market folly

Bridgewater Associates founder Ray Dalio appeared on CNBC this morning for a rare interview.  Bridgewater manages $130 billion and is listed as the top hedge fund by net gains since inception.  Here's a summary of Dalio's thoughts from this morning as well as the videos:

On QE3 and the US Dollar

Dalio said that QE3 was a good plan.  When you ease interest rates,  it stimulates private sector credit growth.  And then after that you utilize quantitative easing.  He feels the US dollar is squeezed due to lots of dollar denominated debt, but after this squeeze he says it's going to decline in the near-term.




On China

The hedge fund titan points out that China can have 6% growth and still think that's depressing all while the US has 2% growth.

Just yesterday we posted about how Jim Chanos is still short China.  And of course we've also highlighted the China hedge fund bear thesis.



On Gold

He says "it should be part of everyone's portfolio to some degree because it diversifies the portfolio."  He likens gold to an alternative version of cash and over the long term he says it's better than cash.  "Money can be produced, but gold is somewhat limited."



On Europe

Bridgewater's founder says there's going to be a "managed depression" in southern Europe in the next few years, and thinks we'll see both a combination of monetary policy (money printing) and a deleveraging and restructuring of debt over there.  He says the euro is "likely" to stay together and it is controlled by southern Europeans, though there's more risk for the currency in later years.



On His Biggest Worry

He worries about social distortion and another leg down in various economies causing them.  He notes that deleveragings can be painful and we've posted up Dalio's in-depth look at deleveragings before.


On a Possible Downturn in the US Economy

The Bridgewater founder said that the odds of an unmanaged downturn are "comparatively low."  He likens it to flying on a plane where you could hit an air pocket and that's when problems could arise. 


Dalio's Rules of Investing

He says, "I don't get caught up in the moment.  I think so many people are reactive and they see things in a very short-term way."  He goes on to say that, "almost all important events never happened in your life."  He looks at what's happened in the past and uses that as a template for rules for each scenario essentially saying 'if this happens, do that.'



Dalio is profiled in the new book The Alpha Masters which we recommend reading.  For even more thoughts from Bridgewater's leading man, check out this recent in-depth interview with Dalio from a few days ago.