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It took almost exactly two years of radical open-mindedness (Principle 1.3), identifying and diagnosing problems (2.2 and 2.4), paying attention to people’s track records (8.4), not getting hung up on how things “should” be (1.4a) and synthesizing the situation at hand (5.2) for logic, reason and common sense (5.5) to finally overtake Ray Dalio’s initially somewhat optimistic view (itself almost certainly the result of the aforementioned radical open-mindedness) of the Trump era and lead him to write a book about World War III, which he still thought was probably not imminent but also: He wrote a book about World War III. Since embracing our extremely depressing reality (1.4), however, the drumbeat of increasingly dire Dalio takes has grown louder and more frequent.

Being a quantitatively-minded sort of guy, Dalio has always tried to put a number on how bad he thinks things are getting. But he’s never put quite so compelling a number on it as this:

Bridgewater paid roughly $1.5 billion for the options contracts… tied to around $100 billion worth of the indexes, said people familiar with the matter. How much the firm stands to potentially make would depend on many factors, including the magnitude of any market decline and the timing of when the firm cashes in its bet….

The massive size of the wager has prompted chatter among traders and caused the price of some options to rise.

Bridgewater insists that it’s not betting on “any potential political developments in the U.S.,” but one can’t help but it isn’t exactly oversqueezing a dot (5.2e) to note that the options expire in March and, well…

March 2020 is significant in the Democratic primary because a majority of the party’s delegates, which are needed to capture a presidential nomination, will have been awarded by the end of the month.

Which suggests that Dalio has either diagnosed an Elizabeth Warren presidency as a bigger threat than a continuing Donald Trump presidency, or that others have inaccurately diagnosed it as such but, in a self-fulfilling way, have accurately diagnosed that it means the markets will tank when it becomes clear that the senior senator from Massachusetts will be triumphantly taking the stage in Milwaukee next July, assuming the good vote-counters of California have given us an inkling of that by midnight on March 31.

Bridgewater Bets Big on Market Drop [WSJ]



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