An expression used when someone is in a bad mood. Similar to "waking up on the wrong side of the bed".
Friend: "Ugh! I'm so fed up with everything!"
Me: "Looks like someone's been drinking muddy water.."
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Drinking muddy water is a term used to describe someone blocking your view. Examples would be standing in front of a TV or blocking a camera's view of the subject.
James stop drinking muddy water we are trying to watch the game