There Is No Joy In Muddlethroughville: World's Biggest Hedge Fund Is Bearish For 2012 Through 2028, And Is Long Gold

Tyler Durden's picture

That Ray Dalio, famed head of the world's largest (and not one hit wonder unlike certain others) hedge fund has long been quite bearishly inclined has been no secret. For anyone who missed Dalio's must see interview (and transcript) with Charlie Rose we urge you to read this: "Dalio: "There Are No More Tools In The Tool Kit." For everyone who is too lazy to watch the whole thing, or read the transcript, the WSJ reminds us once again that going into 2012 Dalio's Bridgewater, which may as well rename itself Bearwater, has not changed its tune. In fact the CT hedge fund continues to see what we noted back in September is the greatest threat to the modern financial system: a debt overhang so large, at roughly $21 trillion, that one of 3 things will have to happen: a global debt restructuring/repudiation; global hyperinflation to inflate away this debt, or a one-time financial tax on all individuals amounting to roughly 30% of all wealth. That's pretty much it, at least according to mathematics. And according to Bridgewater. From the WSJ: "Bridgewater Associates has made big money for investors in recent years by staying bearish on much of the global economy. As the new year rings in, the hedge fund firm has no plans to change that gloomy view...What you have is a picture of broken economic systems that are operating on life support," Mr. Prince says. "We're in a secular deleveraging that will probably take 15 to 20 years to work through and we're just four years in." So basically scratch everything between 2012 and 2028? But, but, it was that paragon of investment insight Jim "Bloody Ridiculous Investment Concept" O'Neill keeps telling us stocks will go up by 20%... stocks will go up by 20%....stocks will go up by 20%...

From the WSJ:

Robert Prince, co-chief investment officer at Bridgewater, and his managers at the world's biggest hedge fund firm are preparing for at least a decade of slow growth and high unemployment for the big developed economies. Mr. Prince describes those economies—the U.S. and Europe, in particular—as "zombies" and says they will remain that way until they work through their mountains of debt.


In Europe, "the debt crisis is [a] long ways from over," he says. The economic and financial morass will mean interest rates in the U.S. and Europe will essentially be locked at zero for years.


In this bleak environment, Mr. Prince says stocks remain vulnerable to "air pockets" from shocks, such as bad news out of Europe. But for longer-term investors looking out over the next decade, he says, equities may be a good buy. There is even money to be made in U.S. Treasurys, despite interest rates near record lows, and gold is likely to resume its climb as central banks print money to bolster their economies. Mr. Prince says

Unlike Paulson, who would have been best advised in the beginning of 2011 to park his money with these "bears", and has lately become a running watercooler joke, what Bridgewater says is actually relevant:

The views of Bridgewater are keenly watched by other investors, given the firm's elevated status in the competitive world of hedge-fund investing. Bridgewater's flagship Pure Alpha Strategy fund is considered one of the top funds in the world. As of the end of November, it was up 25% since the start of the year, according to people familiar with the situation. The average macro fund had lost 3.7%, according to Hedge Fund Research.

Also, don't tell spam-loving party animal econ professors, but the $122 billion hedge fund, is long gold.

Currently, the fund is positioned for higher gold prices, stronger Asian emerging-market currencies and lower yields across high-quality government bond markets, Mr. Prince says.

And for all those marrionettes who parrot the release of patently manipulated and fraudulent data such as anything out of the BLS or the NAR, here is what is really driving those "better than expected" recent numbers, which goes to the core of our argument that the US has not decoupled - not by a long shot - it is merely sustaining as consumers deplete every last bit of savings. Another words for which, of course, is lagging.

Recent better-than-expected news on the U.S. economy is unlikely to be the start of a healthy expansion, he says. The uptick in economic growth has been fueled by a decline in the savings rate, which, without material income and employment gains, is unlikely to be sustainable as long-term credit growth also remains weak, he says.


