Showing posts with label Ray Dalio. Show all posts
Showing posts with label Ray Dalio. Show all posts
Wednesday, December 5, 2012
Ray Dalio: meditation is the secret of my success
Hedge fund manager, Ray Dalio credits meditation as the key to his success.
Says the Bridgewater Associates founder, "Meditation has given me centeredness and creativity. It's also given me peace and health... and it's given me open-mindedness."
"Meditation, more than anything in my life, was the biggest ingredient of whatever success I've had".
I was very interested to hear Dalio's take on the benefits of meditation, since he's obviously a very successful individual who assigns a great deal of value to this practice. It's also a subject I've been wanting to learn more about.
While I am not a yoga practitioner and have never tried transcendental meditation, I've come to learn that my long walks through the forests may share some benefits associated with mindfulness meditation. For me, it's about taking time to exercise, relax, and just focus on the natural (or built) world around us.
As Dalio notes, the key for beginners is to challenge themselves to stick with meditation for the first six months. Those who try it must realize that the 20 minutes spent meditating in mornings and evenings is an investment that pays off in numerous ways, enhancing one's enjoyment of life.
Ray Dalio was also the subject of our most recent post, "Lessons from Hedge Fund Market Wizards: Ray Dalio". If you'd like to know more about Dalio and his ideas on trading and learning from mistakes, check it out.
Related articles and posts:
1. Lessons from Hedge Fund Market Wizards: Ray Dalio.
2. Meditation: A Simple, Fast Way to Reduce Stress (Mayo Clinic).
Thursday, November 29, 2012
Lessons from Hedge Fund Market Wizards: Ray Dalio
You've probably heard of Ray Dalio if you have even a cursory knowledge of the hedge fund industry (or the Forbes billionaires list), so let's get right to it. These notes will fill in the rest of the story.
1). Dalio is the founder and former CEO (now "mentor") of Bridgewater Associates, a fund that has returned more money ($50 billion) for investors than any hedge fund in history.
2). Bridgewater still manages to achieve excellent returns on a huge base of capital and has done so over a long period of time. It is among the few hedge funds with a 20-year track record.
3). Dalio believes that mistakes are a good thing, as they provide an opportunity for learning. If he could figure out what he (or someone else) was doing wrong, he could use that as a lesson and learn to be more effective.
4). His life's philosophy and management concepts are set down in a 111 page document called, Principles, which drives the firm's culture and daily operations. Identifying and learning from mistakes is a key theme. It also advocates "radical transparency" within the firm; meetings are taped and employees are encouraged to criticize each other openly.
5). "The type of thinking that is necessary to succeed in the markets is entirely different from the type of thinking required to succeed in school". Ray notes that school education emphasizes instructions, rote learning, and regurgitation. It also teaches students that "mistakes are bad", instead of teaching the importance of learning from mistakes.
6). If you are involved in the markets, you must learn to deal with what you don't know. Anyone involved in markets knows you can never be absolutely confident. You can't approach trading by saying, "I know I'm right on this one." Dalio likes to put his ideas in front of other people so they can shoot them down and tell him where he may be wrong.
7). "The markets teach you that you have to be an independent thinker. And any time you are an independent thinker, there is a reasonable chance you are going to be wrong."
8). Ray learned in his early working years that currency depreciation and money printing are good for stocks. He was surprised to see US stocks rise after Nixon closed the gold exchange window in 1971 (effectively ending the gold standard). The lesson was reinforced when the Fed eased massively in 1982 during the Latin American debt crisis. Stocks rallied, and of course, this marked the beginning of an 18-year bull market.
9). From these earlier experiences, Dalio learned not to trust what policy makers say. He has learned these lessons repeatedly over the years (much like our previous "Market Wizard", Colm O'Shea).
10). Dalio vividly recalls a time when he was nearly ruined trading pork bellies in the early 1970s. He was long at a time when bellies were trading limit down every day. He didn't know when the losses would end, and every morning he'd hear the price board click down 200 points (the daily limit) and stay there. The experience taught him the importance of risk management - "I never wanted to experience that pain again".
