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One thing I've learned about professional investors is that no matter what, at the end of the day they're talking their book. So whether you buy these argument
by nlh 6y ago
One thing I've learned about professional investors is that no matter what, at the end of the day they're talking their book.
So whether you buy these arguments or not, Ray Dalio is simply promoting a position that Bridgewater no doubt has taken. So when he says:
"I believe a well-diversified portfolio of non-debt and non-dollar assets along with a short cash position is preferable to a traditional stock/bond mix that is heavily skewed to US dollars. I also believe that assets in the mature developed reserve currency countries will underperform the Asian (including Chinese) emerging countries’ markets."
It's not his avuncular advice. He has millions (billions?) of dollars committed to this bet and he wants to convince others that it's correct so it pays off.
- optimalsolver 6y agoIs that worse than recommending one course of action to retail investors while personally doing something completely different?
- ac29 6y agoThe book he has coming out this year The Changing World Order: Why Nations Succeed and Fail certainly seems to touch on some similar themes from the brief description I found online.
- riffraff 6y agowell, the book is cited 3 times in this piece, it's almost advertisement for it :)
- shostack 6y agoYes, it seems he's betting against the Western financial growth and stability. I wonder if he thinks the days of the dollar's reserve currency status are numbered.
- eru 6y agoHuh, why? If the US economy is going to do well, bond yields will be going up. That means a bond short position will pay off. Being short on bonds is basically financially almost exactly the same thing as borrowing money. (The US treasury is 'short' on T-bills. They have to essentially 'buy them back' when they become due.)
- betterunix2 6y agoIt is not that simple. Right now interest rates are extremely low, so what you said is likely to be the case. On the other hand, as the economy improves credit risk will decline, and lower credit risk can drive bond yields lower (this is exactly what happens in the high yield market), which is more or less what happened for three decades beginning in the 1980s.
- eru 6y agoYes, that's true. Might point was just that a short position in the bond market is not automatically 'betting against the Western financial growth and stability.' (And, of course, the Western world is bigger than the US.)
- gohurnd 6y agoIt is way too early to get out of dollars. When the dollar inevitably spikes, these emerging market funds are all going to suffer. If you were to sit on cash and wait to buy emerging markets at a discount, you’d do better over 20 years than buying now.
- wcoenen 6y ago> I wonder if he thinks the days of the dollar's reserve currency status are numbered. That's what he's been saying in his book "The Changing World Order". I believe it's not finished yet, but the chapters are published on his LinkedIn newsletter one by one: https://www.linkedin.com/newsletters/principled-perspectives-6648615071662522368/ https://www.linkedin.com/newsletters/principled-perspectives...
- gonzo41 6y agoWhich is no different from people buying bitcoin and talking about it here :D
- DennisP 6y agoHe doesn't recommend particular companies. Are you suggesting that Ray Dalio thinks he's so powerful that he can make Asian equities in general do better, just because he says he likes them?
- ZephyrBlu 6y ago"I like the stock"
- sokoloff 6y ago“Blue Horseshoe loves Anacott Steel”
- anm89 6y agoA small Ray Dalio Flaps his wings in Connecticut and an Asian Small Cap beats its revenue forecast. edit: For the record, i wrote this because it was fun. I'm not endorsing that this is the case.
- fsagx 6y agoI like it. But maybe try it as haiku: small Ray Dalio flaps his wings in the U. S. asian small caps soar
- imtringued 6y agoHe scares readers of the potential for a rug pull of bonds and then tells readers to pull the rug. He might not be powerful but he clearly is trying to create a self fulfilling prophecy.
- vermilingua 6y agoSure, but if he didn’t actually believe what he’s saying, why stake the money on it? Your argument seems like a tautology.
- drfuchs 6y agoThat’s what a “Pump and Dump” is: buy bad investment, talk it up, sell to bigger fools. (Not that this is what’s going on here; think GameStop perhaps.)
- vermilingua 6y agoSure, but I’ve no idea how that would apply to this strategy, there are no prescribed purchases, and what could they possibly go short on if nobody buys bonds, the government? Then they’d have bigger problems.
- drfuchs 6y agoYou’re right, considering the context. Looks like I’m the bigger fool.