The problem for the U.S, says Mr. Prince, is that it is on the wrong side of a long-term debt cycle.


"We were in a leveraging-up period for 60 years, from the early 1950s to 2008," he says. This debt bubble was self-reinforcing on the way up, and "when it tipped over, it set about a self-reinforcing process on the way down."


As evidence for the long slog facing the U.S economy, he notes that the level of leverage, as measured by comparing household income to net worth, is still higher than it was before 2008.

Which means what?

Against this backdrop, the Federal Reserve will need to do more quantitative easing—buying of government bonds—but Mr. Prince says the purchases will probably be sporadic.


Gold prices should resume a rally amid continued printing of money by the Fed and other central banks, Mr. Prince says. Those efforts effectively devalue those countries' currencies compared with gold.

Bingo, and thus for all the (completed redemption driven) year end gold dumping, we have just one question: when is John Paulson's Q4 13F coming out (that's rhetorical - we know not only when it is coming out, but what is in it - stay tuned).

As for the cataclysm across the Atlantic:

"You've got insolvent banks supporting insolvent sovereigns and insolvent sovereigns supporting insolvent banks," he says.

We could not have said it better ourselves.

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ACP's picture

No joy bitchez!

TruthInSunshine's picture

Ray Dalio or James Cramer...


Ray Dalio or Barton '20mm AUM Smally' Biggs...


Ray Dalio or Dick Bove....




ACP's picture

Correction: It will be a fucking GREAT year if you're a PD.

TruthInSunshine's picture

Unless you wind up as the next MF Global.

TruthInSunshine's picture

As Cameron attempts to protect his masters (the toxic, debt laden financial institutions so prevalent in the UK that are the result of The House of Red Shield's influence, whereby taxpayers are the debt serf collateral to allow for the draining of sovereign nations by private interests), Germany may have finally have decided to call a spade a spade, and take their ball home.

Only this time, Germany won't be the villain. They'll be the only sane actor at the table when it all comes crashing down, and they'll be duly noted as one of the few nations that tried to stop the great implosion that was rigged by the financial engineers fo mass destruction years ago, back when nobody was listening.

flacon's picture

This is what George Soros said of CHARLES Prince III (different Prince, but a Prince nonetheless):


George Soros is said to have replied upon hearing of the remark from the former head of Citigroup, Chuck Prince, in which, Prince said on the lead-up to the catastrophic meltdown in home values in America that "we [Citigroup] have to dance until the music stops". Soros noted that "Actually the music had stopped already when he said that.

Ahmeexnal's picture


Greece and Italy are rising up against the german rapist bankers.

Italian partisans are already targeting german-proxy tax collecting agencies in Italia.

It will only end when Merkel hangs just like il Duce.


TruthInSunshine's picture

I'm going to have to do the big spat thing with you on this.

In reality, Cameron and all of the UK's bagmen and bagwomen would love to see PIIGS get bailed out, so long as UK financial institutions having exposure to PIIGS toxic feces get zero haircuts (just like when TARP, TALF & QE were done in the U.S., seeing nearly every large financial entity that was a BFF of the New York Branch of the Fed [JPGoldmanStanleyWellsBankOfBerkshire]getting 100% on their ill-advised investment courtesy of U.S. taxpayers).

It's exclusively because UK seedlings of the House of Red Shield would have to sustain haircuts that Cameron derided any significant measures designed to salvage what would even amount to a much smaller, core EU state (even if that is next to impossible, at this point, IMO).

Ahmeexnal's picture

The recent PM price smackdown is the result of the looting of italian gold by the eurobanking mafia cartel headed by Douche Bank.

Once the italians realize they have been robed blind, it will be open season on german, french and uk citizens. 

TruthInSunshine's picture

Italian politicians have sold their citizenry down the river.

Berlusconi was as big a POS as anyone.

I will grant you that Italians were blind sheeple grazing at the welfare state trough, but that's what sheeple do, whether they're Italian, Greek, Spanish, French, British, Irish, Portugese, American, etc. etc. etc.

