The Fed’s Jackson Hole meeting and a key inflation reading: What’s coming this week.
The Federal Reserve’s annual economic symposium will be held virtually. Jerome H. Powell will speak on Friday and is expected to reveal details about how and when the central bank intends to wind down its bond-buying.
Hedge Fund Chief Defends His Firm’s Bet Against GameStop
In a House Financial Services Committee hearing, Gabriel Plotkin, founder and chief executive of the hedge fund Melvin Capital, defended his firm’s long-term strategy in betting that GameStop shares would fall.
Contrary to many reports, Melvin Capital was not bailed out in the midst of these events. Citadel proactively reached out to become a new investor, similar to the investments others make in our fund. It was an opportunity for Citadel to buy low and earn returns for its investors if and when our fund’s value went up. To be sure, Melvin was managing through a difficult time, but we always had margin access and we were not seeking a cash infusion. And absolutely none of Melvin’s short positions are part of any effort to artificially depress or manipulate downward the price of the stock. Nothing about our short position prevents a company from achieving its objectives. It is just Melvin’s view about whether it will. Specific to GameStop, we had a research-supported view well before the recent events. In fact, we’ve been short GameStop since Melvin’s inception six years earlier, because we believed and still believe that its business model, selling new and used video games in physical stores, is being overtaken by digital downloads through the internet. And that trend only accelerated in 2020 when, because of the pandemic, people were downloading video games at home. As a result, the gaming industry had its best year ever, but GameStop had significant losses. In January 2021, a group on Reddit began to make posts about Melvin’s specific investments. They took information contained in our S.E.C. filings and encouraged others to trade in the opposite direction. Many of these posts were laced with anti-Semitic slurs directed at me and others. Ordinary investors who were convinced by a misleading frenzy to buy GameStop at $100, $200, or even $483 have now lost significant amounts. When this frenzy began, Melvin started closing out its position at GameStop at a loss, not because our investment thesis had changed but because something unprecedented was happening. We also reduced many other Melvin positions at significant losses, both long and short, that were the subject of similar posts.
In a House Financial Services Committee hearing, Gabriel Plotkin, founder and chief executive of the hedge fund Melvin Capital, defended his firm’s long-term strategy in betting that GameStop shares would fall.CreditCredit…Financial Services Committee
The hedge fund Citadel pumped billions of dollars into Melvin Capital after that fund’s bet against GameStop went bad, leading to huge losses. Now, Citadel is taking some of its money back.
Citadel has notified Melvin of its plans to retrieve $500 million of the $2 billion it injected in late January, according to two people briefed on the matter, who were not authorized to speak publicly about it. Under the terms of Citadel’s investment, the money will be returned at the end of September, the people said, as the third quarter draws to a close.
Citadel’s plan was first reported by The Wall Street Journal.
The cash infusion came in late January as Melvin was grappling with a huge turnaround in its short bet of GameStop. GameStop’s shares flatlined in recent years as it struggled to refashion itself from a brick-and-mortar video-game retailer into a more modern e-commerce company. But the company’s stock skyrocketed in January, after new directors from Chewy.com, which sells pet products, were named and as small investors piled into the stock, goaded on by the WallStreetBets forum on Reddit.
Melvin took heavy losses as it scrambled to cover the costs of its wrong-way trade. Some of its other short positions, including its bet against the movie-theater company AMC Entertainment, were hurting it, too.
Citadel, which is based in Chicago, and Point72 Asset Management — a fund based in Stamford, Conn., that Melvin’s founder, Gabriel Plotkin, once worked at — stepped in with a combined $2.75 billion in cash on Jan. 25. The injections helped stabilize Melvin, which has generated double-digit-percentage returns since Feb. 1, according to one of the people, who was briefed on its performance.
Melvin is still down 41 percent for this year through July, according to an investor letter reviewed by The New York Times, because of its heavy losses from January.
As part of its investment, Citadel receives a cut of Melvin’s revenue, in addition to the returns it gets on its money, the two people said. Citadel was also given the right to pull out at least some of its cash as early as the third quarter of this year, these people added — a right it is now exercising. (Hedge fund investors are typically required to leave their capital invested for a longer period.) Citadel, which manages $38 billion in assets, is itself up about 9 percent through mid-August, according to one of the people, who had been briefed on the firm’s returns.
Mr. Plotkin declined to comment. Kenneth C. Griffin, Citadel’s founder, did not respond to requests for comment.
Point72 is staying put.
“I have the same deal as Ken,” said Point72’s chief executive, Steven Cohen, “and no plans to redeem.”
As companies put off bringing employees back to offices, service businesses that cater to office workers have suffered.Credit…Gabriela Bhaskar/The New York Times
New York has lagged behind the rest of the country in its economic recovery, with a 10.5 percent unemployment rate that is nearly twice the national average. Now, rather than seeing the fuller rebound it was counting on, the city is facing fresh challenges.
Overall employment remains more than half a million jobs below where it was before the pandemic, with steep losses persisting in the leisure and hospitality industries and in other blue-collar fields.
Many companies have scrapped plans to bring employees back to the office shortly. Boston Properties, which owns nearly 12 million square feet of space in the New York region, said about 40 percent of prepandemic occupants had returned to its buildings earlier in the summer, based on lobby badge swipes. In August, that figure had dipped to around 30 percent.
It is less clear whether some suburban workers will ever return to the city and to their sometimes-arduous commutes. Greenberg Traurig, a global law firm, reduced its planned Manhattan footprint and now plans to open two new offices on Long Island, where many of its lawyers and investor clients relocated to during the pandemic.
More than any other American city, New York counts on international tourists. But visitors from Europe continue to be barred. Domestic travelers have returned to New York in rising numbers, but they do not stay as long or spend as much as overseas tourists.
There are signs of hope. But even as the city sponsored an official Homecoming Week, cancellations of trade shows and other big events have mounted. READ THE ARTICLE ->
Many states have their own Covid-tracking apps to keep local residents informed.Credit…Google; COVID Alert NY
As some people head back to the office or classroom after more than 18 months of pandemic disruption, maintaining social distance remains a concern, especially with the highly contagious Delta variant spreading nationwide. J. D. Biersdorfer, The New York Times’s Tech Tip columnist, has a few simple suggestions for using your smartphone to help stay informed and safe if you’re returning to the office or school.
Stay informed: Regular checks of school, municipal and state websites can keep you up-to-date about mask mandates, vaccine requirements, quarantines and other Covid-related news.
Carry your card: Certain institutions, venues and employers now have a vaccine requirement, and many New York businesses require proof and will enforce it next month. Your paper vaccination card serves as proof, but you can keep it safe at home and go digital.
Modify your commute: Commuting is more of a challenge for people who use mass transit. Last year, both Apple and Google added coronavirus-related business information to their maps apps, and a more recent Google Maps update now shows busy areas so you can better avoid crowds.
Fuel up: When a drive-through window isn’t an option for picking up your breakfast or lunch from a distance, there are other ways to minimize your exposure, like phoning in a pickup order to your local diner or bodega.
Video to go: The mobile version of your company’s preferred videoconference app lets you ditch a conference room and take a meeting anywhere, even without your computer.