Ray Dalio’s Bridgewater Associates has made a fortune by remaining bearish on the economy. “As the new year rings in, the hedge fund firm has no plans to change that gloomy view,” reports the Wall Street Journal.
Robert Prince, who is co-chief investment officer at Bridgewater, is preparing for at least a decade of slow growth and high unemployment for developed economies. “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.” Prince also said that the European debt crisis is a long way from over, meaning “the economic and financial morass will mean interest rates in the U.S. and Europe will essentially be locked at zero for years.”
Prince explains that for the time being, stocks will be vulnerable to “air pockets” from shocks that stem from bad news out of Europe and related news. In turn, longer term investors, such as those with an eye toward the next decade or longer, may benefit from equities. Prince says that there could be some money to be made off U.S. Treasuries, despite interest rates being at record lows, and that gold will likely rise as central banks print more money to bolster their respective economies.
Bridgewater Associates is one of the most successful funds in the world. Through the end of November, its flagship Pure Alpha Strategy Fund was up 25%, while the average hedge fund was down roughly 4%. Prince says the fund is currently “positioned for higher gold prices, stronger Asian emerging-market currencies and lower yields across high-quality government bond markets.”