Bearish billionaires can have their own agendas

“Finance’s big guns are betting on bonds and chaos,” headlined Bloomberg last week, noting that a “dream team” – hedge fund billionaires Bill Ackman and Ray Dalio, bond guru Bill Gross, and JPMorgan chief Jamie Dimon – was “very worried about spiralling debt and global instability”.

The headline was somewhat exaggerated. Dimon, for instance, is cautious, but his words have been measured, not apocalyptic. This aside, loudmouth CNBC broadcaster Jim Cramer actually had a point when he told viewers not to take investment advice from “bearish billionaires”, saying they have different priorities and a different agenda to ordinary investors.

Take Ackman. He shorted US treasury bonds just three months ago, citing “structural changes” likely to drive higher long-term inflation. However, he closed that same bet last week, saying there was “too much risk in the world to remain short bonds” right now.

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Ackman is free to change his mind. At the height of the Covid-19 panic in March 2020, he went on CNBC to say that “hell is coming”.

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A week later, he closed his short hedge after bagging a $2.6 billion profit, saying the outlook for stocks had changed and that the economic shock arising from Covid would be “temporary”.

Hedge fund managers are a nimble bunch. Ordinary investors shouldn’t be surprised if bears turn bullish, or vice versa.