What Scares Hedge Fund Managers

Feb 25, 2018 · 3 min read

I wonder what most money managers would say about the things that scare them most. They might say things like, “inflation” or “fraud” or “losing other people’s money.”

I recently spent some time studying Ray Dalio, the founder of the world’s largest hedge fund Bridgewater Associates. I read a blog post titled, Our Biggest Economic, Social, and Political Issue. I was surprised to see that this article was published in late 2017 and I had not yet heard of it.

Nearly 2,000 people are said to work at Dalio’s Bridgewater. I imagine some of them have the most impressive resume’s on planet Earth. Ph.D’s, mathematicians, Navy Seals, and experts with 10,000+ hours of trading experience. I think about all of these people helping him write, find specific statistics, and research every corner of the world.

The post is long. It’s over 2,600 words. And the number one thing that worries him is the difference between the rich and poor in America. You might be the biggest capitalist you know, or maybe you’re further left than Bernie Sanders… I really don’t care. What I do care about, though, is that a man like Dalio is spending his personal time and resources to share these facts. As an investor who manages his own account, I will surely be watching all of these trends going forward. Or even better, maybe someday I can help:

1. Four times more money

“The average household in the top 40% earns four times more than the average household in the bottom 60% [since 1980].”

2. No emergency funds

“Only about a third of the bottom 60% saves any of its income (in cash or financial assets). As a result, according to a recent Federal Reserve study, most people in this group would struggle to raise $400 in an emergency.”

3. No retirement plans

“Only about a third of families in the bottom 60% have retirement savings accounts — e.g., pensions, 401(k)s — which average less than $20,000.”

4. Death rates are climbing

“For those in the bottom 60%, premature deaths are up by about 20% since 2000. The biggest contributors to that change are an increase in deaths by drugs/poisoning (up two times since 2000) and an increase in suicides (up over 50% since 2000).”

5. The education disparity

“The top 40% spend four times more on education than the bottom 60%. This creates a self-perpetuating problem, because those at the bottom get a much worse education than those at the top.”

6. A group that’s falling behind

“Prime working-age white males have given up looking for work in record numbers; the number of prime-age white men without college degrees not in the labor force has increased from 7% to 15% since 1980.”

7. A group that’s falling behind part two

“The rate of premature deaths for whites without college degrees between the ages of 35 and 64 is up by about 25% since 2000 (while it is down for virtually every other demographic group).”

8. Trust is fading

“Trust and confidence in government, financial institutions, and the media, which is at or near 35-year lows.”

9. Paranoia is growing

“The bottom 60% increasingly believe others will take advantage of them: the percentage is 49% today versus 40% in 1990.”

10. This chart

Thanks for reading! If you enjoyed it, subscribe to my email here and I’ll send you some of my other writings and notes. Make sure you’re also following me on Twitter and StockTwits. I also invite you to read some of the other posts from my network:

If you want to tip me, send some crypto: 1GRU37QpMtvE7mqFzNEMnVMQtbvauiaA2t

Money out of Air

Lessons about investing and crazy stories about markets.

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store