(I do hear that Iceland has a very feisty breed of sheople, however, that has retained a spirit of independence and defiance once displayed prominently by their ancestors).

Ahmeexnal's picture

Hungary is also in defiance of the eurofascist project, with a new constitution that will put a leash on it's central bank:

Critics say the law curbs constitutional court powers, threatens media pluralism and ends judicial independence, while accompanying cardinal laws will limit central bank independence, tilt future elections in Fidesz's favour and perpetuate its tax policy, effectively tying the hands of future governments.


It will also put an end to the globalists genocidal agenda:

The constitution also references God, defines marriage as a union between man and woman and life as beginning at conception, sparking criticism from international organisations and EU members.


As a result, the IMF, the EU, Hilarious Clinton and other globalist puppets are outraged at this open display of rebellion.

Expect a no-fly zone over Hungary soon, followed by depleted uranium showers all over the country.

eureka's picture

And who in the US is in defiance of US centralism, Federalism and globalism?

The fourth "solution", unmentioned by Mr. Mega-HedgeFund, is WWIII - which US will launch through proxies and false flags "provocations, any day now - because only WWIII can "save" the day for US Empire, the worst fiat monger and military bamboozeler in the history of the world.

It is coming. Courtecy of your elite and your national pride, US citizens, who back them - and love war more than life, because nothing can give you that cushy little feeling of righteousness and supremacy like war can..

Oh regional Indian's picture

2 true Eureka.

The US has been a Fascist state since it's inception. A fascist state, supposed to be a Con-stitutional Republic but mostly called a Demoncrazy.

If you don't even know your own name....any wonder it's schizophrenic nation?



Manthong's picture

Don't forget those nice Swiss politicians and their flock.

twotraps's picture

  TIS, Well said, recently asked my 19 month old daughter who spilled the milk?    '...Zoe....'  Zoe is my Dad's dog....Hyper-complicated, triple-hypothecated, opaque economic-political bull-shit.....comes down to human nature, a bunch of little kids blaming everyone but themselves and absolutely not respecting the fragility or stupidity of the entire system.

ACP's picture

The problem is, Jon Corzine is still living it up in his High Castle and most people here still have to get up and go to work tomorrow.

YBNguy's picture

Well some of us don't have to work tomorrow due to being recently laid off, happy holidays indeed...

Scirocco's picture


gangland's picture

really good interview thanks, watching it now.

MiddleageThinninghair's picture

Charlie's interviewing style of constantly interrupting and trying to preemptively interpret is highly annoying.

Ray, is very interesting to listen to.


gangland's picture

rose is maddeningly annoying which is why I don't watch him regularly.

you're right, he won't shut up long enough to let his guests finish a thought.

I enjoyed what Ray had to say. I'm so cynical about elites, particularly those in the fire sectors.

But, I was very impressed with what Dalio had to say, to the point that I sought out more, including some criticisms directed towards him, as well as his rebuttal.




Snidley Whipsnae's picture

"rose is maddeningly annoying which is why I don't watch him regularly."


+1... Rose is disgusting. I stopped trying to listen to his interviews years ago. He must be doing what his handlers want; ie, disrupting interviews.

Jim in MN's picture


That's the sound of a Lost Generation.  All because of CORRUPTION and moral bankruptcy.

bob_dabolina's picture

What it do Jimbo? 

Did you hear about the aerosolized plutonium detected in Europe from Fukushima? 

How long does it take to get cancer from that shit?

john39's picture

they spray metals all the time from planes, usually aluminum... helps monsanto take over agriculture with its franken-products.  occaisonal radiation is just an added bonus.

falun bong's picture

bullish for metals then


Caviar Emptor's picture

Goldman selling "Mayan puts" on gold miners. 

They expire 1/2013. Goldie promises to pay if world ends. 

