Singer, Ackman, Gundlach Express Serious Concern Over China

Hedge fund observers don’t often consider Paul Singer and Bill Ackman in the same sentence. While they are both activist hedge fund managers, they have very different styles. But today both Singer and Ackman agreed on one topic: China is a concern. Jeff Gundlach who is certainly not an activist also expressed similar sentiment.

Singer speaks out against China overtly propping up its markets

Speaking at the Delivering Alpha institutional investor conference in New York City and broadcast on CNBC, Singer complained about evaluating asset prices in a world where quantitative easing has numbed the senses. Some say the same holds true for investing in China, where punishment for short selling and a past that had less than optimal rule of law regarding accounting standards have been called into question.

Singer, known as a progressive Republican, a free market advocate who understands the derivatives risk around the world, said it is negative for China’s government to be propping up financial markets to the overt extent that they have. Such market manipulation is “a very damaging thing that connects with other parts of the world,” he said.

“How China and its stock market crash interacts with currency relationships, the confidence of investors around the globe – confidence in central banks, confidence in paper money – its hard to tell. But in a lot of risk management, looking at these macro factors, is connecting dots in a very dense fog or dust storm.” Singer, known among hedge fund managers to focus on risk management, has connected the derivatives dots and wants answers.

“The damage that’s been done to people’s perception” of the free market system, he noted. “All of a sudden you can’t trade and don’t even know a rough price…and your brokerage firm has become insolvent.”

Singer questions market manipulation

In this new world market environment, Singer questions manipulation across the board and notes that when free markets are manipulated, market participants don’t trust them to the same degree.

“Who can tell what the fair or unaffected price of a stock or bond in the developed world,” he said, pointing to the impact of quantitative easing on market dynamics and correlations.  Troubles in the work have the potential of “cascading through different parts of the world…and reducing the confidence in central banks,” he said.

Singer: Greece should leave the Eurozone

In regards to the decision by Greek leaders to accept rough austerity and the EU agreement, Singer says they “should have pulled out” and “what they have done to themselves is a tragedy.” This is a thought being echoed around the world on a risk management basis. Singer is noted for buying distressed debt of Argentina after it defaulted on its debt, in essence advising Greece to do the same.

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