Ray Dalio is a billionaire investor, having founded Bridgewater Associates as a youngster in 1975 and turned into a mammoth $160bn fund. He is author of the best-selling Principles: Life and Work and a renowned philanthropist. Last week he was interviewed by Sal Khan. Below are his thoughts given in that interview. There are the plenty of warnings about division and violence within societies and across borders; about the rise of populists and dictators, and; about the risk of inflation, making money a poor store of wealth. But he seems to think the US stock market will be bailed out by policymakers. I would question whether they really do have infinite firepower to fill every “hole”, especially when the economic winds from the 82% of the economic world that is not American are blowing so cold.
A damaging virus
“I think of the virus like being a tsunami…when it goes away there’s still terrible damage…to incomes and to balance sheets. Every individual, every company and every government has a certain amount of revenue and a certain amount of expenses, and they have savings, a certain amount of balance sheet. Those have been severely damaged…necessitating cutbacks. Think about companies like Disney [cut half its staff] or small businesses; great, great damage.”
The hit to the economy
“This will be the worst economic downturn since the Great Depression. The unemployment rate will approach 20%, and the financial wreckage will be of that magnitude.”
Can policymakers stop it?
“The good thing is the government is acting to fill those holes [in income and balance sheets of individuals and companies].
The resulting social unfairness is dangerous
“When you think of the economy there’s the rich and the poor. I think there’s going to be a restructuring. People and policymakers will think: who’s going to pay for what? So they’ll be a reallocation of resources. Tax rates are going to change, and also spending. What really worries me is the fragmentation, the anger, or the carelessness of one extreme or the other to mess up the continued improvement of the pie…Restructuring will probably take a few years.”
"Hitler came to power in 1933 because the internal fighting was so great. And there could be a move to a more autocratic and confrontational type of politics.
And because this is a world problem there’s going to be competitions going on all over the world - China is a rising power. And then there’s a lot of the world that that won’t have the support the US has had because we’re blessed to have the world’s central bank – we can produce dollars…they can be spent around the world. Very few currencies are like that. Those other countries will not be able to fill holes in income and balance sheets.
We’re gonna see a change in the world order, and there could be fighting. So how it is handled is the most important thing.
It’s very similar to the 1930 – 1945 period. What happens when y………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
Prof. Glen Arnold
I'm a full-time investor running my portfolio from peaceful Leicestershire countryside. I also happen to be UK´s best selling investment book author and a Financial Times Best selling author.
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