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2010 对冲基金观察:Money Flow,GS & Meredith Whitney
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文章时间: 2010-8-06 周五, 下午10:03    标题: 引用回复

2010年07月15日Goldman Sachs将欧元3个月和6个月预测值上调

高盛将欧元3个月预测值自1.15上调至1.22,将6个月预测值自1.15上调至1.35



纯属误会 2010-6-10 周四, 上午11:05 写道:

这个是暂时做多EUR的信号。
Laughing


Goldman Sachs Slashes Euro/Dollar Exchange Rate Forecasts

Last update: 6/10/2010

LONDON (Dow Jones)--Goldman Sachs Group Inc. (GS) Thursday revised its forecasts for the euro's exchange rate against the dollar sharply lower, reflecting continuing political risks and expectations of a wider gap in economic performance between the euro zone and the U.S. The U.S. bank--one of the most widely followed in financial markets--now expects to see the euro trading at $1.15 in three and six months' time from $1.35 earlier. In 12 months it expects to see the euro at $1.25, again from $1.35 earlier. "The likelihood of continued policy mishaps remains very high in the near term and as a result the euro will probably remain under pressure," the bank said in a monthly report to clients. At 1143 GMT, the euro was trading at $1.2047, according to EBS.


-By Clare Connaghan and Katie Martin, Dow Jones Newswires; +44 (0) 20 7842 9496, clare.connaghan@dowjones.com (END)

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文章时间: 2010-8-06 周五, 下午10:27    标题: 引用回复


EUR: from June 10th to Aug. 6th:

A PICTURE IS WORTH A THOUSAND WORDS. Laughing Laughing Laughing


纯属误会 2010-8-06 周五, 下午10:03 写道:
2010年07月15日Goldman Sachs将欧元3个月和6个月预测值上调

高盛将欧元3个月预测值自1.15上调至1.22,将6个月预测值自1.15上调至1.35



纯属误会 2010-6-10 周四, 上午11:05 写道:

这个是暂时做多EUR的信号。
Laughing


Goldman Sachs Slashes Euro/Dollar Exchange Rate Forecasts

Last update: 6/10/2010

LONDON (Dow Jones)--Goldman Sachs Group Inc. (GS)




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文章时间: 2010-8-06 周五, 下午10:59    标题: 引用回复

高盛下调美第二季年率经济增长速度预期至2%
2010年07月20日


  高盛集团经济学家称,进口的大幅增长和消费者开支的下滑导致美国第二季度的经济增长速度有所放缓。

  据高盛集团经济学家发布的修正后预测数据显示,第二季度美国经济的年率增长速度为2%,低于该集团此前预期的年率增长3%今年下半年的平均增长速度预计仍为1.5%。美国政府将在7月30日公布其对GDP数据的年度修正报告。

  高盛集团驻纽约的资深经济学家Ed McKelvey在7月16日的一份客户报告中称:“从最近几周以来的严峻趋势来看,我们可能需要对经济增长速度作出下行修正。虽然可以相信经济增长速度放缓的趋势将是短暂的,但有几个因素则强烈呈现出相反的经济走势。”

  McKelvey表示,可能阻碍下半年经济增长的因素包括,经济将失去财务刺激性措施和库存补充的支持、未占用住房的过度供应量、各州及地方政府的预算限制、信贷的缺乏以及疲弱的就业增长趋势等。

  在此以前,摩根大通和瑞银证券(UBS Securities LLC)驻纽约的经济学家也都已下调了对美国经济增长速度的预期。


纯属误会 写道:
Goldman Sachs:下调美国2011年经济增长速度预期
2010年08月06日


  高盛集团经济学家周五下调了对2011年美国经济增长速度的预期,并表示美联储对高失业率的回应将是“又一轮非传统的货币宽松措施”,其中包括收购更多资产等。

  以Jan HatziusEd McKelvey为首的高盛集团经济学家称,他们仍旧认为,今年下半年美国实际GDP的平均年率增长速度将为1.5%;但经济学家同时预计称,到明年年底为止,经济增长速度将(比此前预期的)更加缓慢。根据他们的预测,2011年美国经济的平均年率增长速度很可能为1.9%,不及此前预期的2.5%,主要由于美国国会拒绝扩大经济刺激性措施。

  根据高盛集团经济学家的预测,美联储将在下周召开的货币政策制定会议上宣布继续实施非传统性货币宽松措施的“最初步骤”

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文章时间: 2010-8-06 周五, 下午11:03    标题: 引用回复

英镑/美元∶GBP/USD测试1.58,高盛报告称英国经济好于美国、日本和欧元区
2010年08月02日

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文章时间: 2010-8-06 周五, 下午11:05    标题: 引用回复


高盛:下半年油价目标85-95美元

2010年08月04日

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文章时间: 2010-8-12 周四, 上午10:10    标题: 引用回复


Goldman Sachs Sees Gold At $1,300 In Six Months

By Claudia Assis, Published August 12, 2010
http://www.foxbusiness.com/markets/2010/08/12/goldman-sachs-sees-gold-months/

SAN FRANCISCO -- "Significantly" lower U.S. interest rates point to higher gold prices, Goldman Sachs said in a note to clients made public late Wednesday. Goldman Sachs forecast
gold futures at $1,300 an ounce in the next six months. The low rates lead to a high level of speculative buying in gold, which is now oversold, the investment bank said.

In addition, Goldman's economists expect that the Federal Reserve will return to quantitative easing measures in late 2010 or early 2011. "We believe that a return to quantitative
easing could act as a strong catalyst to carry gold prices to higher levels," the analysts said.

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文章时间: 2010-8-13 周五, 下午9:42    标题: 引用回复


炒股有如与虎争食。。。



Rigged-Market Theory Scores a Perfect Quarter:
Bloomberg Opinion - Jonathan Weil,May 12, 2010


Score another triumph for the rigged- market theory.

In a feat that would seem to defy the odds, Goldman Sachs, JPMorgan Chase and Bank of America this week each said its trading desk made money every day of the first quarter. Goldman said its daily net trading revenue topped $100 million 35 times last quarter out of 63 trading days. JPMorgan and Bank of America disclosed similar eye-popping stats. Citigroup, too, recorded a profit on each trading day, Bloomberg News reported, citing unnamed people who knew the results.

The intrigue is high. If a too-big-to-fail bank’s traders were able to make money every day of a quarter, were they really trading in any normal sense of the word? Or would vacuuming be a more accurate term? What kinds of risks do such incredible profits entail, for the banks and the rest of us taxpayers? And are results such as these too good to be true?

There seems to be no satisfying way to answer those questions, or even the more basic inquiry: How exactly do these banks’ trading divisions make money? Reading the companies’ impenetrable financial reports is of little help. However they did it, the data suggest it was as easy last quarter as hitting the side of a barn with a baseball from three feet away.

This isn’t the way “trading” works in the real world. A simple exercise in measuring probabilities is instructive here.

Long Odds

Let’s say you manage a highly leveraged, diversified investment fund, and have become so skilled at playing the markets that you have a 70 percent probability of making money any given trading day. This would be a remarkable achievement in most markets. The odds that you would post a daily net gain 63 times in a row, though, would be about one in 5.7 billion. The formula for calculating this is: 1/(0.70 to the 63rd power).

Even if you had a 95 percent likelihood of a winning day, you would have only a 3.9 percent chance of doing it 63 trading sessions in a row.

Now consider that four of the biggest U.S. banks just pulled off a quarter-long win streak -- all in the same quarter. Why would any of them even want to? Do they think the public doesn’t despise them enough? Surely it would have been easy to tweak the values of some illiquid “Level 3” assets lower for a day if they had been so inclined, just enough to avoid looking perfect. Yet none of them did.

These banks have the advantage of an unlevel playing field, of course. They can borrow money for next to nothing at current rates and lend it for more, simply by buying longer-term Treasuries. They have access to information that their clients lack. They have computer-trading platforms that operate in milliseconds. There’s less competition now that Lehman Brothers and Bear Stearns are gone. Yet even taken together, these factors don’t offer a satisfactory explanation for last quarter’s amazing streaks.

Wrong Question

Asking how these four banks did it may even be the wrong question. A better question might be: How did Morgan Stanley’s traders somehow manage to lose money on four days last quarter? Or perhaps the winning streaks were a sign of a perfect calm, just before another perfect storm. It turns out Morgan Stanley posted net trading gains every day during the second quarter of 2007, right before the credit crisis began to hit full-steam.