11). "In trading you have to be defensive and aggressive at the same time. If you are not aggressive, you're not going to make money, and if you are not defensive, you are not going to keep money.".
12). Bridgewater views diversification and asset correlation differently than most. As Dalio puts it, "People think that a thing called correlation exists. That's wrong.". Instead, he describes a world in which assets behave a certain way in response to environmental determinants. Correlations between say, stocks and bonds, are not static, but are changing in response to "drivers" (catalysts) that can cause assets to move together or inversely.
13). By studying how asset prices move in response to certain drivers, Bridgewater looks to build portfolios of truly uncorrelated assets. By combining assets that have very slight correlations, they are able to diversify among 15 assets (instead of 100 or 1000 more closely linked assets). This helps them cut volatility and greatly improve their return/risk ratio.
14). We are currently in the midst of a "broad global deleveraging" that is negative for growth. Since the United States can print its own money, it will do so to alleviate the pressures of deflation and depression. The effectiveness of quantitative easing will be limited, since owners of bonds purchased by the Fed will use the money to buy similar assets. Dalio elaborates on our future economic course and possible policy approaches to these problems throughout the interview.
There's a lot more in Schwager's chapter with Ray Dalio. These notes just scratch the surface on Bridgewater's process and their quest for the Holy Grail of investing.
There is also an addendum to the chapter containing Dalio's big picture view of long-term economic cycles and a historical "stage analysis" of the economic rise and fall of nations.
Be sure to check out this latest Market Wizards book (a very worthwhile read) and look for our upcoming posts for more "Lessons from Hedge Fund Market Wizards". In the meantime, you'll find more lessons and interviews in our related posts below.
If you're enjoying these posts and would like to see more, please subscribe to our free RSS updates and follow Finance Trends in real-time on Twitter and StockTwits. You can also check out our related posts below for more market wisdom and trading insights.
Related posts:
1. Lessons from Hedge Fund Market Wizards: Colm O'Shea.
2. Jack Schwager interviews on Hedge Fund Market Wizards.
3. Ray Dalio in Barron's: "It's a D-Process".
4. Ray Dalio's 'Principles'.
*Photo credit: Ray Dalio Blog.
Thursday, April 16, 2009
Jamie Dimon eager to pay back TARP funds
JP Morgan Chase CEO Jamie Dimon is eager to pay back "scarlet letter" TARP funds, saying that his firm has the cash to pay back the government tomorrow.
Bloomberg has the story:
"JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, who today reported first-quarter profit that beat analysts’ expectations, said his firm could repay U.S. government rescue funds “tomorrow.”
Dimon, calling money received through the Troubled Asset Relief Program “a scarlet letter” and “the TARP baby,” said on a conference call today that the New York-based bank is awaiting guidance from the U.S. Treasury Department. “We could pay it back tomorrow,” he said.
The 53-year-old CEO took $25 billion in U.S. government rescue funds last year. He’s fared better than most of his rivals in guiding the company through the financial crisis, taking $33.3 billion in writedowns, losses and credit provisions through the fourth quarter. That compares with $88.3 billion at New York-based Citigroup Inc. and $55.9 billion at Merrill Lynch & Co., now part of Bank of America Corp., the biggest U.S. bank..."
You'll remember that JPMorgan Chase & Co. was strong-armed into accepting the rescue funds last year as part of the Treasury's "voluntary" bank plan, in which nine major banks accepted government funds (whether they needed the money or not, in order to avoid "stigmatizing" truly needy banks) in exchange for newly-issued ownership stakes in said banks.
Dimon also said that JPMorgan Chase will not be participating in the Treasury's Public-Private Investment Partnership (PPIP), saying "we learned our lesson" on borrowing from the government.
This puts Dimon and JPMorgan Chase in league with hedge fund giant Bridgewater Associates and its chairman, Ray Dalio, who have also declined to participate in the PPIP.
Bloomberg has the story:
"JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, who today reported first-quarter profit that beat analysts’ expectations, said his firm could repay U.S. government rescue funds “tomorrow.”
Dimon, calling money received through the Troubled Asset Relief Program “a scarlet letter” and “the TARP baby,” said on a conference call today that the New York-based bank is awaiting guidance from the U.S. Treasury Department. “We could pay it back tomorrow,” he said.
