"Our current debt may be manageable at a time of unprecedentedly low interest rates. But if we let our debt grow, and interest rates normalize, the interest burden alone would choke our budget and squeeze out other essential spending. There would be no room for the infrastructure programs and the defense rebuilding that today have wide support."
Remember Ray Dalio's warning from early 2016 that if assets remain correlated and things continue to move in the “wrong” direction, "there’ll be a depression"? Well, this is where we are now courtesy of the latest observations of Citi's Matt King...
While bomb threats to schools and government institutions are a standard feature in this day and age, there was a twist on a familiar theme yesterday afternoon when employees of Bridgewater Associates, the biggest hedge fund in the world, evacuated from the company's Westport headquarters Wednesday after a " nonspecific bomb threat.
With bond-stock correlations reaching record highs (and broad risk parity fund performance deteriorating rapidly), Ray Dalio’s $150 billion Bridgewater Associates managed modest gains across its main strategies last month - even as macro funds have suffered amid policy and political uncertainty. However, the manager of the world's largest hedge fund warns “Investment returns will be very low going forward,” in his latest investor remarks, suggesting that betting on gold could prove preferable.
"... it would only take a 100 basis point rise in Treasury bond yields to trigger the worst price decline in bonds since the 1981 bond market crash. And since those interest rates are embedded in the pricing of all investment assets, that would send them all much lower."
"QE need not be confined to bond instruments in our mind. By limiting themselves to bonds, central banks are indeed deemed to face quantitative constraints given declining government bond issuance even as spread product issuance has increased" - JPM
"the focus on risk parity unwinds is here to stay even beyond the next couple of weeks. As the polls for the US elections narrow further, higher volatility and increasing likelihood of fiscal stimulus will keep this theme alive.”"
Confirming his previous op-ed, the founder of the world's largest hedge fund warned that the current environment is analogous to the 1935 to 1945 period in America as we "reach the limits" of [central banks] "ability to stimulate" the economy " and raise global asset prices."