Ray Dalio's Short-Bet Puzzle Is Missing Some Pieces
Bridgewater could be overlooking the full
picture if it's relying solely on European economic data.
Hedge fund titan Ray Dalio is
famously enigmatic, but his latest wager may be the most puzzling yet.
reported on Thursday that the fund Dalio founded, Bridgewater Associates, has made a $22 billion bet that
many of Europe's biggest companies in the blue-chip Euro Stoxx 50 Index are poised to decline.
Add Stock Buybacks to the Causes of the Market Downturn
There's a new reason to dislike
stock buybacks: They contributed to last week's market downturn.
Some market watchers are
adding corporate share repurchases to the list of reasons for last week's turmoil, which already included
rising interest rates, higher inflation, growing government debt, volatility-linked investment funds and
Washington instability. More significantly, those pointing the finger at buybacks say continued corporate
stock purchases -- which, unlike some of those volatility funds, survived the brief market downturn --
will make the next one far worse.
Here's the logic: Companies over the past decade or so have
significantly increased buybacks to the point where they are now collectively the largest single buyer of
stocks. Some have called the market self-cannibalizing. Equity shrink is the nicer way to say that.
Corporations are not particularly price sensitive -- buybacks tend to rise with the market -- but
they do try over short periods to buy at the lowest average price. So in a long bull market, like the one
we are in now, corporations tend to step in to buy whenever there is a dip, which is what happened last
week. Goldman Sachs, for one, said that its unit that executes share buybacks received a surge of orders
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