The 53-year-old CEO took $25 billion in U.S. government rescue funds last year. He’s fared better than most of his rivals in guiding the company through the financial crisis, taking $33.3 billion in writedowns, losses and credit provisions through the fourth quarter. That compares with $88.3 billion at New York-based Citigroup Inc. and $55.9 billion at Merrill Lynch & Co., now part of Bank of America Corp., the biggest U.S. bank..."
You'll remember that JPMorgan Chase & Co. was strong-armed into accepting the rescue funds last year as part of the Treasury's "voluntary" bank plan, in which nine major banks accepted government funds (whether they needed the money or not, in order to avoid "stigmatizing" truly needy banks) in exchange for newly-issued ownership stakes in said banks.
Dimon also said that JPMorgan Chase will not be participating in the Treasury's Public-Private Investment Partnership (PPIP), saying "we learned our lesson" on borrowing from the government.
This puts Dimon and JPMorgan Chase in league with hedge fund giant Bridgewater Associates and its chairman, Ray Dalio, who have also declined to participate in the PPIP.
Friday, April 3, 2009
Geithner's gift to Pimco, BlackRock, et al.
Last week, in our post on the Fortune profile of Bridgewater Associates and its chief, Ray Dalio, I mentioned that we'd be keeping an eye on whether or not Bridgewater would join the rather select group of investors eligible to invest in the Treasury's public-private investment partnership (PPIP).
As it turns out, Bridgewater has decided not to invest in the PPIP. Ray Dalio offers his reasons for not joining the plan in this letter to investors, excerpt courtesy of Clusterstock.
I'm not sure I understand all the issues at work here, but the gist of the argument seems to be that Dalio sees a clear conflict of interest for the few investment firms eligible to be the "fund managers" that would purchase toxic assets from banks.
He also sees a great deal of political risk for investors in the plan, due to perceived collusion among the group:
"Then there is the issue about the political risk, which we are more concerned about because there will be such a limited number of managers being allowed to participate in this program that it raises possibilities (or at least perceived possibilities) of them colluding because they all know each other. Either these investments will make a lot of money for their investors or the government will lose a lot of money -- in either case, there will be reasons for politicians to complain and to focus on the five winners to see how they "abused" the system."
Today, Bloomberg reports that Geithner's plan to rid banks of toxic assets will benefit Pimco and Bill Gross, among others.
"Treasury Secretary Timothy Geithner’s plan to rid banks and markets of devalued assets may be a boon for Pacific Investment Management Co.’s Bill Gross.
The plan may reward investors with 20 percent annual returns on “really ‘toxic’” mortgages bought at 45 cents on the dollar by allowing them to borrow six times their money with “non-recourse” government-backed debt, New York-based Credit Suisse Group AG analysts Carl Lantz and Dominic Konstam wrote in a March 27 report. That loan would be worth 15 cents to an investor seeking the same return who can’t use borrowed money.
Geithner’s Public-Private Investment Program, or PPIP, promises to boost prices enough to encourage banks, insurers and hedge funds to sell their mortgage holdings, freeing them to make loans while creating a potential windfall for investors. Federal Reserve Chairman Ben S. Bernanke said March 20 that “credit market dysfunction” is countering efforts to fix the economy."
Bloomberg calls it "Geithner's non-recourse gift" that keeps on giving. Nice work, if you can get it.
Related artices and posts:
1. Treasury's very private asset fund - WSJ.com.
2. Geithner's gift to Pimco - Bear Mountain Bull.
3. On PPIP and Geithner's amazing power grab - Finance Trends.
As it turns out, Bridgewater has decided not to invest in the PPIP. Ray Dalio offers his reasons for not joining the plan in this letter to investors, excerpt courtesy of Clusterstock.
I'm not sure I understand all the issues at work here, but the gist of the argument seems to be that Dalio sees a clear conflict of interest for the few investment firms eligible to be the "fund managers" that would purchase toxic assets from banks.
