Stock valuations "mouth-watering"

LONDON (Reuters) - Valuations and yields in stock and bonds markets are now "mouth-watering", according to Crispin Odey, on of the UK's top hedge fund managers, who says investors can close their eyes and ears to those telling them to sell.

Odey, who is chief investment officer at Odey Asset Management, said that while many investors had been "sucked in to investing" in falling markets, only to lose money as prices fell further, the balance is now in favour of investors taking risks.

"Up until now, to survive in these markets you have needed your wits, your eyes and your ears. My own view is that the falls in both share prices and bond prices have eliminated the need for most of these senses," he said in a note to investors, obtained by Reuters.

"Hanging on to yields of 12-14 percent, you can close your eyes and your eyes to those who would have you sell."

Odey's portfolio is currently net long equities, including insurance, media and energy, and net short bonds.

Shorting means betting on a lower price for a security in the future.

"Today (markets) offer returns that are mouth-watering, but will investors, who have never taken a risk before now take one when the return/risk profiles are clearly in favour of the risk-taker?"

So far this year Odey's 928 million euro (797 million pound) European fund is up 3.38 percent while the index has fallen 37.34 percent.

In October it fell 2.57 percent, including a 1.65 percent loss on Volkswagen (VOWG.DE), whose share price more than quadrupled over several days after Porsche (PSHG_p.DE) said it had effective control of 74.1 percent of VW, leaving less than 6 percent tradable in the market.

(Reporting by Laurence Fletcher)