- SuchAnonMuchWow 6y agoYou can do the opposite of pump and dump: there is an investment you want to buy, talk it down, buy it low.
- vermilingua 6y agoThat would be much more fitting, but does that apply to bonds? My understanding was that the whole point of bonds is that they're more or less immune to market forces, and run on their own schedule?
- eru 6y agoNo, not at all. The price of bonds with a long duration varies with the prevailing interest rate (and inflation expectations). Even if the solvency of the issuer is beyond doubt.
- xkjkls 6y ago> One thing I've learned about professional investors is that no matter what, at the end of the day they're talking their book. That doesn't make them wrong. It's basically just a tautology. If you believe X is a great investment, and you aren't investing in it, that would be a far stranger situation.
- neighbour 6y agoBasically what Taleb describes as Skin in the Game: >"Don’t Tell Me What You Think, Tell Me What You Have In Your Portfolio"
- hutch120 6y agoOnly if it going to actually hurt to lose it... when did these guys every really get hurt... they hedge their bets exactly so they never put themselves in a position to literally loose their house(s).
- Singletoned 6y agoOr in other words, they are sensible
- wskish 6y agoNot sure I interpret it the same way. Wouldn't this advice heavily/completely discount/ignore the written words associated with the portfolio?
- eru 6y agoI think that's the point. (I'm not sure whether I agree with the point, but I think that is the point Taleb was making.)
- vagrantJin 6y agoThen again, Taleb has little to no respect for most professional investors.
- eloff 6y agoGood. Any idiot can say something online, and many do. Ray Dalio is putting his money where his mouth is, aka staking his opinion like numerai does with erasure. That makes it more credible, not less. Unless you think he's actually trying to pump and dump the entirety of all the Asian stock markets? He doesn't have that kind of influence.
- deleted 6y ago[deleted]
- pmastela 6y agoI don’t know a whole lot about professional investing, but if watching The Big Short has taught me anything it’s that the pros will say one thing publicly but do the opposite in private until it’s to their advantage to do a 180 and make their private stance actually public. Recently this was Jamie Dimon lambasting Bitcoin all the while a cryptocurrency trading desk was being set up at Chase. The following exchange from The Big Short stuck with me. It’s Dr. Burry’s response to Goldman Sachs when they finally returned his numerous calls: Deeb: Dr. Burry? Burry: Yeah. Deeb: Deeb Winston, Goldman Sachs. Listen, I've been reviewing your position. I wanted to discuss your marks and make sure they're fair. Burry: Yeah, I think you mean that you've secured a net short position yourselves. So you're free to mark my swaps accurately for once because it's now in your interest to do so. Deeb: I'm not sure what you want me to say. Burry: I think that...I think that you've already said it.
- jonmc12 6y agohttps://finbox.com/ideas/ray-dalio https://finbox.com/ideas/ray-dalio
- Scoundreller 6y agoHoldings here: https://www.sec.gov/Archives/edgar/data/1350694/000156761921003290/xslForm13F_X01/form13fInfoTable.xml https://www.sec.gov/Archives/edgar/data/1350694/000156761921...
- ROARosen 6y agoBig fund holdings (without knowing their full strategy) are insightful, but only in the sense that you can see how many big funds are holding a particular stock. Looking just at holdings of any one fund can be pointless since you never know how these holding are part of some bigger strategy especially when you don't know what other derivatives they're holding like options / futures and other non publicly traded products. Any particular holding might also be part of a bigger ploy. It can be part of a hedge / bet / short / or acquisition strategy. Any single holding can also be part of multiple portfolios within one fund each with their own diverse investment goals.
- anm89 6y agoWouldn't it be weirder if he didn't have his own advice on his own books?
- bidirectional 6y agoYes, this is honestly one of the most bizarre criticisms I can imagine of fund managers like Dalio. Their entire reason for existing is that they have viewpoints and express them in the market.
- vtbg 6y agoI once spoke to a commodities trader who (half-jokingly) explained his job as: predicting the market in the morning, then letting his clients bet and make this happen during the day. Repeat.
- deleted 6y ago[deleted]
- csomar 6y agoThey are trying to explain it to the world, or to sub-consciously justify their position. BridgeWater has $100bn of AUM; which is not a small amount but peanuts comparing to these institutional sovereign funds. So while they can profit from the market by being smarter, they cannot move the market (neither can their readers).