He also sees a great deal of political risk for investors in the plan, due to perceived collusion among the group:
"Then there is the issue about the political risk, which we are more concerned about because there will be such a limited number of managers being allowed to participate in this program that it raises possibilities (or at least perceived possibilities) of them colluding because they all know each other. Either these investments will make a lot of money for their investors or the government will lose a lot of money -- in either case, there will be reasons for politicians to complain and to focus on the five winners to see how they "abused" the system."
Today, Bloomberg reports that Geithner's plan to rid banks of toxic assets will benefit Pimco and Bill Gross, among others.
"Treasury Secretary Timothy Geithner’s plan to rid banks and markets of devalued assets may be a boon for Pacific Investment Management Co.’s Bill Gross.
The plan may reward investors with 20 percent annual returns on “really ‘toxic’” mortgages bought at 45 cents on the dollar by allowing them to borrow six times their money with “non-recourse” government-backed debt, New York-based Credit Suisse Group AG analysts Carl Lantz and Dominic Konstam wrote in a March 27 report. That loan would be worth 15 cents to an investor seeking the same return who can’t use borrowed money.
Geithner’s Public-Private Investment Program, or PPIP, promises to boost prices enough to encourage banks, insurers and hedge funds to sell their mortgage holdings, freeing them to make loans while creating a potential windfall for investors. Federal Reserve Chairman Ben S. Bernanke said March 20 that “credit market dysfunction” is countering efforts to fix the economy."
Bloomberg calls it "Geithner's non-recourse gift" that keeps on giving. Nice work, if you can get it.
Related artices and posts:
1. Treasury's very private asset fund - WSJ.com.
2. Geithner's gift to Pimco - Bear Mountain Bull.
3. On PPIP and Geithner's amazing power grab - Finance Trends.
Wednesday, March 25, 2009
Ray Dalio - Fortune interview
Ray Dalio was recently interviewed for a Fortune magazine profile of Bridgewater Associates, the "world's biggest hedge fund".
You may know Dalio as founder and chief of said hedge fund; his views on the markets and the economy (see our related articles and posts below) are already a popular draw with traders and investors across the globe, as well as Finance Trends readers. So, let's get to the new stuff...
Here's the lead in from Fortune's piece:
"Is the current downturn merely a severe slump, or are we facing a second coming of the Great Depression? That's the question everyone is asking these days. But Ray Dalio, founder of Bridgewater Associates and manager of what is now the world's biggest hedge fund, has been preparing to answer it for eight years.
In 2001 he had his investment team build a "depression gauge" into the firm's computer system, line by line in the code, to adjust the portfolio's strategy and risk profile if the economy ever entered a massive deleveraging period - the kind of multiyear process that ricocheted through the world economy in the 1930s and that has eviscerated markets periodically through the ages.
On Sept. 30 of last year, just a couple of weeks after the failure of Lehman Brothers, Dalio logged into his system and saw that the computer had flipped the switch. Bridgewater's black box is now operating on high alert.
Yet even as he is preparing his clients to hunker down for something different and more challenging than a typical recession, Dalio still expects his fund to thrive. Because his approach doesn't depend on the direction of any particular market, he explains matter-of-factly, there is no reason that he shouldn't continue to find as many good investment opportunities as he always has. Considering what he sees coming, that's a pretty bold statement."
Check out the full article at the link above. With Bridgewater's Ray Dalio as the focus, it should prove enlightening.
Sidenote: Ray Dalio also appears in the latest Alpha magazine list of top hedge fund earners.
As Barry Ritholtz points out, at least these hedge fund chiefs have earned their pay by performing for their investors (unlike some of the "bailout banksters" on the taxpayer dole).
Update: Caveat to that last part about hedge fund chiefs earning their pay; I will be taking back that comment if private equity investors and hedge funds like Bridgewater end up raping the taxpayers via the toxic-assets plan/PPIP. More on that tomorrow.
Related articles and posts:
1. Ray Dalio in Barron's: it's a "D-process" - Finance Trends.
2. Ray Dalio Financial Times profile - Finance Trends.
You may know Dalio as founder and chief of said hedge fund; his views on the markets and the economy (see our related articles and posts below) are already a popular draw with traders and investors across the globe, as well as Finance Trends readers. So, let's get to the new stuff...