Goldman’s chief operating officer, Gary Cohn, this week said his bank’s infrequent trading losses -- 11 losing days in the past 12 months -- are evidence that Goldman’s traders don’t depend on proprietary trading to generate revenue. The simple answer, he said, is that Goldman’s trading operations “are largely global market-making businesses.”

One Answer

Of course, no matter what the question is these days, it seems the answer from Goldman always is: We’re a market maker. When senators ask about e-mails that show Goldman telling its sales army to dump crappy mortgage bonds from its warehouse on its clients? Market maker. When the e-mails show Goldman created the crappy deals? Market maker. By Goldman’s definition, an Amway salesman pitching energy drinks to old ladies in nursing homes would qualify as a market maker. It’s all just matching buyers and sellers to create liquidity, you know.

So let’s forget about the how and focus on the why. Why were these banks able to make so much money with such uncanny consistency? One logical answer is that America’s political leaders obviously want it this way.

Otherwise, for example, the government already would have begun to liquidate Fannie Mae and Freddie Mac and let the crash in housing prices and mortgage-backed securities run its course. To encourage personal savings, the Federal Reserve would have raised interest rates and turned off the banking industry’s easy-money spigot. And the White House would be throwing a fit over the International Monetary Fund’s use of U.S. taxpayer dollars to help bail out Greece and its ilk, along with the European banks that own their debt.

Americans don’t want the immediate pain such steps would bring, though. So our government keeps trying to stretch it out through massive subsidies for the financial-services industry, which means traders at America’s largest too-big-to-fail banks get to keep making their killings and bonuses, for now. What nobody knows yet is how long the government can keep up the rig.

(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)

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文章时间: 2010-8-24 周二, 下午9:17    标题: 引用回复

Cont'd from: http://www.gaofamily.com/viewtopic.php?p=58077#58077
A new record of 17 wks outflow by the end of the week ???

DIRECT ICI DATA SOURCE: http://www.ici.org/research/stats/flows


Retail Investors Don't Care If Stocks Are Up Or Down, They Just Want Out - Record 15th Weekly Outflow From Domestic Stock Funds
Tyler Durden on 08/19/2010


Retail threw in the towel weeks ago, which is why at this point confirmation that nobody is trading is like watching reruns of Weekend at Bernies (or GETCO's). ICI reports that the week ended August 11 saw a record 15th weekly outflow from domestic stock mutual funds, this time of $2.1 billion. YTD outflows are now just under $48 billion.

Hedge funds are not the only ones who missed the miraculous and completely senseless July stock ramp: retail pulled out $13.1 billion in the same time, and has followed up by redeeming another $4.1 billion in August so far: nothing matters anymore - stocks can go up, they can go down: it is all the same to the one segment of the stock market responsible for the biggest portion of market capitalization.

There is no improvement in the trend - retail has no faith in stock valuations, in the SEC, in the possibility that another flash crash won't happen tomorrow.

Furthermore, retail is getting older and the retiring baby boomers would rather drink cyanide than put their money in stocks. We wish all the best to the computers and the Primary Dealers - they are now all alone. We dread to even think what cash levels are like at mutual funds.


http://www.zerohedge.com/article/retail-investors-dont-care-if-stocks-are-or-down-retail-just-wants-out-record-15th-weekly-ou


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文章时间: 2011-4-12 周二, 下午12:36    标题: 引用回复


高盛的国民经济总产值预测:2010-2050


(泡泡吹得越大,爆破起来威力越大。。。)

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文章时间: 2011-5-13 周五, 下午1:53    标题: 引用回复


高盛分析师称原油市场仍旧看涨

2011年05月13日

  高盛集团(GS)高级分析师、商品研究部门负责人杰弗里-卡瑞(Jeffrey Currie)周五称,原油(99.46,0.49,0.50%)市场“从结构上来说仍旧看涨”,未来12个月时间里原油价格很可能将会上涨。

  卡瑞在今天接受采访时称,原油市场将在2012年面临“关键性的短缺”状况,“从中长期来看,原油市场从结构上来说仍旧看涨”。今年截至目前为止,北海布伦特原油期货价格已经上涨了21%,美国西得克萨斯中质原油期货价格则已经上涨了10%。在上周的交易中,原油期货价格创下两年多以来的最高周度跌幅,该周美国经济指标和走强中的美元触发商品价格大跌。

  卡瑞指出,商品价格的波动性将从下个月开始趋于稳定,原因是市场获得了更加明确的美国经济增长迹象。他表示,商品市场目前正在经历“一个难关”,原因是宏观经济数据表现疲弱。卡瑞进一步指出:“一旦这些令人担心的问题显示出一些稳定的迹象,那么市场状况就会变得更加明晰。”

  卡瑞预测称,即使是在美联储完成购买6000亿美元美国国债的第二轮“定量宽松”计划以后,原油需求也仍将继续增长。他指出:“如果‘定量宽松’计划确实给美国经济带来了可持续的增长,当这项计划完成以后,经济增长速度可能会有所放缓,但即使如此,从根本上来说经济增长应该仍旧不会受到损害。”

  所谓“定量宽松”(Quantitative Easing),是由日本最早提出的一个概念,是在经济萎靡不振、银行信贷急剧萎缩的背景下,日本央行对从2001年3月开始的零利率(银行间隔夜贷款利率)政策的进一步深化,其内容是由中央银行向银行体系提供充裕的流动性,以便鼓励借贷和刺激经济复苏。

  卡瑞还指出,新兴经济体中的通胀压力将在今年下半年有所减弱,从而为“风险资产创造一个更加有利的环境”。

  国际能源署(IEA)昨天下调了对2011年全球原油需求的预期,原因是今年原油价格的上涨趋势正开始令个人消费者面临压力。根据IEA的预测,今年全球原油消费量将增长1.5%。


(金良)

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文章时间: 2011-5-13 周五, 下午2:18    标题: 引用回复



对照上面GS的分析,参考IEA这个报告。。。
Smile

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文章时间: 2011-5-19 周四, 上午12:24    标题: 引用回复

Hedge Funds

May 11, 2011, 4:16 p.m. EDT
Goldman seeks smaller hedge fund managers
Investment bank focuses on funds with less than $1 bln in assets
By Alistair Barr, MarketWatch

LAS VEGAS — Attention aspiring George Soros’s of the world: Goldman Sachs Group is looking to invest more in smaller, emerging hedge fund managers.

Since the 2008 financial crisis, most of the money flowing into the hedge fund industry has gone to the biggest firms, including Davidson Kempner Capital, Millennium Management, Och-Ziff Capital and Fortress Investment Group.

That’s left new hedge funds struggling to raise money.
http://www.marketwatch.com/story/new-hedge-funds-lack-fuel-for-big-launches-2010-09-20

“All flows have gone to managers with $2 billion and above over the past two years,” Lawrence Restieri, Alternative Capital Markets Group, said Wednesday during the SkyBridge Alternatives Conference in Las Vegas.

“Intuitively that would lead you to believe there’s opportunity in smaller emerging managers,” he added.

Goldman has been focusing on new, emerging hedge funds and managers who have less than $1 billion in assets, Restieri said.

“That’s resonated with a lot of our clients,” he added. “Larger clients — with $100 million plus — they don’t need help finding Och-Ziff. They need help sorting through the thousands of smaller managers out there. So there’s value that our platforms can provide there.”

Michael McGrath, head of the Alternative Investment Group at Morgan Stanley Smith Barney, said that 90% of the assets raised by the hedge fund industry in 2010 went to firms with at least $5 billion in assets.

It's difficult to invest a lot of money in a small hedge fund, because the investor becomes so important to that manager — something McGrath called “concentration risk.”

“If you can find ways to create a diversified portfolio of these managers then there’s a tremendous opportunity for them to get back into the race,” McGrath added.


Alistair Barr is a reporter for MarketWatch in San Francisco.

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文章时间: 2011-5-22 周日, 下午11:56    标题: 引用回复

May 22, 2011, By PETER LATTMAN, NYTimes.com
Hedge Funds: Grassley Investigating Trades Made by SAC Capital


Senator Charles E. Grassley, Republican of Iowa, is examining 20 stock trades by the hedge fund SAC Capital
Advisors, a spokesman for the lawmaker said Saturday.

The inquiry is the result of a letter sent by Mr. Grassley on April 26 to the Financial Industry Regulatory Authority
asking it to provide information on the “potential scope of suspicious trading activity” at SAC, the hedge fund run by
the billionaire investor Steven A. Cohen.

Mr. Cohen’s firm, one of the largest hedge funds in the world, has become ensnared by the government’s vast
investigation into insider trading at hedge funds. The investigation resulted in the conviction earlier this month
of Raj Rajaratnam, the head of the Galleon Group.

