Bridgewater Goes From Mocking Cash Holders To Warning A "Bigger Shakeout Is Coming"

Life - or rather losses - come at you fast, especially if you listen to Bridgewater's investing advice.

It was just two weeks ago, with the S&P at all time highs, that Ray Dalio told a fawning Davos audience to go all in stocks: "We are in this Goldilocks period right now. Inflation isn’t a problem. Growth is good, everything is pretty good with a big jolt of stimulation coming from changes in tax laws. If you’re holding cash, you’re going to feel pretty stupid."

Two weeks later, if you held cash, you felt pretty smart after the biggest Dow Jones point crash in history and the biggest VIX surge on record.

Of course, in the interim period we learned that far from adding to Bridgewater's positions, the world's biggest hedge fund was actively adding to its shorts, and as Bloomberg reported on Friday, Bridgewater now has at least $13.1 billion in European Union shorts, quadrupling the $3.2 billion short from last week, and over 18 times more than the fund's original position last October.

Fast forward to today when Dalio's cheerful optimism is a distant memory and according to an FT interview with Bob Prince, co-chief investment officer at Bridgewater, last week’s market turbulence, which helped trigger record outflows from global stock funds, was set to continue.

"There had been a lot of complacency built up in markets over a long time, so we don't think this shakeout will be over in a matter of days,” Mr Prince, who runs Bridgewater’s $160bn of investments alongside the fund’s founder Ray Dalio, said in an interview. “We'll probably have a much bigger shakeout coming."

But, but... just two weeks ago Bob's boss was urging to double down on the complacency, or risk "feeling pretty stupid."

Delightful irony aside, this is what else Prince told the FT: “Last year equity markets had a free run. But this year we are going from central banks contemplating tightening policy to actually doing it,” Mr Prince said. “We will have more volatility as we are entering a new macroeconomic environment."

Whatever the reason behind last week's "short-vol" unwind, Prince predicted that "the broader economic backdrop was setting the stage for more turbulence later this year."

While Mr Prince doubted inflation would become a real problem, he expected central banks to start draining the global economy of some of the trillions of dollars they have pumped into the financial system in recent years — further challenging the post-crisis bull market.

We are curious just which principle of Ray Dalio it was to recommend one thing and just a few days later to turn around and pitch the exact opposite.

Prince's interview is available at the FT after the jump.

Comments

Laowei Gweilo JRobby Sun, 02/11/2018 - 23:24 Permalink

to be fair, if you've been holding cash you've still made far less than had you went long -_-

whether it's gold, BTC, or the SP500, any of those would have been better than cash o.0

 

so i'm not sure where this, oh look holding cash is so smart trend across multiple blogs is coming from lol

 

In reply to by JRobby

Dilluminati algol_dog Sun, 02/11/2018 - 17:05 Permalink

People who complain about irrational markets, irrational valuations, central bank meddling, and bailouts should not go a whole lot further than acknowledging when the credit is pulled the market in it's ledger wealth destruction goes deflationary. 

About the only premise that you can hold is that you should be diversified where the correction doesn't destroy you and remember that the inflation is cyclical or market specific, absent in wages, absent in most housing, evident in food, and etc. healthcare being the real inflationary force.

But anyone who can make a rational argument beyond the very large generalization that market credit is at risk is fooling themselves.

I was reading about all-in investors in bitcoin, people borrowing from credit cards and all-in.  Well when liquidity gets tight they have a lesson in non-liquid markets or the phenomenon of too many debts chasing too few dollars.

But anyone speculating they understand what happens next?  Probably very wrong.. and in hindsight 20-20 somebody will claim to have called it, but they made a different call each day like tossing voodoo bones and reading chicken entrails.

Two things I'm following is the general idea that solar will get cheaper in 10 years, that electricity will displace more of the oil and gas markets, and that new participants in those markets: fracking etc.. will change things more than we can imagine now.  Artificial intelligence, self driving cars and trucks, robotics, etc.. and then natural disasters and political events.

