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Biggest Opportunity Will Be Shorting the Bond Market: Dalio

Raymond "Ray" Dalio
Scott Eells | Bloomberg | Getty Images
Raymond "Ray" Dalio

Rising interest rates in 2013 will likely push down prices in almost every financial asset in the world according to Ray Dalio, the founder and chief investment officer of the world's largest hedge fund, Bridgewater Associates.

Low interest rates made necessary by global deleveraging have squeezed risk premiums out of nearly every asset class, Dalio said. As a result, most financial assets are "fully priced" and many are overvalued, according to Dalio.

"I think those risk premiums are likely to expand, and as a result I think that is generally a negative for asset classes as a whole," Dalio said.

"The biggest opportunity, and I don't think its an imminent opportunity, will be shorting the bond market," Dalio said.

Speaking on a panel at the New York Times DealBook conference Wednesday afternoon, Dalio sounded far more pessimistic than fellow panelists Steve Schwarzman and David Rubenstein, the respective founders of the Blackstone Group and the Carlyle Group.

While Rubenstein and Schwarzman happily discussed areas where they see investment opportunities, Dalio wasn't positive on any asset classes at all. The closest he came to sounding a bullish note was a mention that there may still be some existing risk premium left in agricultural property in Australia.

When pressed by moderator James Stewart to forecast when rates would rise, Dalio said that he thinks the chances of rates rising will increase as 2013 progresses. He warned, however, that forecasting the timing of rising rates is probably a fool's errand.

"He who lives by the crystal ball will eat shattered glass," Dalio said.

Earlier Wednesday, Goldman CEO Lloyd Blankfein warned that investors holding bonds with very low interest rates would see losses when rates climb.

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