05 February 2015

Ray Dalio's All Weather Fund Holding $6 Billion In Gold - The Doré of War

If this longer term investment allocation model became more general accepted by funds and the wealthy for their portfolios, and I believe that some day it will, then gold would have to undergo a significant price reset higher.  
Paper claims on gold will be redeemed in a run on the funds as the leverage unwinds, and the new demand for gold bullion far outstrips the crippled mining industry and the rehypothecated physical supply.
The current allocation of gold in most portfolios is minimal to none.  And when disinterest in holding that historical safe haven turns to fear and then greed, which it has done many, many times in the past, the result will be impressive given the over-leveraged and under-supplied structure of the market today.
Can this happen?  Are you kidding me?  What has NOT happened that the thought leaders and their financiers have assured us could not happen.  
But there is so much anti-gold nonsense presented by our sophisticates so often that the average person does not know what to think.  The flow of gold from West to East is little remarked upon phenomenon of historic significance.  And yet it is little remarked upon outside certain 'circles' on the periphery of the major media. 
Why is that?  I suggest it is the doré of currency war, both in terms of economic thought, historical knowledge, and the quality of their bullion.  And it will all be sharply refined out in the next financial crisis, as the tide of paper recedes once again.  As for proper pronunciation, who could pass up such a nice triple pun so easily.  See the orthographic note at the bottom below the video.
As a fiduciary Kyle Bass seems to think so, and so does one of the world's greatest fund managers Ray Dalio.  But then again, they are not very serous and famous people who regularly appear on bubblevision.   And so what do they know.

This Hedge Fund Heavyweight Could Be Holding US$6 Billion In Gold
By Travis McPherson
5 February 2015

Ray Dalio is the founder of Bridgewater Associates, the world’s largest hedge fund firm and is one of the most iconic money managers on Wall Street.

The Harvard graduate created the All Weather fund in 1996 and revolutionized traditional optimal strategic asset allocation models. Instead of balancing portfolios based on total weightings only, he included risk, inflation and growth (now referred to as ‘risk parity’) in order to match weightings with risk exposure given certain inflation and growth scenarios.

The new spin on portfolio theory helped the All Weather fund return some of the most consistent numbers in the hedge fund business and allowed Bridgewater to grow assets under management to over US$160 billion (his personal net worth grew as well, now over US$15 billion). The All Weather fund holds roughly 50% of Bridgewater’s total AUM.

Mr. Dalio is a big believer in gold as a hedge against inflation and believes every portfolio needs a gold allocation.

The All Weather fund calls for a 30% weighting in stocks, 15% intermediate term Treasuries, 40% long-term Treasuries, 7.5% gold and 7.5% commodities. This means, the All Weather fund is holding up to US$6 billion in gold or roughly 4.7 million ounces (at $1,270/oz gold price)...

Read the entire article from CEO.CA here.

Cultural Aside
Before the better educated critics and the urbane write in, I am well aware that doré is properly pronounced as 'doreh or dory' and not as 'door.'  My French has grown feeble with years of disuse, but I am not yet a complete barbarian for the world's most beautiful language (with an honorable mention to Italian).  I freely admit to a bias in this.
However if English orthography famously permits Lord Byron to get away with pronunciation like this for Don Juan (as Don Joo Wun) in his epic satirical poem, then I am quite comfortable talking about the dore of war as a rhyme to make my own satirical point about the quality of the current stocks of 'gold bullion' held in places like the Comex and the Fed.  lol. 
And thanks to my long time reader from Delray Beach Florida for suggesting it.  It is truly the little things that make life, if not worth living alone, then surely at least interesting while looking for things that do.
Till, after cloying the gazettes with cant,
The age discovers he is not the true one;
Of such as these I should not care to vaunt,
I'll therefore take our ancient friend Don Juan.