscal strategy – is being reversed or reconsidered. This will need to happen before November in order to avoid a much worse outcome for the economy.”

Paul Donovan, chief economist of UBS Global Wealth Management, has warned that investors seemed to view Tory party in charge of government as “a doomsday cult”.

Virgin Atlantic chief executive Shai Weiss also suggested Mr Kwarteng and Liz Truss should “reverse course” to halt the perception of “unsustainable perceived weakness in international markets”

The airline boss added: “Sometimes all of us in this room should be humble enough to say, ‘If I did something that is not working, maybe I should reverse course.’ That is not a bad thing to do.”

Germany’s finance minister Christian Lindner has questioned the “experimental” economic plan.

“In the UK, a major experiment is starting as the state simultaneously puts its foot on the gas while the central bank steps on the brakes,” he told an event last night, Bloomberg reported.

Sir Charlie Bean, the Bank of England’s former deputy governor for monetary policy, said the Bank should consider an emergency meeting in light of the UK economy’s current state.

He told BBC Radio 4’s Today programme: “I think on this occasion ... I certainly would have been counselling the governor that I think this is one of the occasions where [and emergency meeting] might have made sense.”

Sir Charlie also warned: “It now costs the UK government more to borrow than Italy or Greece, who we have traditionally thought of as being not quite basket cases, but certainly weaker-performing sovereign entities.”

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