Ray Dalio Admits QE Won't Work, Asks For More Anyway

Tyler Durden's picture

While not as dire as his Davos forecast, in which he warned that "if assets remain correlated and things continue to move in the “wrong” direction, "there’ll be a depression", earlier today Ray Dalio released a new Op-Ed in the FT in which the manager of the world's largest hedge fund (excluding Apple's Breitburn of course), once again implores the Fed and other central banks to stop tightening and boost global easing.

The reason for this is what while Dalio admits the U.S. business cycle, now in its seventh year, reflects a need to tighten monetary conditions and hike rates, the bigger threat is the long-term debt supercycle, as according to Dalio we are "near the end of the expansion phase of a long-term debt cycle, which typically lasts about 50 to 75 years."

The irony of Dalio's Op-Ed is that he admits that QE has reached its limits...

What I am contending is that there are limits to spending growth financed by a combination of debt and money. When these limits are reached, it marks the end of the upward phase of the long-term debt cycle. In 1935, this scenario was dubbed “pushing on a string”. This scenario reflects the reduced ability of the world’s reserve currency central banks to be effective at easing when both interest can’t be lowered and risk premia are too low to have quantitative easing be effective.


* * *

[Now] the expected returns of bonds (and most asset classes) are relatively low in relation to the expected returns of cash.


As a result, it is difficult to push the prices of these assets up and it is easy to have them fall. And when they fall, there is a negative impact on economic growth.


When this configuration exists — and it is also the case that debt and debt service costs are high in relation to income, so that debt levels cannot be increased without reducing spending — stimulating demand is more difficult, and restraining demand is easier, than is normally the case.

... even as he urges the Fed and its peers to do more:

It is because of the long-term debt cycle dynamics that we are seeing global weakness and deflationary pressures that warrant global easing rather than tightening.


At such times the risks are asymmetric on the downside and it behoves central banks to err on the side of waiting until they see the whites of the eyes of inflation before tightening.


Since the dollar is the world’s most important currency, the Fed is the most important central bank for the world as well as the central bank for Americans, and as the risks are asymmetric on the downside, it is best for the world and for the US for the Fed not to tighten.

It is "best for the US", or best for the world's biggest hedge fund?

All of this, of course, has previously duly explained in the latest Matt King letter, in which he observes that we have now entered a liquidationist regime where thanks to EM selling of reserve assets, the global markets are collectively seeing asset prices decline while liquidity exits. However, unlike Dalio, King has the intellectual honesty to admit that the centrally-planned farce is effectively over, and that any can-kicking will only make the final rout that much more destructive.

For Dalio, whose career is to manage assets while piggybacking on a 75 year supercycle of central bank generosity, continued asset declines are a career killer and he knows it.

So what explains Dalio's disingenuous appeal to the US central bank?

This: "Hedge fund billionaire Ray Dalio’s key All Weather Fund, which aims to perform well in both good and bad markets, suffered annual losses for the second time in three years in 2015. The All Weather Fund returned -7% in 2015."

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KesselRunin12Parsecs's picture
KesselRunin12Parsecs (not verified) Jan 25, 2016 9:34 AM

These people really just exist in their own little make believe bubble world, don't they?

Durrmockracy's picture
Durrmockracy (not verified) KesselRunin12Parsecs Jan 25, 2016 9:35 AM

Dalio needs to check into a good QEhab program...

nuubee's picture

"I know it won't cure me, but give me more anyway" --- every drug addict ever.

mtl4's picture

I've got such a hangover this morning I think I need to start drinking so it will go away........nice one Ray, did you get that from one of your meditations?!



SWRichmond's picture
Ray Dalio Admits QE Won't Work, But Asks For More Anyway

It won't work for US, but it WILL work for HIM, and this is why he wants it.  Told you.

highandwired's picture

"The All Weather Fund returned -7% in 2015" <---------------  this

kliguy38's picture

He's an asshat too but at least he's the best asshat in the house of asshats

Cognitive Dissonance's picture

When all you know is kick-the-can, that's the only game you'll ever play. Particularly when you are financially rewarded for doing so.

remain calm's picture

He definitely owns GOLD. So QE he wins, No QE and monetary collapse he wins. Really, you people calling him stupid.....well your just stupid

Bay of Pigs's picture

Being honest doesnt mean your stupid.

He is talking his own book. Doesnt make him smart or ethical.

Fukushima Sam's picture

Once you've started printing you can't stop without a reset.  And the debt-holders don't want a jubilee so the reset can only come with collapse.

Pedal to the metal bitchez!

MillionDollarBonus_'s picture

Yellen needs to step up or leave her current position as Fed Chairwoman. Literally trillions of dollars worth of investments have been invested on the assumption that she had investors' backs, and for her to simply abandon these investors is inhumane and a crime of epic proportions . We desperately need investment in this country, and hawkish policies do absolutely nothing to encourage investment in our stock and bond markets. How exactly are we supposed to sustain this economic recovery without the proper incentives to invest in our markets?

mtl4's picture

Just waiting for Buffett to chime in on needing more QE soon too.

Temporalist's picture

The "All Weather Fund" has a disclaimer at the bottom which reads "In the event of a shit storm, tuck you head between your legs and pucker up."

nidaar's picture

What was the definition of "insanity" again?

NoDebt's picture

So, basically, what you're saying, MDB is "But I was promised!"  Fantastic.  Green arrow.  Your own satire has brought you full circle to what reality actually is right now.  Hope you enjoyed the journey.

LawsofPhysics's picture

Power and control (what this is really all about) over real resources is never given up willingly.

We have seen the outcome of such "let the majority eat cake" monetary experiments.  This one is happening on a global scale and will end no differently.