- darawk 6y agoThe idea that Dalio published this in order to move markets in his favor is patently absurd if you know anything at all about the markets in question. The markets that would have to move here are the world's most liquid by a mile. Retail investors reading this blog post are not going to move them at all. And institutional managers are not getting their market takes from blogs like this. The only purpose of this essay is PR, for hiring and attracting capital. If you want to do the cynical self-interest take, that's the one you should be going with.
- stevievee 6y agoThe ideas and narratives put forth by Bridgewater/Dalio over the past 1-3 years are permeating markets and shaping investor sentiment more than you think. Both retail and institutional.
- elefanten 6y agoGot any links or sources to read up on this? Or any particular narratives you're referring? Asking out of curiosity
- stevievee 6y agoYou will not struggle to find Bridgewater/Dalio talking about the following themes: - The concept of "Debt cycles" (From Dalio's book "Principles for Navigating Big Debt Crises") - Interpretation of monetary policy effects on markets - Emerging markets (Mainly China) and the rise and fall of "reserve currencies"
- nostrademons 6y agoThis could also be because he's right, and as more information comes out, the rest of the market is coming around to his line of thinking. I made a number of bets on the tech industry early on in my career (2005-08): that the Web and Javascript would become increasingly more important, that Python would be a major language both for web development and for scientific computing, that Google and other new tech companies would continue growing until they were bigger than we could imagine, that startups would become a more respectable way of spending your career. I would happily crow about them to anyone that would listen, while also arranging my professional life to benefit from them. They happened. Did I cause the ascendancy of Javascript, or Python, or Google, or startups? Of course not. I called it, and then lots of other people, as events progressed, independently made the same call and jumped on the bandwagon. So it is with Dalio (and Buffett, and other thought leaders in the financial industry). It's unlikely that their words are moving markets, particularly since their bets are often contrarian and unremarkable at the time they start publicly stating them, and financial markets often take years to catch up. Rather, they spot the trend, understand the implications, and then position themselves to benefit when everyone else spots the trend and understands the implications.
- dejj 6y agoTIL the word “avuncular”. It’s perfectly cromulent.
- deleted 6y ago[deleted]
- anonymoushn 6y agoI've recently entered the space and I find that I cannot talk my book, because some trades get better when other people follow you into them and some trades get a lot worse when that happens.
- eru 6y agoTo give an obvious example: I am invested on margin. That is for every dollar I own, my broker lends me two, so I can buy stock for three. It's in my interest to keep interest rates low. So I want other people to invest in bonds long, rather than buy on margin (ie sort-of invest in bonds short). Of course, my influence is so small that it doesn't really make a difference. But I can imagine there are much smaller markets, where your voice can make a difference.
- boh 6y agoThis "theory" has been pretty obvious since the 80s. Not really sure who this is written for (probably his clients) but investment firms are always going to buy bonds regardless. It doesn't matter if equities will be higher in the long term, your performance is measured in the short term, and a firm is going to hedge against short-term equity swings.
- bostonsre 6y agoI usually err towards the side of distrust due to obvious potential conflicts of interest when large institutional investors make public statements but from a lot of his talks and interviews, I've gotten the impression that Ray Dalio is less bad than most. It could be a con that I fell for, but he seems to push against bubbles to make sure the market is priced closer to actual valuation and he tries to educate retail investors some. This is a video[1] he put out about the economy. I think it is the best tldr summary out there and is incredible. It is short and amazing at conveying the principles of the economy. I think his lex fridman interview was good as well [2]. [1] https://m.youtube.com/watch?v=PHe0bXAIuk0 https://m.youtube.com/watch?v=PHe0bXAIuk0 [2] https://m.youtube.com/watch?v=M95m2EFb7IQ https://m.youtube.com/watch?v=M95m2EFb7IQ
- jksmith 6y agoWell I think if he made that statement, it's probably fair regardless of what's in his book.
- tim333 6y agoI think the causation is different - investors believe something and both invest that way themselves and preach it. It's not normally to try to juice the prices of what they own with the exception of stuff like crypto and meme stocks.
- Klwohu 6y agoThat's some neat blablabla but his argument is mathematical while yours is purely emotional.