With news about a newly discovered earth-like planet and out-of-this-world comments from Donald Trump, we hardly noticed when a little article on Bridgewater Associates passed through our orbit last week. It was a rare galactic phenomenon: the non-clarification.
As it turned out, there were two articles on Bridgewater last week, and it was the second we noticed most. The first was a page-one feature in the Wall Street Journal reporting that Bridgewater’s investment outlook for China had turned negative. It quoted from a note Bridgewater sent to its clients saying the drop in China’s stock market would dent consumer spending and dim China’s appeal for investors. The note ominously warned there now were “no safe places to invest.”
Although it occupied the first few paragraphs, Bridgewater was seldom mentioned in the rest of the WSJ article, which went on to note the views of other investment firms on China and other topics. (It even got in a mention of Bill Ackman’s long-running dispute with Herbalife.)
So we were surprised to see a second WSJ article the next day, saying that Bridgewater issue a statement the following day apparently disputing the WSJ report.
Here is Bridgewater’s complete statement:
“While the report to Bridgewater clients is a private communication which they want to continue to try to keep private, Ray Dalio and Bridgewater believe that too much has been made of the shift in their thinking and want to clarify their thinking.
“The observations that were made simply noted that falling stock prices have a negative wealth and negative psychological effect. 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.”
Normally when a firm takes issue with something a reporter is writing, it offers a comment of some kind. But Bridgewater declined that opportunity. Instead, it offered this three-paragraph clarification the next day that seemed to clarify nothing while breathing new life into a story that was fading into the rear-view mirror.
More puzzling, though, was what the statement said, or rather didn’t say. The statement doesn’t refute the claim that Bridgewater turned more negative on China. It reads like something a congressman or presidential candidate would issue after saying something a supporter didn’t like: Not a denial but meant to sound like one.
The statement also said Ray Dalio and Bridgewater wanted to “clarify their thinking,” which suggests the original missive to clients was imprecise or misleading – a damning admission by a firm that makes its living on getting things right.
Then again, maybe such ambiguity is exactly what Bridgewater wanted. After all, the firm is famously secretive, inscrutable as the farthest reaches of the universe.
Bridgewater’s statement also suggests it was surprised that its note to clients attracted attention at all. If true, that’s rather naïve. When you’re the one of the biggest and most successful hedge funds on the planet, your views will attract notice. Commentaries to clients will end up in a reporter’s hands; it happens all the time. (Indeed, many investment firms are quite happy for the attention when it does.)
It seems possible that the statement was an effort to smooth relations with Chinese officials. But Bridgewater isn’t like, say, Rupert Murdoch’s NewsCorp, which needs government approval to operate in China. Besides, speaking candidly and rattling governments are what big investors are supposed to do.
The general rule is that if you’re going to dispute a story, do it as the story is being written or immediately after it appears. Public opinion, like fresh cement, hardens quickly. Changing it later becomes very difficult.
Bridgewater’s statement probably didn’t change views very much, and it gave the story a fresh spin through the news cycle. Predictably, those articles repeated the claims that Bridgewater found objectionable in the first place.
Bridgewater’s clients can be forgiven if they are confused after all this.