The name Ray Dalio is synonymous with investment success and sheer size. He runs the world’s largest hedge fund, Bridgewater. His long-term track record is one of the best in the business. He’s notorious for nurturing a culture of “radical transparency.”

Don’t even think about working at Bridgewater unless you have a thick skin and are ready to be criticized several times daily by your closest colleagues. You also better be ready to criticize others continually or you’re not doing your job. Dalio believes this culture of criticism flushes out flaws in trade ideas and leads to better investment results.

Maybe. What it definitely leads to is high turnover since many professionals can’t take the heat and leave the firm in a year or less.

In any case, the investment success is undeniable. This article describes a new trading strategy that involves a $1 billion bet that the stock market will fall between now and next March.

Of course, things are never that simple in hedge fund land. The report may well be true in a narrow sense, but it could miss the larger picture. The short bet might actually be a hedge to a long position rather than an outright short. Or it could be a hedge to a variety of other positions based on a conditional correlation. It’s impossible to know without a lot more information about Bridgewater’s entire book of positions.

Ray Dalio and Bridgewater spokespeople say as much in their rebuttal to the first version of the story (the rebuttal is included in this version). On the other hand, why would you need a hedge at all unless you were concerned about the stock market dropping sharply?

We don’t have to know Bridgewater’s book to know Dalio is concerned about the high level of stock prices. Other investors should take heed.

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