Ray Dalio went into this year even more bullish than we thought

March 5, 2013

By Matthew Goldstein

Hedge fund titan Ray Dalio is really bullish on stocks and all things risky–at least he was in early January.

A few weeks ago, our competitors at Bloomberg and The Wall Street Journal did a good job reporting on Dalio’s macro market thesis for 2013 when they got a transcript of an investor call (Bloomberg) and a sneak peak at Bridgewater Associates’ year-end report to investors (WSJ). But after taking my own recent look at Bridgewater’s year-end investor note–book is probably a better description for the 300-page plus bound treatise–you realize that bullish just doesn’t describe Bridgewater’s stance going in 2013.

Here’s a sampler of some of Bridgewater’s comments to investors:

“Cash in the developed world is a terrible asset.” “We would be short cash of all the major developed currencies” And this: “Bonds will be a lousy investment but cash will be worse.”

OK, we get it. Dalio really hates cash–or at least holding too much of it in his Pure Alpha and All Weather portfolios, which combined have $141 billion in assets. BTW, Pure Alpha was up .8% last year, while All Weather was up 14.7%.

So just what does Dalio, who likes to play things close to the vest and security-protects his firm’s daily research notes, see as the thing to do with all that cash? Well, buy stocks and other risky assets–especially with the Federal Reserve intent on keeping interest rates as low as it can.

“When and where this cash moves will be the dominant theme in upcoming market movement,” Bridgewater wrote. And Dalio is strong in his conviction that its time to add on risk, he’s willing to lever up to do it. “Borrowing cash to hold risky assets is as attractive as it has ever been.”

Well, we’re a little over two months in the year and we don’t know for sure if Dalio still holds this conviction as strongly as he did in early January.  A Bridgewater spokesman did not return a request for comment.

But with the S&P500 index up 6.2% this year, his early bullish call is looking pretty good. Much better than noted stock pickers Bill Ackman of Pershing Square and David Einhorn of Greenlight Capital, whose hedge funds are both underperforming the broader market by a good margin.


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Dear Matthew:
Thanks for this article. I’d love to read the annual report you mention. Can you help me with it? thanks

Posted by unknownsoldier | Report as abusive