Here's the lead in from Fortune's piece:
"Is the current downturn merely a severe slump, or are we facing a second coming of the Great Depression? That's the question everyone is asking these days. But Ray Dalio, founder of Bridgewater Associates and manager of what is now the world's biggest hedge fund, has been preparing to answer it for eight years.
In 2001 he had his investment team build a "depression gauge" into the firm's computer system, line by line in the code, to adjust the portfolio's strategy and risk profile if the economy ever entered a massive deleveraging period - the kind of multiyear process that ricocheted through the world economy in the 1930s and that has eviscerated markets periodically through the ages.
On Sept. 30 of last year, just a couple of weeks after the failure of Lehman Brothers, Dalio logged into his system and saw that the computer had flipped the switch. Bridgewater's black box is now operating on high alert.
Yet even as he is preparing his clients to hunker down for something different and more challenging than a typical recession, Dalio still expects his fund to thrive. Because his approach doesn't depend on the direction of any particular market, he explains matter-of-factly, there is no reason that he shouldn't continue to find as many good investment opportunities as he always has. Considering what he sees coming, that's a pretty bold statement."
Check out the full article at the link above. With Bridgewater's Ray Dalio as the focus, it should prove enlightening.
Sidenote: Ray Dalio also appears in the latest Alpha magazine list of top hedge fund earners.
As Barry Ritholtz points out, at least these hedge fund chiefs have earned their pay by performing for their investors (unlike some of the "bailout banksters" on the taxpayer dole).
Update: Caveat to that last part about hedge fund chiefs earning their pay; I will be taking back that comment if private equity investors and hedge funds like Bridgewater end up raping the taxpayers via the toxic-assets plan/PPIP. More on that tomorrow.
Related articles and posts:
1. Ray Dalio in Barron's: it's a "D-process" - Finance Trends.
2. Ray Dalio Financial Times profile - Finance Trends.
Monday, February 9, 2009
Ray Dalio in Barron's: it's a "D-process"
Hedge fund manager and Bridgewater Associates founder, Ray Dalio talks to Barron's this week about the global economic downturn and ongoing deleveraging process (H/T: Paul Kedrosky).
Here's an excerpt from the Barron's interview:
"Barron's: I can't think of anyone who was earlier in describing the deleveraging and deflationary process that has been happening around the world.
Dalio: Let's call it a "D-process," which is different than a recession, and the only reason that people really don't understand this process is because it happens rarely. Everybody should, at this point, try to understand the depression process by reading about the Great Depression or the Latin American debt crisis or the Japanese experience so that it becomes part of their frame of reference.
Most people didn't live through any of those experiences, and what they have gotten used to is the recession dynamic, and so they are quick to presume the recession dynamic. It is very clear to me that we are in a D-process..."
Dalio is careful to use the "D-process" term to describe what's happening, but judging by what he says later on in the interview, it's pretty clear that we're facing something more than your run of the mill post-World War II recession. Meanwhile, there are some who are not shying away from using the term "depression".
Check out the rest of the interview at the link above and see our post, "Ray Dalio in FT", for more background on Dalio's investing methods and how he got his start in the business.
Here's an excerpt from the Barron's interview:
"Barron's: I can't think of anyone who was earlier in describing the deleveraging and deflationary process that has been happening around the world.
Dalio: Let's call it a "D-process," which is different than a recession, and the only reason that people really don't understand this process is because it happens rarely. Everybody should, at this point, try to understand the depression process by reading about the Great Depression or the Latin American debt crisis or the Japanese experience so that it becomes part of their frame of reference.
Most people didn't live through any of those experiences, and what they have gotten used to is the recession dynamic, and so they are quick to presume the recession dynamic. It is very clear to me that we are in a D-process..."
Dalio is careful to use the "D-process" term to describe what's happening, but judging by what he says later on in the interview, it's pretty clear that we're facing something more than your run of the mill post-World War II recession. Meanwhile, there are some who are not shying away from using the term "depression".
Check out the rest of the interview at the link above and see our post, "Ray Dalio in FT", for more background on Dalio's investing methods and how he got his start in the business.
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