As part of an investigation separate from the one involving Mr. Rajaratnam, two SAC portfolio managers have pleaded
guilty to making illegal trades based on secret corporate information. Neither SAC nor Mr. Cohen has been charged
with any wrongdoing. A firm spokesman has said that SAC was “outraged” by the conduct of the two portfolio
managers, Noah Freeman and Donald Longueuil.


Steven A. Cohen Steve Marcus/Reuters
SAC Capital Advisors, run by Steven A. Cohen, is one of the largest hedge funds in the world.

In his letter to the financial authority, known as FINRA (美国金融业监管局), Mr. Grassley, the ranking Republican on the
Senate Judiciary Committee, said that “while SAC Capital itself has not been charged, these allegations raise serious
questions about the corporate culture at SAC Capital and undercut investor confidence in a fair and balanced playing
field.”

FINRA provided Mr. Grassley with details of SAC’s trading last week. The stock transactions were made over the last
decade and previously were referred to the Securities and Exchange Commission. They included trades made around
the time of merger announcements or other market-moving events.

News of the SAC trades that FINRA provided to Mr. Grassley was first reported by The Wall Street Journal.

Earlier this month, SAC executives, including Peter Nussbaum, the firm’s top lawyer, and its outside counsel
met with staff members in Mr. Grassley’s office to discuss his inquiry.

“We welcomed the opportunity to meet with the staff to educate them about the firm and our compliance efforts,
and had an entirely appropriate, professional and cordial meeting. We will continue to cooperate in any way we can,”
SAC said in a statement provided Saturday by a firm spokesman.

Mr. Grassley’s aggressive stance toward SAC follows the senator’s past criticism of the S.E.C. for not being vigilant
enough in its pursuit of illegal activity on Wall Street, including its failure to uncover frauds including Bernard L.
Madoff’s Ponzi scheme. Now Mr. Grassley’s attention has turned to insider trading.

“The use of nonpublic information for insider trading purposes is sadly alive and well in our nation’s financial
markets,” Mr. Grassley wrote in his letter to Finra. “More must be done to investigate and bring these criminals to
justice.”

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文章时间: 2011-5-23 周一, 上午11:51    标题: 引用回复

Mon, 05.16.11 12:25pm EST

GOLDMAN SACHS ON THE S&P500 EARNINGS TARGET

US Equity Strategist David Kostin’s US Weekly Kickstart, Goldman Sachs

HIGHLIGHTS:

Our 1Q 2011 S&P 500 Beige Book highlights the continuing margin growth debate.

The ability of S&P 500 companies to continue expanding margins remains the
most debated fundamental aspect of our outlook in conversations with
clients. Results from 1Q 2011 support our view as S&P 500 companies (ex Fin.
and Util.) raised net margins on sequential (17 bp) as well as year-on-year bases
(114 bp). EBIT margins rose similarly. Notably, this was achieved despite a
tepid 1Q economic environment and surging input costs. As we highlighted
in our quarterly Beige Book, pricing strategies and productivity gains
were key to this success. Other topics mentioned on earnings calls
included international revenue growth and boosts to capex.

Performance
We expect the S&P 500 to rise to 1525 in 12 months (+13%).

S&P 500 Earnings
Our top-down EPS forecasts of $96 and $106 for 2011 and 2012 reflect +15%
and +11% growth, respectively. Bottom-up consensus forecasts an 18%
increase in 2011 to $99, and a 14% increase in 2012 to $113.

Valuation
Top-down, S&P 500 trades at an NTM P/E of 13.5X. Bottom-up,
it trades at an NTM P/E of 13.1X and an LTM P/B of 2.4X.


http://www.scribd.com/doc/55949193/5-21-Kickstart

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文章时间: 2011-9-20 周二, 下午8:18    标题: 引用回复

Average Joes get extremely rich? Commentary of "Mastering the Machine"

Mastering the Machine

http://www.newyorker.com/reporting/2011/07/25/110725fa_fact_cassidy#ixzz1YVjkKvd9

How Ray Dalio built the world’s richest and strangest hedge fund.
by John Cassidy July 25, 2011

Ray Dalio has an uncanny ability to anticipate economic trends. Critics say that he runs a cult. Photograph by Platon.

[Biographies of successful richers such as Warren Buffett and George Soros mislead to assume that an average Joe could succeed with talents and hard work combined. Here, Mr. Dalio, is another live example of such funky legend. In this article, the writer tries the best to defend and rationalize him on personality, management style and beyond. Comments are made as [Comments:] to probe or question how a person could get extremely rich or extremely successful from scratch.]

Ray Dalio, the sixty-one-year-old founder of Bridgewater Associates, the world’s biggest hedge fund, is tall and somewhat gaunt, with an expressive, lined face, gray-blue eyes, and longish gray hair that he parts on the left side. When I met him earlier this year at his office, on the outskirts of Westport, Connecticut, he was wearing an open-necked blue shirt, gray corduroy pants, and black leather boots. He looked a bit like an aging member of a British progressive-rock group. After a few pleasantries, he grabbed a thick briefing book and shepherded me into a large conference room, where his firm was holding what he described as its weekly “What’s going on in the world?” meeting.

Of the fifty or so people present, most were clean-cut men in their twenties or thirties. Dalio sat down near the front of the room. A colleague began describing how the European Central Bank had just bought some Greek bonds from investors at a discount to their face value—a move that the speaker described as a possible precursor to an over-all restructuring of Greece’s vast debts. Dalio interrupted him. He said, “Here’s where you are being imprecise,” and then explained at length what a proper debt restructuring would entail, dismissing the E.C.B.’s move as an exercise in “kicking it down the road.”

Dalio is a “macro” investor, which means that he bets mainly on economic trends, such as changes in exchange rates, inflation, and G.D.P. growth. [Comments: it misleads people to assume that he is an investor instead of a speculator, while in the end of this article, he admitted that it's a sum-zero game. Is it contradictive?] In search of profitable opportunities, Bridgewater buys and sells more than a hundred different financial instruments around the world—from Japanese bonds to copper futures traded in London to Brazilian currency contracts—which explains why it keeps a close eye on Greece. In 2007, Dalio predicted that the housing-and-lending boom would end badly. Later that year, he warned the Bush Administration that many of the world’s largest banks were on the verge of insolvency. [Comments: he could do so because he is the very manipulator who knows when to ignite the timing bomb.] In 2008, a disastrous year for many of Bridgewater’s rivals, the firm’s flagship Pure Alpha fund rose in value by nine and a half per cent after accounting for fees. [Comments: yes, otherwise, there is no reason for others to lose!] Last year, the Pure Alpha fund rose forty-five per cent, the highest return of any big hedge fund. This year, it is again doing very well.

The discussion in the conference room moved on to Spain, the United Kingdom, and China, where, during the previous week, the central bank had raised interest rates in an attempt to slow inflation. Dalio said that the Chinese economy was in danger of overheating, and somebody asked how a Chinese slowdown would affect the price of oil and other commodities. Greg Jensen, Bridgewater’s co-chief executive and co-chief investment officer, who is thirty-six, said he thought that even a stuttering China would still grow fast enough to push world commodity prices upward. [Comments: why stuttering China would still have such impact? What a nonsense logic!]

Dalio asked for another opinion. From the back of the room, a young man dressed in a black sweatshirt started saying that a Chinese slowdown could have a big effect on global supply and demand. Dalio cut him off: “Are you going to answer me knowledgeably or are you going to give me a guess?” The young man, whom I will call Jack, said he would hazard an educated guess. “Don’t do that,” Dalio said. He went on, “You have a tendency to do this. . . . We’ve talked about this before.” After an awkward silence, Jack tried to defend himself, saying that he thought he had been asked to give his views. Dalio didn’t let up. Eventually, the young employee said that he would go away and do some careful calculations. [Comments: of course, he is the boss!]

After the meeting, Dalio told me that the exchange had been typical for Bridgewater, where he encourages people to challenge one another’s views, regardless of rank, in what he calls a culture of “radical transparency.” Dalio had no qualms about upbraiding a junior employee in front of me and dozens of his colleagues. When confusions arise, he said, it is important to discuss them openly, even if that involves publicly pointing out people’s mistakes—a process he referred to as “getting in synch.” He added, “I believe that the biggest problem that humanity faces is an ego sensitivity to finding out whether one is right or wrong and identifying what one’s strengths and weaknesses are.” [Comments: Nonsense! What a business cares about is profit! Big companies likewise such as MSFT/AMZN/ORCL/CSCO all claim they care about and build up employees and yet never show mercy on layoffs!]

