For a long time, Ray Dalio's Bridgewater, the largest hedge fund (excluding the Fed of course) was a work solid believer that cheers to the "beautiful deleveraging" thesis or namely a globe inward which nominal gross domestic product growth is inward a higher house nominal involvement rates, driven lower primarily as well as around would nation exclusively past times the backstop of Fed purchases alongside the lawsuit beingness a reject inward debt relative to GDP, at that topographic point could travel a way out of the Keynesian liquidity trap. Alas, every bit a lawsuit of the recent surge higher inward rates due to fears of a taper, either now, or inward the near-term future, this dynamic has changed as well as every bit Bridgewater reports inward its virtually recent large motion painting summary, the "beautiful deleveraging" is forthwith far less likely. The corollary to this charge per unit of measurement surge is that a necessary as well as sufficient status would travel a selection upwards inward the broader economic scheme to offset the charge per unit of measurement increase. However, at a fourth dimension when the Fed is actively considering non only tapering, but likewise unwinding QE as well as coin printing exclusively - a reflexive status which likewise volition kicking the bucket along to displace rates higher all else equal - such a selection upwards would request to stimulate got house without the create goodness of the Fed's active coin printing.
Which, inward the eyes of Bridgewater, agency the only way out is for the somebody sector to selection upwards loan creation where the Fed leaves off.
This, however, would request to travel on at a fourth dimension when rates kicking the bucket along to creep higher as well as every bit a lawsuit of the increasing debt service payments to the somebody sector, the touching on on wealth as well as property pricing would travel adverse. In other words, someone else would request to stride inward if the Fed were to stride out. Can this happen? Bridgewater's assessment is that for the somebody sector to travel able to selection upwards the Fed's torch to the extent necessary, is "at the upper terminate of the make of reasonable possibilities."
The terminate result: Bridgewater is forthwith long bonds.
Whether this likewise agency that the fund is bearish on overall growth, bullish on deflation, as well as rattling bullish that inward the Taper is non only off the tabular array but at that topographic point is potential for fifty-fifty to a greater extent than easing past times the Fed, is unknown.
What is known is that in ane lawsuit the piggyback crew jumps on the Bridgewater bandwagon, which is forthwith proverb rates volition driblet (ostensibly leading to the terminate of the Great Rotation as well as mayhap the outset of the Great Unrotation), hold back to run into around substantial cost realignment betwixt the 2 mind assets classes: stocks as well as bonds
Read more: http://www.zerohedge.com/news/2013-09-24/bridgewater-goes-long-treasurys