Georgiabelle's picture

Most of Bridgewater's clients are international sovereign wealth funds and pension funds, so his perspective is both global and informed by the political insights gleaned through dealing with clients at that level. While Dalio can see that QE doesn't work to stimulate growth he also sees that the entire world is now entrapped in a massive debt cycle that has only been exacerbated by QE, and knows what will happen if QE is withdrawn in the absence of organic growth. So yes, he is pointing out the calamity that will ensue if QE is withdrawn without pro-growth policies in place and functioning. He has the personal wealth to survive regardless of what happens. So maybe he is warning about what he sees ahead because he just doesn't want to see the whole world on fire, even if he has hedges in place to profit from that scenario.  

PaperTaperFakerCaper's picture

@remain calm   Uh...  it's "you're" , not "your",   stupid.  

BurningFuld's picture

This is because it rained in 2015.

BandGap's picture

Simple pain avoidance. Until you can't anymore.

SuperRay's picture

It will eventually kill me but it'll make me feel good now...

FireBrander's picture

What needs to be done here is obviously clear....

The solution to too much debt is MORE debt at a LOWER interest rate!

Lewshine's picture

The greater part of the ploy is to speak as though QE doesn't continue when needed. There's two programs that Fed exercises; Those that are announced, and those used spontaneously to calm and stabilize markets. There is not an up day in the markets that doesn't see some form of QE...Otherwise known as "The mystery buyer". Even ZH fails to understand the magnitude of this buy program.

Arrowflinger's picture

In October 2008 there was $2.7 TRILLION delivery  failures in what was then about $10 trillion Treasury debt. Thinking about that and seeing the grand fraud makes a coherent observer opine than QE in the $hundreds of trillions has poured into every failing financial conduit. The amplitude, frequency, and complexity is increasing now to the point that the ponzi CBs cannot respond and coordinate fast enough. This isn't  the Greatest Depression, it is THE ERA OF UNIVERSAL FRAUD!





KesselRunin12Parsecs's picture
KesselRunin12Parsecs (not verified) mandalou Jan 25, 2016 9:37 AM

"Oh look! The sky is falling & the world is about to end!... So ~ BUY MY FUND so we can frontrun the thing!" -lol

mandalou's picture

Was talking about your use of bubble. Even if you didn't , see what you did?

Georgiabelle's picture

The majority of Bridgewater's clients are pension funds and sovereign wealth funds so no, he is not angling for new investors from the retail class. 

KesselRunin12Parsecs's picture
KesselRunin12Parsecs (not verified) Georgiabelle Jan 25, 2016 1:13 PM

I got news for you... "pension funds" ARE the retail class...


Now, whether you're stupid enough to have an E-Trade account, or, are even MORE STUPID to trust some lazy 18 handicap golfer to 'manage' your pension contributions... Well, what can I possibly say about that?

Georgiabelle's picture

Kind of free with the word "stupid" there, Buddy. Given that Bridgewater generally requires that its clients have a minimum of $5 billion of investable assets I'd say that eliminates 99.999% of retail investors. Also, you might want to look up the definition of the term 'retail investor':  "A retail investor is an individual who purchases securities for his or her own personal account rather than for an organization. Retail investors typically trade in much smaller amounts than institutional investors such as mutual funds, pensions, or university endowments." Bridgewater's clients are pension funds, university endowments, sovereign wealth funds and other institutional class investors.

And just for the record I manage my own personal funds.





Id fight Gandhi's picture

Sure helped create the oil bubble. Check that off.


Now for education and healthcare

__Usury__'s picture

the way of the PARASITE

VAD's picture

I can't imagine there is anyone outside the little .0001% circle of elites who think the planet needs these fuckers.  If they all woke up dead tomorrow, would anyone in the 99.9999% be any worse off?

Id fight Gandhi's picture

these geniuses can't make alpha without QE handouts.

Lady Jessica's picture

Don't worry Ray.  The FED is having its cake and eating it too.  Rates have lifted (primary dealers being paid not to lend!) but all that accumulated QE largesse/liquidity is still sloshing around.  So pop a Xanax.

Winston Churchill's picture

A lot of words to say: Make me right and fuck you.

Fuck you Dalio.

Dr Freckles's picture

Does anyone know if stocks are supposed to go up or down today?

(Janet must have one or two friends on ZH)

(maybe ... ?)

(glug, glug, goes the cheap whiskey)

DipshitMiddleClassWhiteKid's picture

he just wants to breakeven and cut his losses


insanelysane's picture

Down arrowed because these guys never want to break even.  8% return is break even to them.

Argenta's picture

What a weird feeling it is to feel like all logic (financial and otherwise) has flipped upside down.  Outside of my visits to ZH and a few of my friends, I swear the whole world is living in a different reality that I am. 


BandGap's picture

Same here, so you're not alone.

Are you finding any discussions about this surreal, as well? Outside of my immediate friends and family it is like nothing bad is happening and nothing will.

Argenta's picture

Surreal, without a doubt.  There is a Star Trek: TNG episode that sums this up fairly nicely:


I was in Wal-Mart last weekend and noticed at least three people around me paying for their groceries with EBT cards.  We have major soup lines all across this country, but they aren't visible like in the 1930's.  They're all in Wal-Mart paying for stuff with inconspicuous cards.  I have a friend that has well over $100k sitting in a savings account, doing nothing.  I told him he should consider moving a large percentage of that into precious metals.  He asked me "Why do I need that much gold or silver?"

I just let it go...


NoDebt's picture

Most people have no idea how finance or economics works so they wouldn't know if it was running backwards even if you pointed it out to them.