Dalio is rich—preposterously rich. Last year alone, he earned between two and three billion dollars, and reached No. 55 on the Forbes 400 list. But what distinguishes him more from other hedge-fund managers is the depth of his economic analysis and the pretensions of his intellectual ambition. [Comments: What a joke! He is NO difference from any hedge-fund managaer.] He is very keen to be seen as something more than a billionaire trader. Indeed, like his sometime rival George Soros, he appears to aspire to the role of worldly philosopher. In October, 2008, at the height of the financial crisis, he circulated a twenty-page essay immodestly titled “A Template for Understanding What’s Going On,” which said the economy faced not just a common recession but a “deleveraging”—a period in which people cut back on borrowing and rebuild their savings—the impact of which would be felt for a generation. [Comments: Nothing special, many people fortold this concept and idea!] This line of analysis wasn’t unique to Dalio, but almost three years later, with economic growth stagnating again, it does not seem off the mark.

Many hedge-fund managers stay pinned to their computer screens day and night monitoring movements in the markets. [Comments: No, unless a trader does DT, he doesn't!] Dalio is different. He spends most of his time trying to figure out how economic and financial events fit together in a coherent framework. [Comments: What a joke!] “Almost everything is like a machine,” he told me one day when he was rambling on, as he often does. “Nature is a machine. The family is a machine. The life cycle is like a machine.” His constant goal, he said, was to understand how the economic machine works. “And then everything else I basically view as just a case at hand. So how does the machine work that you have a financial crisis? How does deleveraging work—what is the nature of that machine? And what is human nature, and how do you raise a community of people to run a business?” [Comments: Show full respect on these statements! Because it leads to his personal philosophy which is crucial. And he admitts "how to raise a community of people to run a business" where focus is business!]

Dalio is serenely convinced that the precepts he relies on in the markets can be applied to other aspects of life, such as career development and management. [Comments: Joke! Other aspects should be quality relationship, love, care and attention etc. spiritual fields] And he has enough regard for his own views on these subjects to have collected them in print. Before our meeting, he sent me a copy of his “Principles,” a hundred-page text that is required reading for Bridgewater’s new hires. It turned out to be partly a self-help book, partly a management manual, and partly a treatise on the principles of natural selection as they apply to business. “I believe that all successful people operate by principles that help them be successful,” a passage on the second page said. The text was organized into three sections: “5 Steps to Personal Evolution,” “10 Steps to Personal Decision-Making,” and “Management Principles.” The last of the two hundred and seventy-seven management principles was: “Constantly worry about what you are missing. Even if you acknowledge you are a ‘dumb shit’ and are following the principles and are designing around your weaknesses, understand that you might still be missing things. You will be better and be safer this way.” [Comments: I bet he himself can't remember those rules!]

Dalio’s philosophy has created a workplace that some call creepy. Last year, Dealbreaker, a Wall Street Web site, picked up a copy of the Principles and made fun of a section in which Dalio appeared to compare Bridgewater to a pack of hyenas feeding on a young wildebeest. In March, AR, a magazine that covers hedge funds, quoted a former colleague of Dalio’s saying, “Bridgewater is a cult. It’s isolated, it has a charismatic leader and it has its own dogma.” The authors of the article noted that Dalio’s “emphasis on tearing down an individual’s ego hints at the so-called struggle groups of Maoism,” while his search for “human perfection devoid of emotion resembles the fantasy world in Ayn Rand’s ‘The Fountainhead.’”

Dalio doesn’t pretend that Bridgewater is a typical workplace, but he is sensitive to criticism. The recent media attention irked him, because, in his view, it misrepresented and trivialized Bridgewater’s culture, which he insists is central to the firm’s success. “It is why we made money for our clients during the financial crisis when most others went over the cliff,” he wrote to me in an e-mail. “Our greatest power is that we know that we don’t know and we are open to being wrong and learning.” [Comments: Yes, money is what matters! That's his true philosophy. However, did it say in the beginning he helped build employees?]

After the “What’s going on in the world?” meeting, he walked back to his office, an airy but modest-sized corner space that overlooks the Saugatuck River and is lined with pictures of his wife and four sons. [Comments: it tries to portray an image that he emphasize family value.] He sat down behind his desk and showed me a book he had been reading—“Einstein’s Mistakes: The Human Failings of Genius,” by Hans C. Ohanian. “Here was the greatest mind of the twentieth century, and he made lots of mistakes,” Dalio said. In his Principles, Dalio declares that acknowledging errors, studying them, and learning from them is the key to success. He writes, “Pain + Reflection = Progress.” Bridgewater puts this equation into action by organizing lengthy assessment sessions, in which employees must discuss their mistakes. [Comments: Nothing new. Everybody knows it!]

The next item on Dalio’s agenda was a meeting with his two co-chief executives: Jensen and David McCormick, a former senior official in the Treasury Department under George W. Bush. [Comments: It implies networking is what matters!] Like virtually all meetings at Bridgewater, this one was taped. [Comments: real deals and conversations that matter will never be taped!] Dalio says that the tapes—some audio, some video—provide an objective record of what has been said; they can be used for training purposes, and they allow Bridgewater’s employees to keep up with what is going on at the firm, including his discussions with senior colleagues. “They get to see all of my mistakes,” Dalio told me. “They get to see all of my humanity.” [Comments: lies!]

Once a tape recorder had been switched on, Jensen, McCormick, and Dalio discussed the possible promotion of an internal candidate to a senior-management role. McCormick, a soft-spoken forty-five-year-old who studied engineering at West Point, argued that the candidate’s prior experience at a big Wall Street firm indicated that he could probably do the job. Dalio disagreed. An investment bank is a “totally different world,” he said. But, rather than continue the discussion, he asked one of his assistants to call in the candidate. One rule of radical transparency is that Bridgewater employees refrain from saying behind a person’s back anything that they wouldn’t say to his face. [Comments: lie!]

The man arrived and stood before Dalio’s desk. Dalio explained what the discussion was about and said, “I don’t imagine that you would be a good fit for the job.” The man took a seat, and Dalio and McCormick continued their discussion about his qualifications. The candidate explained his experience on Wall Street and said he thought he could do the job well. Dalio leaned back in his chair, looking skeptical. The employee didn’t get the promotion.

[Comments: The following paragraph starts portraying his legend.]

The only child of Italian-American parents, Ray Dalio was born in Jackson Heights, Queens, in 1949. His father was a jazz musician who played the clarinet and saxophone at Manhattan jazz clubs such as the Copacabana; his mother was a homemaker. When Dalio was eight, the family bought a three-bedroom house in Manhasset, and enrolled Ray in the local public school. “I was a bad student,” he recalls. “I have a bad rote memory, and I didn’t like studying.” From the age of twelve, Dalio caddied at the nearby Links Golf Club, whose members included many Wall Street investors. Some of them gave Dalio tips. The first stock he purchased was Northeastern Airlines, which soon received a takeover offer. Its shares tripled. [Comments: Yes! Insider Information is the key to succeed!] “I figured that this was an easy game,” Dalio said. By the time he started college, at a nearby campus of Long Island University, he had built up a stock portfolio worth several thousand dollars. [Comments: It didn't say how his skills were developed and related to the performance. BTW, several grand bucks was sort of big money at that time]

After signing up for some finance classes, he discovered that there were some topics he enjoyed studying. Transcendental meditation, which he took up following a trip to India by the Beatles, also helped his work habits. Most mornings before going to the office, he still meditates. Demonstrating his technique, he sat back in his office chair, closed his eyes, and clasped his hands in front of him. “It’s just a mental exercise in which you are clearing your mind,” he said. “Creativity comes from open-mindedness and centeredness—seeing things in a nonemotionally charged way.” [Comments: Miracles are generated by this? Who else has never done it?]

After graduating, Dalio went to Harvard Business School, where he traded commodities—grains, oil, cotton, and so on—for his own account. [Comments: getting to a field professionally at early age is one of the keys] Not long after leaving Harvard, he landed at Shearson Hayden Stone, the brokerage firm run by Sanford Weill. [Comments: it could be special and it could be not on landing such a job] Dalio worked in the commodity-futures department, advising cattle ranchers, grain producers, and others on how to hedge risks. (The horns of a longhorn steer, the gift of some California ranchers, are mounted behind his desk.) [Comments: This is trivial, nothing special to mention. But it leads people to think he did a great job on that.] On New Year’s Eve in 1974, Dalio went out drinking with his departmental boss, got into a disagreement, and slugged him. About the same time, at the annual convention of the California Food & Grain Growers’ Association, he paid an exotic dancer to drop her cloak in front of the crowd. After being fired, he persuaded some of his clients to hire him as a consultant and founded Bridgewater, operating it out of his two-bedroom apartment. He was twenty-six years old. [Comments: an unbelievable legend is described here. How can someone easily "persuaded some of his clients to hire him as a consultant and founded Bridgewater" after being fired at 25 years old, can an average Joe do it?]

