Are Ray Dalio and his colleagues planning to get into politics? It sure seems like it, given their recent conflicting missives sent out to their clients and press in one day. A lot of attention was given to stunning comments the Bridgewater Associates founder and his colleagues made in a 10-page letter to clients and first reported by the Wall Street Journal — and subsequently obtained by Alpha — which starts off saying: “Our views about China have changed as a result of recent development in the stock market.” However, during the morning, after the report was widely read and reacted to, Bridgewater sent out a “clarification” asserting that its view on China “remains the same.” Huh? In other words, its view on China changed until it didn’t change.
The root of this walk-back was the letter’s detailed analysis of the recent plunge in the Chinese stock market. Bridgewater explains that until now, it felt that debt and economic restructurings would be negative for growth over the near term but positive over the long term. But it adds in the report that while developments in the stock market would support growth, recent developments have led Bridgewater to deem them negative for growth.
“While we would ordinarily consider the impact of the stock market bubble bursting to be a rather small net negative because the percentage of the population that is invested in the stock market and the percentage of household savings invested in stocks are both small, it appears that the repercussions of the stock market’s declines will probably be greater,” the letter goes on to state. “Because the forces on growth are coming from debt restructurings, economic restructurings and real estate and stock market bubbles bursting all at the same time, we are now seeing mutually reinforcing negative forces on growth.”
In the clarification statement fired off to the media, Bridgewater asserts that “too much has been made” of the shift in thinking. “The observations that were made simply noted that falling stock prices have a negative wealth and negative psychological effect,” it explains. “When a classic stock market bubble (supported by unsophisticated investors buying stocks on a lot of margin) bursts there are negative growth effects. When combined with the debt and economic restructurings underway, that will most likely result in slower growth, and more stimulative government policies to offset these downward pressures. Bridgewater’s view that China faces debt and economic restructuring challenges, and that it has the resources and the capable leaders to manage these challenges, remains the same.”
Clear now?
___
One day after Qualcomm announced a series of cost cuts, layoffs and changes to its board of directors as part of a settlement with activist hedge fund firm Jana Partners, Wall Street’s sell-side seemed divided over the ramifications.
For example, investment bank Stifel Nicolaus cut its price target from $78 to $70 but maintained its Buy rating. It points out in a note that the chip maker provided disappointing guidance “as challenges in its chip business deepened.” However, the bank is encouraged by the series of changes Qualcomm also announced, asserting in the note: “Most of the downside is largely reflected in the stock. We believe that the restructuring and strategic realignment should unlock value in the stock.”
Barclays, on the other hand, maintained its Overweight rating and $77 price target. “The strategic moves are the first signs of meaningful change since activist investors got involved in the stock, and we applaud the move to cut $1.4B in spending and conduct a comprehensive review of corporate structure and other potential moves to create shareholder value,” it states in a note to clients.
___
David Einhorn’s Greenlight Capital boosted its stake in CONSOL Energy to 29.6 million shares, or 12.9 percent of the total outstanding. The coal and natural gas company, Greenlight’s fourth-largest long position at the end of the first quarter, plunged 22 percent in June and 14 percent in May.
___
Kenneth Griffin’s Chicago-based Citadel said it owns more than 3.84 million shares of Seritage Growth Properties, or 15.6 percent of the real estate investment trust recently created by Sears as part of a sale-leaseback transaction. Sears sold 235 Sears and Kmart stores to Seritage, along with Sears’ 50 percent interests in joint ventures with Simon Property Group, General Growth Properties and The Macerich Company. Those three real estate giants together hold another 31 Sears Holdings properties.
___
Falcon Edge Capital is one of several investors to participate in the $25 million Series C funding for Mswipe Technologies, an India-based mobile payment services provider. Before this deal, we recently reported that New York–based Falcon Edge — founded in 2012 by Richard Gerson, a so-called Tiger Grandcub — had invested more than $93 million in seven private companies in a portfolio of side pockets since April 2014.
___
Viking Global Investors, the Greenwich, Connecticut-based hedge fund firm co-founded by Tiger Cub O. Andreas Halvorsen, led a $45 million, Series B financing for Ginkgo Bioworks, which describes itself as an organism design company.
___
Total hedge fund assets declined by 1.57 percent in June, to $3.118 trillion, according to the calculations of data tracker eVestment. Even so, eVestment points out that investors pumped $48.6 million into hedge funds in the second quarter, the second largest quarterly inflow since the third quarter of 2009. “After January’s spike in redemptions, investors have steadily been allocating to hedge funds focused on equity markets,” according to the firm.
