What Ray Dalio is buying now

published 2 August 2012

Ray Dalio, founder of Bridgewater, the world's biggest hedge fund group, is pessimistic on the global economy. In a recent letter to investors, the 62-year-old American estimated that "80% of the world's economies have slowed, including all of the largest". At the same time, "none of the world's largest economies are stimulating aggressively via either monetary or fiscal policy", making a recovery even less likely.

Even so, Dalio, who recently over-took George Soros as the world's most successful hedge fund manager, sees opportunities in stocks. The market is pricing in "the worst real earnings growth rate in 100 years", even though "companies still retain plenty of ability to protect their operating margins and profitability by keeping labour costs down".

He is also positive on oil and gold. For oil the "uncertain Iranian situation" could provide "upside". Meanwhile, gold is seeing "secularly increasing demand". Dalio thinks it is "under-owned relative to financial assets" and that rising demand from central banks and sovereign wealth funds "is still in its early stages".