The Economist on Ray Dalio, HFT, and Bridgewater Associates
The document linked in this Economist article is an interesting take on recent, and ongoing, economic events. (paragraph 6)Also read a very good piece in Vanity Fair or New Yorker archive on Mr Dalio and Bridgewater
==Interesting article looking at the bigger picture; that is the debt cycle. Europe is doing the right thing enforcing stringent debt restructuring policies on the PIGS. Japan should be doing this also but has no pressure from other countries to reduce its massive public debt because the majority is owned by the Japanese people. US will be interesting to watch in the coming years having expanded its balance sheet close to the 100% debt to GDP level amid little to no restructuring policies for its debt. Again little pres==sure is on the US to restructure its debt because roughly 27% of it is owned by foreign countries. This is going to be a long drawn out process but you cant help to feel that confidence is very very very slowly returning.
==Interesting. He doesn’t seem to have a clue about economics.
==Interesting approach, given the massive increase in computers processing power of recent years, constructing bottom-up economic agents aggregation models becomes a lot more real that it was to “old school” economists. I only wonder, how successfull those bottom-up models will be in forecasting. Also, there is a massively important issue how the agents respond to informations (that was at a core of ==
Economics, CAPM PMT, Black-Scholes are a massive fail for the bunch of fund managers who are masters of these thought experiments/instruments yet returned -4.5% in 2011 while DJI+S&P+NASDAQ markets averaged 2.98% gain. Dalio thinks and acts differently for that reason whether or not articulate, for an entirely practical reason. By being determined not to use the above, we finished 2011 with 33.32% IRR running into 2012 now 40.14%, with 48.27% in 2010 on smaller database, while our current 2012 portfolios are running at average 33.79% IRR. Longer term holds of about a year many longer based on our alternative methods and new theory. ==
When you’re making 2-and-20 on $125 billion or so, you don’t have to have a clue about economics. You can hire the smartest propeller-heads on the planet and pay them obscenely. And then, you win.
:Here is New Yorker article I mentioned the other day this gives impression that bridgewater is managed from the top down accroding to a strict set of rules and that Mr Dalio spends a lot of his time thinking about the bigger picture and tweaking his “system ” as new thoughts and connections occur to him.
–You are quite right, and in the end it is the market and not the economics that rule the day. The economics only give us a clue as to what should happen, but things can change on a dime. Economics tells us what happened in the past, not what will happen. Knowing correct economics (not the Keynesian trash) can help us make our opinions about what should happen, and what the affects of government action will be. One thing to watch out for are the lies that government numbers tell.
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