By the early nineteen-eighties, Dalio had got married, started a family, and moved to Wilton, Connecticut, where he lived and traded out of a converted barn. [Comments: Dates are wrong here. According to the end of the article, he has been married to his wife for 34 years which should be translated to got married in 1977] He also advised businesses on how to manage risk and published an economic newsletter. One of his readers was Bob Prince, a young financial analyst who worked for a bank in Oklahoma, and who is now Bridgewater’s co-chief investment officer. Prince showed one of Dalio’s articles to his boss, David Moffett, who went on to become the chief executive of Freddie Mac. “He said it was the best thing he had ever read on how the economy works,” Prince recalled. [Comments: what David Moffett said is nothing as people usually say things like this everyday and then forget it. What's important is networking or connection it implies! Question: how do these people get connected and worked together to establish and run the business?] Another of Dalio’s articles that stuck in Prince’s memory was titled “What Is a Jeweler?” It described a jeweller as basically an investor with a long position in gold and precious stones. If the market price of these commodities goes up, the jeweller makes money on his stock. If prices fall, he can lose out. To limit the risk, Dalio wrote that jewellers should purchase gold-futures contracts designed to rise in value when the price of gold falls. [Comments: this is NOTHING special! But it tries to portray how smart or special Ray is!]

In 1985, Dalio persuaded the World Bank’s employee-retirement fund to let Bridgewater manage some of its capital. [Comments: Ray was 36 years old at that time. How could an average 36 years old persuade WB? Plus, nothing was shown that his company had succeeded so much that it could draw attention from money keepers such as WB] In 1989, Kodak’s retirement system did the same. [Comments: well, for whatever the reason is, it's easier to do so after getting WB] At the time, Kodak had most of its money invested in stocks. Dalio’s pitch, which hasn’t changed much over the years, was that by investing in a variety of other markets, such as U.S. and international bonds, and using leverage to bolster its exposure, Bridgewater could match or beat the stock market with less risk. “He had a new way of thinking,” Rusty Olson, who ran Kodak’s retirement funds for many years, told me. “You get the same return, but you get a heck of a lot of beneficial diversification, too.” [Comments: lies! Diversification is never an option for investment success! He really should tell why Kodak gave the business to Ray!]

Hedge funds date to 1949, when Alfred Winslow Jones, a writer at Fortune, opened a private investment firm using sixty thousand dollars he had raised from friends and forty thousand he had saved. To boost his returns, Jones borrowed heavily and bought stocks he liked “on margin”—a practice that had been discredited in the late nineteen-twenties. As a “hedge” against the market falling, Jones also picked out some stocks he believed to be overvalued and bet against them—a practice known as “selling short.” Jones’s fund regularly beat the Dow, and by the late nineteen-sixties it had attracted many imitators. [Comments: NOTHING NEW!]

Worldwide, there are now some ten thousand hedge funds, which the government regulates only loosely. Together, they have about two trillion dollars under management. Even today, they employ the two basic tools that Jones used—borrowing (“leverage”) and selling short—and they charge their clients hefty fees, as Jones did. On top of a two-per-cent management fee, they deduct twenty per cent of any investment gains they generate. Jones claimed that this remuneration scheme, which is known as “two and twenty,” was inspired by the way ancient Phoenician merchants financed their trading expeditions. But the practice is also tax-driven. It allows hedge-fund managers to classify much of their income as capital gains, which are taxed at a far lower rate than regular income. While cops and schoolteachers face a marginal tax rate of twenty-five per cent, hedge-fund managers like Dalio have for years paid fifteen per cent on the lion’s share of their income.

Some hedge-fund managers, such as Steven A. Cohen, of S.A.C. Capital, and David Einhorn, of Greenlight Capital, are stock pickers, like Jones. Others, such as James Simons, of Renaissance Technologies, are known as “quants.” They use computers to sift through market data, spot profitable opportunities, and place trades, all with minimal human intervention. As a macro trader, Dalio is working in the tradition of George Soros and Julian Robertson, famous speculators who ranged across markets.

Bridgewater has long run two primary investment funds. One, called All Weather, has low charges attached to it and seeks to match the over-all market return, which is known as “beta,” in whichever market the client chooses. Another, Pure Alpha, which has the standard two-and-twenty charges, aims at beating the market return but also at limiting risk. To investment professionals, “alpha” is the return over and above the market return. If in a given year the S. & P. 500 returns fifteen per cent and an equity-fund manager generates a return of twenty per cent, his alpha is five per cent.

Part of Dalio’s innovation has been to build a hedge fund that caters principally to institutional investors rather than to rich individuals. [Comments: what's the difference? NO difference at all!] Of the roughly one hundred billion dollars invested in Bridgewater, only a small proportion comes from wealthy families. Almost a third comes from public pension funds, such as the Pennsylvania Public School Employees’ Retirement System; another third comes from corporate pension funds, such as those at Kodak and General Motors; a quarter comes from government-run sovereign wealth funds, such as the Government Investment Corporation of Singapore. “Making money on a constant basis is the holy grail, and Ray and Bridgewater have done that,” Ng Kok-Song, the chief investment officer of the Singapore fund, told me. “They are consistently innovating—constantly soul-searching and asking, ‘Have we got this right?’ ” Kok-Song went on, “I am constantly asking myself, ‘If Bridgewater is doing this, shouldn’t we be doing the same thing?’ ” [Comments: Laughable!]

At some hedge funds, client service is an afterthought. Bridgewater’s investors receive a daily newsletter, monthly performance updates, quarterly reviews, and conference-call briefings from Dalio and other senior executives. “When a lot of folks were very, very secretive, Ray could see the value in creating something that was more open, something that was attractive to very large streams of money,” Robert Johnson, a former senior executive at Soros Fund Management, who now runs the Institute for New Economic Thinking, said to me. [Comments: Even MSFT claims it's a world-class leader on software invention! Would AAPL be upset about it? This paragraph implies that Ray is better than Soros! But they are exactly the same!]

Recently, the hedge-fund industry has been shaken by allegations that it exploits inside information. In May, Raj Rajaratnam, the founder of the Galleon Group, was convicted on fourteen counts of conspiracy and securities fraud. Other government investigations are continuing, including one involving S.A.C. Capital. Dalio and Bridgewater don’t appear to be involved. Dalio told me that Bridgewater hasn’t received any subpoenas, adding that he had no reason to believe that the firm was under investigation by any official agency. [Comments: Until caught, everybody would say so. Buffett did the same! But later he was subpoenaed.]

Dalio is an outdoorsman and naturalist of the Hemingway school: he likes to go places and kill things. He fishes in Canada, shoots grouse in Scotland, and hunts big game in Africa, with a bow—particularly Cape buffalo, which weigh up to two thousand pounds, are famously ornery, and sometimes gore hunters with their giant horns. Naturally, Dalio sees this as a metaphor for how he invests. [Comments: a sort of legend is being portrayed!] “It’s always a matter of controlling risk,” he explained. “Risky things are not in themselves risky if you understand them and control them. If you do it randomly and you are sloppy about it, it can be very risky.” The key to success, he said, is figuring out “Where is the edge? And how do I stay the right distance from the edge?” [Comments: is it common sense every trader or investor has been consistently talking about?]

One way he does it is by spreading his bets: at any given time, the Pure Alpha fund typically has in place about thirty or forty different trades. “I’m always trying to figure out my probability of knowing,” Dalio said. “Given that I’m never sure, I don’t want to have any concentrated bets.” Such thinking runs counter to the conventional wisdom in the hedge-fund industry, which is that the only way to score big is to bet the house. George Soros famously did this in 1992—selling short some ten billion dollars’ worth of sterling. A few years ago, John Paulson wagered hugely against U.S. mortgage bonds and made several billion dollars. [Comments: "I'm never sure" contradicts!]

Dalio is a consistent hitter of singles and doubles—the José Reyes of Wall Street. Among the bets the Pure Alpha fund placed last year were long positions in Treasury bonds, the Japanese yen, and gold, and short positions in the euro and European sovereign debt. A potential problem with this type of global investing is that these days many markets move in the same direction, which makes it hard to achieve real diversification. Bridgewater’s solution is to place a lot of “spread” bets, purchasing one security it considers undervalued and selling short another one it considers overvalued. For example, it might buy platinum and sell silver, or buy a thirty-year U.K. bond and sell a ten-year bond. The returns from spread bets tend to be uncorrelated with the over-all market. [Comments: they have to spread because they are the market makers on various markets! But they focus on typical markets at a time to fleece and make big-picture plans accordingly!]