Long-John-Silver's picture

That's like buying life insurance with no surviving family members.

bob_dabolina's picture

I wouldn't discount stock prices going up. Let's not forget the best performing stock market of the decade; ZSE

I postulate that the debt jubilee enviasaged is less probable than just printing the money. Both are painful though countries (or empires) have never collapsed due to deflation, only under the conditions of inflation-hyperinflation have these social edifices collapsed.  

I wouldn't discount another wave of massive delevering and deflation before we hit the inflation tsunami. It's a very tenuous time to be investing, that's for sure. 

twotraps's picture

I agree with you.  Perhaps a 'light' version of 08 where everything sold off, maybe less panic but definitely an effort to raise cash.  I still wonder why they would entertain wild, hard to control inflation when a painful deflation could be cushioned by new accounting regs or more bullshit to allow banks to hide losses??  They are doing that anyway, and deflation leaves the game intact, ready to re-inflate at a later date without calling it 'hyper-inflation'???

FrankDrakman's picture

Meanwhile, some moron at Slate is telling us everything will be fine:

TruthInSunshine's picture

Joe Wiesenthal & Andrew Ross-Sorkin are sexting each other right now.

Hopium Dealer's picture

Andrew looks like a former ankle grabber..

Caviar Emptor's picture

Long personal radiation shields and detection kits for 2012 on Iran, Nth Korea, Paki all revving up, mushrooming Euro missile shields, Russia nuclear smuggling, fire-prone nuclear subs, ocean radiation dumping, nuclear fish (fuku~sushi) and baby milk, and US pre-approving first nuke plant in over 30 years. What could go wrong? 

nah's picture

you dont need to own anything anymore


the government is fine

antidisestablishmentarianismishness's picture

"4 years in" and the S&P has been up big or flat in 3 of the 4 years.  Hmmm.

RobotTrader's picture

This guy will probably do OK on his gold longs.


But he's going to get destroyed on his bearish view on stocks.

akak's picture

RobotRetard would probably do OK on his gold longs, that is, if he actually owned any --- until the curtain goes up on MFG act II (and acts III, IV, etc). 

But of course, he is going to get destroyed by the coming two-decade bear market in stocks.

Hopium Dealer's picture

You'll be Trollin' in 2012 it looks like..

akak's picture

It's the RobotRetard Bunny: he keeps going, and going, and going, and going ..... just about as automatically and mindlessly, too.

Unfortunately, Bernanke put lithium (carbonate) batteries in him before winding him up.

Meremortal's picture

2028? Nah, things will look a lot better by 2022! It's time to start looking past the Big Dip instead of waiting for it to happen. It's happening now. Life goes on. Get cracking.

Hopium Dealer's picture

I  agree. Look at collapses through history. A hyperinflation depression followed by a deflationary depression would take globally about 10 years at this stage. If this circus goes on until 2014-2015 then 2028 would right.

Hopium Dealer's picture

I agree. Look at collapses through history. A hyperinflation depression followed by a deflationary depression would take globally about 10 years at this stage. If this circus goes on until 2014-2015 then 2028 would right.

twotraps's picture

Hopium, never really read about hyperinflation-depression and its duration, where can I read about it ?  Thanks.

San Diego Gold Bug's picture

Long gold of course.  Gold has now gone up 11 years in a row at an average of 18.5%.  Gee....tough call.  Stack em, pack em and rack em.  Thanks to the ZH reader who mentioned!

ebworthen's picture

Holy Fuck.

I cannot talk common sense to otherwise intelligent people.

Family members being screwed over by Wells Fargo and they think I am a tin foil hat wearer.

Good friend who has a credit card balance of $7,000 at 9.99% or higher who has a savings account of $8,000 who thinks I am a conspiracy theorist for telling them to pay off the damn credit card and that they are losing money earning 0.5% on a savings account while paying 9.99% on a credit card balance!

Oh but wait...they need a good FICO score!

But wait...the Government wouldn't let Wells Fargo and Chase do something illegal, would they????