How many of these market pimps predicted Trump?

Fuck them and their voodoo.

But be scared if you are smart, get ready for change.. diversify and become a prepper.. the times they are a changing

 

In reply to by algol_dog

Bemused Observer divingengineer Sun, 02/11/2018 - 18:03 Permalink

Actually, we need to see a couple of days where it goes limit down...that'll change the mood. That will be a sign that this could be IT, and that when this market says down, it MEANS down!

I think limit down drops would start a major sell-off, as in relentless. The PPT will forget about keeping things green, and just work on keeping those breakers from tripping.

In reply to by divingengineer

Dragon HAwk Sun, 02/11/2018 - 16:52 Permalink

Come on 401k'ers it's not like it's your money or anything. the stock market never goes down, and people never loose their Homes to Debt.  or as Clint used to Say.. Do you feel Lucky Punk. Do You?

Knave Dave Sun, 02/11/2018 - 17:15 Permalink

Either Dalio had a lot of money betting in favor of volatility and was Cramering the market to boost volatility, or HE'S feeling pretty stupid. Now maybe his company is pumping the Cramer trade the other way to make money coming and going. 

MusicIsYou Sun, 02/11/2018 - 18:42 Permalink

Oh haha and if you're holding precious metals you're silly haha and if you have a fallout bunker you're really crazy. Of course don't look over there though because you'll see the banks are buying 1000's of tons of silver and gold and that the President, Congress and most elites have bunkers. But you're all crazy lunatics if you do it. Most people are gutless cowards who won't acknowledge reality. So to those ends Eric Holder was right when he said Americans are cowards.

Md4 Sun, 02/11/2018 - 21:38 Permalink

"We are curious just which principle of Ray Dalio it was to recommend one thing and just a few days later to turn around and pitch the exact opposite."

Big shots are clueless.

Simply astounding.

We used to have markets. Now we have juiced robo rackets.

These shark bastards aided and abetted--even demanded through racketeer activism--that western corporate bastards swell bottom lines endlessly...no matter the socioeconomic economic costs.

These greedy motherfuckers patted themselves on each other's back at how smart and "efficient" they were. Billions in decades of bonuses certified their collective insanity as though they were being sanctified for their wondrous business "acumen"...

These sharks, in and out of western corporate boardrooms and C-suites, destroyed working America.

Now, they have no idea about what they've wrought us brings next...

...still more salt in wounds THEY created with the Grand Lie of outsourcing.

 

We USED to be a 70% consumer-driven economy.

These sumbitches want to know what comes next?

Ask the rank-and-file what kind of jobs they have left, and how well those jobs pay. Ask them what they lost to your bullshit schemes over the last 40+ years.

Broke consumers drive no volume in anything...

...except debt and default.

 

I just hope they have the presence of mind to hang these greedy, warping bastards on the way toward oblivion.

THAT would at least be a little justice...

MagicMoney Mon, 02/12/2018 - 00:00 Permalink

It was fairly safe to say stocks would eventually crash when interest rates rise and THEY WILL rise. The latest tax cut law and now the new infrastructure bill is nuts. The bond market will react. How can you not expect the market to react? Apparently, people think interest rates will stay low forever. The stock market bubble is more sensitive to interest rates than say the housing market. It is a bigger bubble. So you would expect the stock market to crash before any other crash. The bond market itself is the ultimate crash that coincides with the US dollar to the downside. All this with the backdrop of structural growing debts and deficits.

You also must consider that the bond market may not be Trump fans. They might be thinking this guy is a loose cannon or nuts and don't trust the guy. They may have a negative view of him.

 

I am pretty baffled to all the positivity. The euphoria is something else. I wouldn't buy the dip in this stock market until the I know that interest rates go back down. The market was stable in bubble territory because of not much change in interest rates until recently.