Other hedge funds have tried to mimic Dalio’s approach, which is sometimes referred to as “portable alpha,” but none have proved as successful. The strategy depends on an ability to outperform the market consistently, which many economists regard as virtually impossible. Dalio somehow seems to manage it. [Comments: see? what a legend! He somehow managed to accomplish things virtually impossible, typically others can't do!]

At the start of the year, Bridgewater turned bearish on U.S. bonds and built up a short position. [Comments: why was there the historical downgrade US credit in July 2011? Have you got the answer? I have!] When the bond market stumbled, this bet (which the firm has since reversed) paid off handsomely, as did wagers on commodities and emerging-market currencies. [Comments: of course!] So far in 2011, while the average hedge fund has struggled to make any money at all, the Pure Alpha fund is up more than ten per cent. [Comments: yeah! Zero-Sum game!] The bet against Treasuries gave the lie to a criticism sometimes made of Dalio—that he is basically a bond-market investor, who has benefitted from a twenty-year rally in bonds. “We have been equally likely to be short bonds or long bonds,” he said. “The performance of the Pure Alpha fund is not correlated with any asset class or any market. It has done equally well in any environment.” [Comments: the size and liquidity of markets by order: 1st monetary market, 2ndly commodity market and 3rdly stock market]

What accounts for Dalio’s success? His colleague Bob Prince describes him as “a big-picture thinker connected to a street-smart” trader. [Comments: legend! But did the article in the beginning say he is a macro investor?] Many economists start at the top and work down. They look at aggregate statistics—inflation, unemployment, the money supply—and figure out what the numbers mean for particular industries, such as autos or tech. Dalio does things the other way around. In any market that interests him, he identifies the buyers and sellers, estimates how much they are likely to demand and supply, and then looks at whether his findings are already reflected in the market price. If not, there may be money to be made. In the U.S. bond market, Bridgewater scrutinizes the weekly U.S. Treasury auctions to see who is buying—American banks, foreign central banks, mutual funds, pension funds, rival hedge funds—and who isn’t. In the commodities markets, the firm goes through a similar exercise, trying to figure out how much demand is coming from corporations and how much from speculators. “It all comes down to who is going to buy and who is going to sell and for what reasons,” Dalio explained. [Comments: show full respect here! This is what market truly means: who buys/sells with what sizes and for what reasons! They know because they are market makers while market followers like us have to GUESS!]

To guide its investments, Bridgewater has put together hundreds of “decision rules.” [Comments: joke! Does common sense say the simpler the better?] These are the financial analogue of Dalio’s Principles. He used to write them down and keep them in a ring binder. Today, they are encoded in Bridgewater’s computers. Some of these indicators are very general. One of them says that if inflation-adjusted interest rates decline in a given country, its currency is likely to decline. Others are more specific. One says that, over the long run, the price of gold approximates the total amount of money in circulation divided by the size of the gold stock. If the market price of gold moves a long way from this level, it may indicate a buying or selling opportunity. [Comments: if really so, why don't give an example since it's well programmed?]

In any given market, Bridgewater may have a dozen or more different indicators. However, even when most or all of the indicators are pointing in a certain direction, Dalio doesn’t rely solely on software. Unless he and Jensen and Prince agree that a certain trade makes sense, the firm doesn’t make it. [Comments: what does it imply?] While this inevitably introduces an element of human judgment to the investment process, Dalio insists it is still driven by the rules-based framework he has built up over thirty years. [Comments: suddently, the importance of rules loses ground!] “When I’m thinking, ‘What is going on today?,’ I also need to make the connection to ‘How does what is happening today fit into our framework for making this decision?’ ’’ he said. Ultimately, he says, it is the commitment to systematic analysis and systematic investment that distinguishes Bridgewater from other hedge funds. “I hear a lot of people describing what’s happening today without the proper historical context and without the framework of how the machine works,” he says.

In looking at the economy as a whole, Dalio pays particular attention to the amount of credit that banks and other financial institutions are creating, which he regards as a key factor in over-all spending. This may seem like common sense, but until recently many economists and policymakers didn’t pay much heed to the growth of credit, concentrating instead on the amount of actual money in the economy—notes, coins, bank deposits—which is largely determined by the Federal Reserve. In July, 2007, Dalio and a co-author wrote in Bridgewater’s daily newsletter about “crazy lending and leveraging practices,” adding, “We want to avoid or fade this lunacy.” A couple of weeks later, after the subprime-mortgage market froze up, Dalio’s newsletter declared, “This is the financial market unraveling we have been expecting. . . . This will run through the system with the speed of a hurricane.”

Searching for historical precedents, Bridgewater put together detailed histories of previous credit crises, going back to Weimar Germany. The firm’s researchers also went through the public accounts of nearly all the major financial institutions in the world and constructed estimates of how much money they stood to lose from bad debts. The figure they came up with was eight hundred and thirty-nine billion dollars. Armed with this information, Dalio visited the Treasury Department in December, 2007, and met with some of Treasury Secretary Henry Paulson’s staff. Nobody took much notice of what he said, but he went on to the White House, where he presented his numbers to some senior economic staffers. “Ray laid out the argument that the losses he foresaw in the banking system were astronomical,” a former Bush Administration official who attended the White House meeting recalled. “Everybody else was talking about liquidity. Ray was talking about solvency.”

His warnings ignored in Washington, Dalio issued more jeremiads to his clients. “If the economy goes down, it will not be a typical recession,” his newsletter said in January, 2008. Rather, it would be a disaster in which “the financial deleveraging causes a financial crisis that causes an economic crisis. . . . This continues until there is a reflation, a currency devaluation and government guarantees of the efficacy of key financial intermediaries.” As the crisis deepened, Dalio continued to assess it far more accurately than many senior policymakers did. When the government allowed Lehman Brothers to collapse, he despaired. “So, now we sit and wait to see if they have some hidden trick up their sleeves, or if they really are as reckless as they seem,” the newsletter said on September 15, 2008. [Comments: they know the game! Can you recall Alan Greenspan called all top bankers to save LTCM? BSC was the only one who refused to give a hand. Does the outcome tell anything? Big private funds never lose!]

Eventually, after the near implosion of the financial system had brought about a deep recession, some policymakers came to respect Dalio’s analysis. [Comments: joke! In fact, they are in the same team!] “I think the central policy judgment was that there was more risk in doing too little than in doing too much,” Lawrence Summers, who headed the National Economic Council between 2009 and 2010, recalled. “That was a judgment I reached, and it was a judgment Ray reached.” While Summers was in the White House, he read Bridgewater’s economic newsletter and spoke every few months with Dalio, whom he described to me as “an impressively intellectually aggressive guy.” Summers went on, “He had a fully articulated way of looking at the economy. I’m not sure I would agree with all of it, but it seems to have been a very powerful analytical tool through this particular period.”

And a powerful investment tool, too. Anticipating that the Federal Reserve would be forced to print a lot of money to revive the economy, Bridgewater placed a number of bets that would pay off in such a scenario—for instance, going long Treasury bonds, shorting the dollar, and buying gold and other commodities. [Comments: forced to print a lot of money? It's intentionally planned!] These trades helped the Pure Alpha fund make money in 2008, but Dalio’s bearishness cost him in 2009. Despite the Fed’s actions and the Obama Administration’s stimulus package, Dalio predicted that the economic recovery would be weak. When growth rebounded faster than he expected and the Dow rose nineteen per cent, the Pure Alpha fund gained just four per cent. But last year, when G.D.P. growth faltered, the fund made a great deal of money betting on Treasury bonds and other securities that tend to do well in a weak economy.

In April, an article in New York ridiculed Dalio’s Principles, saying that they read “as if Ayn Rand and Deepak Chopra had collaborated on a line of fortune cookies.” It also accused him of running Bridgewater like a cult. “I’ve been surprised that there’s been so much controversy about us having such clearly set-out principles, especially since they’re all about being truthful and transparent to do good work and have meaningful relationships,” Dalio wrote to me subsequently. “Most of the people who don’t like us having them haven’t read them—they just assume that us having a lot of principles makes us a cult. That’s O.K. I figure that the people who matter to us will take the time to read them and form their own opinions and those who don’t care enough to read them don’t matter to us.”
[Comments: yeah! Money, clients and business are what matters!]
Dalio may protest too much. The word “cult” clearly has connotations that don’t apply to an enterprise staffed by highly paid employees who can quit at any moment. But Bridgewater’s headquarters are in the woods, isolated from any other financial institution; Dalio is a strong-willed leader; and the employees do use their own vocabulary—Dalio’s vocabulary. Bob Elliott, a twenty-nine-year-old Harvard graduate who has worked at Bridgewater for six years, told me earnestly, “Once you understand how the machine works, you have the ability to take that and study and apply it across markets.” It’s also the case that in the time I spent at the firm I saw senior people criticizing subordinates—but not the reverse.

