Bridgewater Associates has lost 20% this year. Ray Dalio's two predictions: no recession, rate cuts ineffective.

According to Bloomberg, the world's largest hedge fund, Bridgewater Associates, is struggling amid the escalating pandemic. The investment management company, which manages $160 billion, has incurred losses of nearly 20% this year. Its fund product, Pure Alpha II, has already faced an 8% loss in the first two months of the year, and suffered a significant 13% loss in the challenging month of March for the U.S. stock market.

According to Bloomberg, the world's largest hedge fund Bridgewater Associates has been hit hard by the escalating pandemic. The investment management company, which manages $160 billion, has suffered nearly a 20% loss this year: its fund product Pure Alpha II incurred an 8% loss in the first two months of this year and a staggering 13% loss in the challenging month of March in the U.S. stock market.

Since the end of 2011, Bridgewater has managed a number of global macro funds with an overall annualized return of about 4%, while Pure Alpha II has seen returns as high as 11.5% since its inception. The losses this year are in stark contrast to previous performances, and founder Ray Dalio admitted to the media that they "misjudged the situation."

Note: Global macro is an investment strategy that refers to hedge funds using this strategy for investment. It involves investing on a global scale, focusing on global economic, historical, and international relations.

Virus Disrupts "Recession Won't Happen" Prediction, But Rate Cuts Ineffective

During the Davos Economic Forum in January, Bridgewater founder Ray Dalio stated that the stock market was strong at the time and advised investors to diversify their portfolios, claiming that cash is trash. He also issued a warning against holding Bitcoin, stating that it is neither a medium of exchange nor a store of value.

At that time, Dalio recommended holding gold as part of a diversified investment portfolio and did not anticipate an economic recession this year. Interestingly, he added that there was a 20% chance of a downturn each year, and if it occurred, the Fed's rate-cutting measures would likely no longer be effective.

Now, with a 20% probability not being low, Bridgewater has not escaped this economic recession. As reported by foreign media, Dalio stated, "We didn't know how to navigate the virus situation, and we didn't think we would have an edge in trading, so we decided to stay still. Looking back, we should have eliminated all risks."

Recession Hits, Rate Cuts Ineffective: What Worries Dalio Now?

One successful prediction by Dalio is that the Fed's rate-cutting measures to rescue the economy are indeed not very effective. On the 16th, he expressed concerns about the 0% rate on Twitter and published an article on LinkedIn titled"Implications of Hitting Hard 0 Interest Rate Floor."

In the article, Dalio stated:

"When long-term rates hit the 0% floor, it means that almost all asset classes will fall because all the positive effects of rate cuts will no longer be there, and all central bank rate stimulation tools will be ineffective."

He offered advice to current fiscal and monetary policymakers to assist industries under debt repayment pressure and ensure liquidity. Mishandling could lead to significant social and political issues. The article also analyzed the policy situations of the U.S., major European countries, Japan, and China.

While this article is not directly related to the cryptocurrency market, there is a familiar scenario described, reflecting Dalio's current concerns about the market:

"Remember that most investors and companies are long (holding assets, hoping for price increases) on leverage, so what we see as asset price declines will have greater financial impacts than unleveraged assets."

Compared to March 12-13, in the high-leverage derivative market of cryptocurrencies, there have been massive liquidations due to the sharp decline in asset prices, leading to more intense price reactions and concerns about Bitcoin going to zero. Looking back at the unstoppable global economic downturn, will more butterfly effects emerge?

On March 10, data websites monitored Bridgewater Fund heavily shorting 37 European companies, indicating pessimism about economic development.

Over the past few days, Dalio has continued sharing his economic views on Twitter and used his videos to educate people on "How the Economic Machine Works" to understand his perspectives.

Related Readings

• Quantitative Easing Turning Point? BitMEX: "Rate Cut War" by Central Banks Will Drive Bitcoin to $20,000 by Year End
• Real-time: U.S. stocks plummeted on the evening of the 12th, triggering circuit breakers again, Bitcoin now down 22%

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