{"id":15036,"date":"2020-09-18T15:52:02","date_gmt":"2020-09-18T19:52:02","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=15036"},"modified":"2020-09-25T19:40:55","modified_gmt":"2020-09-25T23:40:55","slug":"bridgewater-history","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/bridgewater-history\/","title":{"rendered":"Bridgewater History: New Strategies for a New Decade"},"content":{"rendered":"\n

What is Bridgewater’s history? When in Bridgewater history did Bridgewater fail, and how did they recover?<\/p>\n\n\n\n

In Bridgewater history, Ray Dalio’s company saw both successes and failures. When the company faced a downturn in the 1970,s Dalio had to build the company back up using new tools and strategies. <\/p>\n\n\n\n

Read more about Bridgewater history and how Ray Dalio<\/a> build Bridgewater back up after its fall. <\/p>\n\n\n\n\n\n\n\n

Bridgewater History<\/h2>\n\n\n\n

The late 1970s were one of the most volatile periods in markets in history. The fluctuations were caused by big shocks like breaking the link between the dollar to gold in 1971, the oil crisis after the Iranian Revolution, and the Fed\u2019s monetary policy to try to control inflation.<\/p>\n\n\n\n

The Downfall<\/h4>\n\n\n\n

During all of this, Dalio confidently predicted that the next depression was soon to come. He saw that debt levels were at record highs and rising faster than borrowers could repay them, particularly to emerging countries. The Fed was in a difficult position. It could print more money to avoid a cash crunch, but this would stimulate more inflation. On the other hand, if the Fed were to control inflation by becoming tight, this would trigger a massive decline in markets.<\/p>\n\n\n\n

Dalio had seen elements of this before. He\u2019d studied the past two centuries of economic history for debt and depressions. He was confident that a depression was coming, and he told his clients at Bridgewater this. To profit from his prediction, he held gold (which performs well in inflation) and bonds (which perform well in depressions).<\/p>\n\n\n\n

At first, it looked like Dalio was completely right. In August 1982, Mexico defaulted on its debt, and it seemed clear that other emerging countries would follow. The Fed\u2019s policies hadn\u2019t been enough. Dalio\u2019s bond bets were beginning to pay off. <\/p>\n\n\n\n

Dalio looked clairvoyant for his predictions. He testified at Congressional hearings on the crisis, and he went on finance shows, claiming \u201cI can say that with absolute certainty, because I know how markets work.\u201d The Fed tried to ease the situation by making money more available, but Dalio predicted credit problems would only get worse, seeing analogies to the Great Depression<\/a> in 1929.<\/p>\n\n\n\n

He was completely wrong. The market rebounded in response to the Fed\u2019s actions. Inflation fell, and growth accelerated. Over the next two decades, the economy enjoyed the greatest growth period in history.<\/p>\n\n\n\n

Dalio lost nearly everything. He had to let go of his entire staff, leaving only himself. He had to sell their second car and borrow money from his father. After eight years building Bridgewater, he had to start from zero once again.<\/p>\n\n\n\n

Building Up Bridgewater Again<\/strong><\/h3>\n\n\n\n

After Bridgewater took a downturn, Dalio worked to rebuild the company using new strategies. <\/p>\n\n\n\n

Computers and Automating Decision-Making<\/strong><\/h4>\n\n\n\n

The development of microcomputers in the early 1980s gave Dalio even greater ability to turn his investment principles into automated rules. Working alongside a computer gave the team a few critical advantages:<\/p>\n\n\n\n