In his Principles, Dalio acknowledged that his firm can seem strange to outsiders and newcomers: “Since Bridgewater’s culture is very different from what is typical in the world at large, people often encounter culture shock when they start here.” In part to minimize this shock, for years Bridgewater recruited young men and women straight out of college. (Harvard, Princeton, and Dartmouth were favorite targets.) But the firm’s in-your-face attitude—and the relentless pressure to perform—takes its toll. “We get a lot of people who self-select out of that pretty quickly,” Michael Partington, a recruiter at Bridgewater, said to me. Within two years of arriving at Bridgewater, about a quarter of new hires have quit or been let go. [Comments: to employees, every employer is JUST a job!]

Bridgewater has been expanding rapidly—it now has more than a thousand people on its payroll—and it has brought in a lot of mid-career executives. One day, I drove to Westport and sat in on a management-committee meeting, which had been set up for the purpose of “getting in synch” with a recent recruit, whom I’ll call Peter and who had come from a big financial firm. All nine members of Bridgewater’s management committee were sitting at a long wooden conference table. Peter, a lean man with fair hair, sat stiffly near the front: he looked like somebody anticipating a root canal. Jensen and McCormick were nominally in charge, but Dalio took over, telling Peter that, during a previous management meeting, he had answered emotionally in response to questioning from Jensen. “This is a common thing when somebody’s getting probed,” Dalio said. “Because the amygdala gets stimulated and you have that emotional reaction.” Peter agreed that he had become upset, especially when he sensed he was being accused of misleading his colleagues. “I felt in some sense my integrity was being attacked,” he said. “That’s when things spiralled out of control.”

Dalio walked to the front of the room, where he wrote on a whiteboard, “FELT,” “INTEGRITY,” and “MISLED.” “?‘Felt’ is the key word here . . . and it’s a challenge for people,” he said. After a bit more discussion, he went on, “What we’re trying to have is a place where there are no ego barriers, no emotional reactions to mistakes. . . . If we could eliminate all those reactions, we’d learn so much faster.” Another member of the committee, Eileen Murray, intervened to say she assumed that Peter had not encountered this type of conversation at his previous job. He confirmed that he hadn’t. Murray nodded sympathetically. “When I first came here, I was like, ‘What the hell is going on?’ ” she said. [Comments: could people in the 40s, 50s, 60s change much, especially those veterans in big firms? So could Ms Murray agree to change? Make some common sense, please!]

Dalio wasn’t finished. He suggested that the problem was that Peter had an idea of how things should be handled, and when the reality turned out to be different he hadn’t been honest with his colleagues. “The issue is that you are not freely releasing those beliefs,” he said to Peter. “Unlike a lot of companies, where you are meant to sit there and be quiet . . . here we respect your notion that you have a point of view. . . . Your responsibility is to say, ‘Does it make sense to me?’ And if it doesn’t make sense don’t keep it bottled up.” Dalio went on, “I’m saying, just let it flow, man.”

Peter said he thought it was understandable that somebody new to the firm would react under stress as he had. Still, he added, “If I had to replay this thing again, I’d be much more open with my thoughts.”

“What would you say the duty of a leader is?” Dalio asked him.

Peter replied, “The duty of a leader, first and foremost, is to be transparent.” [Comments: NO! It's make money]

Bridgewater’s decision rules surely contribute to his firm’s success. But Dalio also believes that his management principles play a role. “What is a typical organization?” he asked me one day. “A typical organization is one where people are walking around saying, ‘This is stupid, this doesn’t make sense,’ behind each other’s backs.” In support of his management theories, Dalio has an expert witness. “About eighty-five per cent of what’s in the Principles could be documented and supported by research,” Bob Eichinger, an organizational psychologist who has done consulting work for Bridgewater and other large companies, said. Eichinger went on, “Is it a better way to run a company? From a results perspective, probably so. Could a large portion of the working population be comfortable in that environment? Probably not.”

Some senior executives at Bridgewater do relish working there. Eileen Murray, who runs the firm’s accounting and technology systems, is one of them. Before moving to Bridgewater, in 2009, she spent twenty-five years on Wall Street, rising to a senior post at Morgan Stanley. “I wanted to make sure I wasn’t joining some petri dish in Westport, Connecticut, as part of a big experiment,” she said, recalling her initial, lengthy conversations with Dalio. “If someone’s intention is to make me a better person, I really appreciate that. If people do things because they can, or because they are the boss . . . I don’t react to that well.” Murray said she is now reassured, because “the intention is to make people better. . . . I have never seen a C.E.O. spend as much time developing his people as Ray.” [Comments: Did Ray just say what matter is make money for clients a few paragraphs before?]

Another new member of Bridgewater’s management committee is James Comey, the firm’s top lawyer, who served as Deputy Attorney General in the Bush Administration between 2003 and 2005. “Most of my friends think I am having a midlife crisis,” Comey told me in a recent phone conversation, referring to his decision, last year, to leave Lockheed Martin and accept an offer from Dalio. He was tired of corporate politics and craved a setting where people spoke truth to power, but, he said, it took him a while to get used to dealing with Dalio. “When Ray sent me an e-mail saying, ‘I think what you said today doesn’t make sense,’ I tended to think, What does he really mean? Where’s he coming from? And what is my play? Who are my allies? All of the things you think about in the outside world. It took me three months to realize that when Ray says, ‘I think you are wrong,’ he really means ‘I think you are wrong.’ He’s not trying to provoke you, or anything else.” [Comments: common sense doesn't agree! Bill Gates claimed the same thing: MSFT is free of politics. But the fact is: politics is everywhere. ]

Comey was initially struck by how long it took Bridgewater to make decisions, because of the ceaseless internal debates. [Comments: Did Ray say if the three don't agree, no action will be taken? Would it be ridiculous for a business to be democratical?]
“I said, ‘Lordy, we have to put tops on bottoms. Let’s get something done,’ ” Comey recalled. But he added, laughing, “The mind control is working. I’ve come to believe that all the probing actually reduces inefficiencies over the long run, because it prevents bad decisions from being made.” Comey said of Dalio, “He’s tough and he’s demanding and sometimes he talks too much, but, God, is he a smart bastard.” [Comments: what a flattery!]

And yet Dalio’s acuity prompts an awkward question: how much of Bridgewater’s success comes not from the way it is organized, or any notion of “radical transparency,” but from the boss’s raw investment abilities? At other hedge funds, it is taken for granted that the firm’s principal asset walks out the door every evening and settles into a chauffeur-driven car. Is Bridgewater really any different? Although the firm trades in more than a hundred markets, it is widely believed that the great bulk of its profit comes from two areas in which Dalio is an expert: the bond and currency markets of major industrial countries. Unlike some other hedge funds, Bridgewater has never made much money in the U.S. stock market, an area where Dalio has less experience. “Bridgewater really is Ray,” one former employee told me. “The key decisions they have made—where they have really made their money—is Ray. Most of what really matters is Ray, with help from Greg and Bob. You could run the firm with forty or fifty people instead of a thousand, and it would be basically the same.”

As long as Dalio remains healthy, the fact that he plays a key role in directing Bridgewater’s investments isn’t an issue. (Based on past experience, it is a big advantage.) But, from a business and marketing perspective, the suggestion that Bridgewater’s success continues to hinge on Dalio is a problematic one. As the former employee explained, “It’s hard to market that model—one guy and his brilliant track record. If you want to sell your firm to institutional clients, it’s critical to appear to be ‘rule-driven.’ That takes a lot of smarts. Most people want to take the credit. To say ‘I just run this machine’ detracts from your own individual brilliance. But that is very smart business.”

Dalio contests this account. He insists that he is but one member of a large team, with Greg Jensen and Bob Prince acting as his co-chief investment officers. He compares the comments of former employees to the carping of ex-spouses. In fact, with the firm prospering, Dalio has been living up to a promise to spend a bit more time away from it, and he has ceded some day-to-day management responsibility to Jensen and McCormick. “I’m stepping back a little: I’m going to a minister/mentor role,” Dalio said, comparing himself to Lee Kuan Yew, the longtime Prime Minister of Singapore, who relinquished his post in 1990 but even today retains great influence. This month, Dalio is formally giving up his co-C.E.O. title in favor of “Mentor.” [Comments: it basically says "Rules work. With a smart guy as Ray, even better!"]

The managerial changes and Dalio’s lean appearance have ignited some speculation that he is sick, but he insisted to me that he is fine. He said his weight loss was the result of an “intended weight-loss program,” and he said he has absolutely no intention of giving up his role in directing Bridgewater’s investments. In stepping back from day-to-day management and in bringing in senior people, he said he is seeking to preserve the essence of the firm he built while preparing it for his eventual departure. Bridgewater has grown so large that its two main funds are now closed to new investors. Recently it launched a third fund, which is called Pure Alpha Major Markets.

Last year, Dalio sold about twenty per cent of Bridgewater to some of its employees in a deal financed by several of the firm’s longtime clients, and he told me that ultimately he would like to sell his entire ownership stake to his colleagues. Unlike certain other hedge-fund managers, though, he has no interest in making another fortune by floating his firm on the stock market. “I don’t want Bridgewater to go public or have it controlled by anybody outside the firm,” he said. “I think people who do that tend to mess up the firm.” [Comments: transferring a portion of ownership is a way to keep people on board]

Dalio insists that money has never been his main motivation. [Comments: did he say something otherwise in the beginning?] He lives well, but avoids the conspicuous consumption that some of his rivals indulge in. He and his wife, Barbara, to whom he has been married for thirty-four years,[Comments: it must be in 1977 instead of early 1980s! What a simple inconsistence on simple facts!] own two houses, one in Greenwich, Connecticut, and one in Greenwich Village, which he sometimes uses on weekends. (They are currently building a new house on the water in Connecticut.) Apart from hunting and exploring remote areas, Dalio’s main hobby is music: jazz, blues, and rock and roll. Recently, he joined a philanthropic campaign started by Bill Gates and Warren Buffett, pledging to give away at least half of his money. (Forbes estimates his net worth at six billion dollars.) He and his wife wrote in a public letter, “We learned that beyond having enough money to help secure the basics—quality relationships, health, stimulating ideas, etc.—having more money, while nice, wasn’t all that important.” [Comments: every rich claims money is not important with trying the best to make even more!]

Not that Dalio makes any apology for his fortune or his profession. An agnostic and a self-described “hyperrealist,” he regards it as self-evident that all social systems obey nature’s laws, and that individual participants get rewarded or punished according to how far they operate in harmony with those laws. He views the financial markets as simply another social system, which determines payoffs and punishments in a like manner. “You have to be accurate,” he says. “Otherwise, you are going to pay. Alpha is zero sum. [Comments: Not only Alpha is zero sum, but also all stock markets, all commodity markets and all monetary markets!] In order to earn more than the market return, you have to take money from somebody else.” [Comments: accurate: timing the market is about everything in the game! But it applies to market followers only! For guys like Ray Dalio, they are both players and referees!]

Dalio is right, but somewhat self-serving. If hedge-fund managers are playing a zero-sum game, what is their social utility? And if, as many critics contend, there isn’t any, how can they justify their vast remuneration? When I put these questions to Dalio, he insisted that, through pension funds, Bridgewater’s investors include teachers and other public-sector workers, and that the firm created more value for its clients last year than Amazon, eBay, and Yahoo combined. However, it is one thing to say that the most successful hedge-fund managers earn the riches they reap. It is quite another to suggest that the entire industry serves a social purpose. But that is Dalio’s contention. “In aggregate, it really contributes a lot to the efficiency of capital allocation, and capital allocation is very important,” he said. [Comments: So the value is capital allocation. One has to LOL]

Like many successful financiers, Dalio justifies capitalism and his place in it as a Darwinian process, in which the over-all logic of the system is sometimes hidden. This is actually what the mention, in his Principles, of hyenas savaging a wildebeest was about. “Is this good or bad?” he wrote. Like “death itself, this behavior is integral to the enormously complex and efficient system that has worked for as long as there has been life.” Of course, this view conveniently ignores the argument that hedge funds, through their herd behavior, have contributed to speculative bubbles, in tech stocks, oil, and other commodities. Even some defenders of the industry concede that the problem is real and potentially calamitous. “There is a basis for the argument that hedge funds add economic value,” Andrew Lo, an economist at M.I.T. who runs his own hedge fund, says. “At the same time, they create systemic risks that have to be weighed against those positives.” [Comments: why is Satan great? Because with Satan we can see how great God is! What a logic!]

Because hedge funds use a lot of borrowed money to magnify their bets, they are subject to rapid reversals: the history of the industry is littered with blowups. This wouldn’t matter much if other parts of the economy weren’t affected by the actions of hedge funds, but sometimes they are. In 2008, hedge funds had hundreds of billions of dollars on deposit at investment banks, which acted as their brokers and counterparties on many trades. When the Wall Street firms got into trouble, a number of other hedge funds demanded their money back immediately. These demands amounted to a virtual run on the banks and helped to bring down Bear Stearns and Lehman Brothers. Dalio acknowledged to me that Bridgewater was one of the funds that pulled a lot of money out of Lehman and other Wall Street firms, but he said he had little choice. “I’m a fiduciary to my clients. My responsibility is to know where it’s risky and where it’s not risky, and to get out of the risks.” [Comments: clearly, making profits is what matters! And yet Ray doesn't admit it!]

Hedge funds have also contributed to the radical increase in income inequality. Fifteen years ago on Wall Street, remuneration packages of five or ten million dollars a year were rare. Today, C.E.O.s and star traders routinely demand vastly higher sums to keep up with their counterparts at hedge funds. In addition to distorting salary structures elsewhere, the rewards that hedge-fund managers reap draw some of the very brightest science and mathematics graduates to the industry. Can it really be in America’s interest to have so much of its young talent playing a zero-sum game?[Comments: well, same question should be asked to military force development and weapon invention.]

Rather than confronting these issues, Dalio, like all successful predators, is concentrating on the business at hand—the markets and the global economic outlook. This spring, he told me that economic growth in the United States and Europe was set to slow again. This was partly because some emergency policy measures, such as the Obama Administration’s stimulus package, would soon come to an end; partly because of the chronic indebtedness that continues to weigh on these regions; and partly because China and other developing countries would be forced to take drastic policy actions to bring down inflation. Now that the slowdown appears to have arrived, Dalio thinks it will be prolonged. “We are still in a deleveraging period,” he said. “We will be in a deleveraging period for ten years or more.”

Dalio believes that some heavily indebted countries, including the United States, will eventually opt for printing money as a way to deal with their debts, which will lead to a collapse in their currency and in their bond markets. “There hasn’t been a case in history where they haven’t eventually printed money and devalued their currency,” he said. Other developed countries, particularly those tied to the euro and thus to the European Central Bank, don’t have the option of printing money and are destined to undergo “classic depressions,” Dalio said. The recent deal to avoid an immediate debt default by Greece didn’t alter his pessimistic view. “People concentrate on the particular thing of the moment, and they forget the larger underlying forces,” he said. “That’s what got us into the debt crisis. It’s just today, today.” [Comments: it doesn't happen by accident, instead, it's well plotted and executed by guys like Ray Dalio!]

Dalio’s assessment sounded alarmingly plausible. But when one plays the global financial markets a thorough economic analysis is only the first stage of the game. At least as important is getting the timing right. I asked Dalio when all this would start to come together. “I think late 2012 or early 2013 is going to be another very difficult period,” he said.

[Comments: can a reader truly logically find how Ray Dalio becomes successful and extremely rich from the article? Well, I perosnally can't!

For another example, John Paulson made a killing in the subprime crisis and became a famous legend. And yet he consistenly "made mistakes" in the bull run of the past two years and "delcared losses" with it. Why? Because he was used to mislead market followers for which reason he was deliberately portrayed as a legendary figure. After he finished the job of misleading others as far as he could, the legend will be over.

Jim Rogers has been doing the same misleading job in China! Well, at 5 years old, like Ray Dalio, Jim Rogers worked at Golf course. Looks like legendary invention has not progressed much... But Jim is truly from an average family, perhaps that's why he didn't have a chance to run a big fund. Acccording to public accounts, Rogers departed Soros with taking away $37M, which was paid by Soros in the threat of Rogers going to sue to court when Soros arbitrarily refused to pay prior to the payment, in 1980 at 37 years old.

These riches don't care about reputation at all. All legendary reputations are created for a reason! After the designed purposes are fulfilled and money is made during the process, it always fades without an explanation or even a tracking effort.

All is just for money which is the only thing that matters for them and in the game!]

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