Ray Dalio: Paradigm Shifts

Legendary investor Ray Dalio says gold may be key amid monetary policy shift.

July 18, 2019

Legendary investor Ray Dalio says gold may be key amid monetary policy shift.

Ray Dalio thinks the current era of low interest rates and quantitative easing might be coming to an end, and his answer to a new market paradigm that could see escalating conflict between capitalists and socialists is simple -- gold.

"I believe that it would be both risk-reducing and return-enhancing to consider adding gold to one's portfolio," the billionaire founder of investment management firm Bridgewater Associates said in a 6000-word essay posted on LinkedIn.

For Dalio, monetary policy swings between helping debtors or creditors at each other's expense, and the next move of the pendulum could lead to a new era of debt monetisation and currency depreciation.

"The big question worth pondering at this time is which investments will perform well in a reflationary environment accompanied by large liabilities coming due and with significant internal conflict between capitalists and socialists, as well as external conflicts," Dalio said.

Other key quotes:

"I think that the paradigm that we are in will most likely end when a) real interest rate returns are pushed so low that investors holding the debt won't want to hold it and will start to move to something they think is better and b) simultaneously, the large need for money to fund liabilities will contribute to the 'big squeeze"'
"There will have to be some combination of large deficits that are monetised, currency depreciations, and large tax increases, and these circumstances will likely increase the conflicts between the capitalist haves and the socialist have-nots"
"In such a world, storing one's money in cash and bonds will no longer be safe"
"It is also a good time to ask what will be the next-best currency or storehold of wealth to have when most reserve currency central bankers want to devalue their currencies in a fiat currency system"

Ray Dalio will be speaking at this year's Sohn Hearts & Minds Investment Leaders Conference.

This article was written by Nathan Crooks and published in the AFR on July 18.
Licensed by Copyright Agency. You must not copy this work without permission.

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July 18, 2019

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Australian Financial Review

Ray Dalio thinks the current era of low interest rates and quantitative easing might be coming to an end, and his answer to a new market paradigm that could see escalating conflict between capitalists and socialists is simple -- gold.

"I believe that it would be both risk-reducing and return-enhancing to consider adding gold to one's portfolio," the billionaire founder of investment management firm Bridgewater Associates said in a 6000-word essay posted on LinkedIn.

For Dalio, monetary policy swings between helping debtors or creditors at each other's expense, and the next move of the pendulum could lead to a new era of debt monetisation and currency depreciation.

"The big question worth pondering at this time is which investments will perform well in a reflationary environment accompanied by large liabilities coming due and with significant internal conflict between capitalists and socialists, as well as external conflicts," Dalio said.

Other key quotes:

"I think that the paradigm that we are in will most likely end when a) real interest rate returns are pushed so low that investors holding the debt won't want to hold it and will start to move to something they think is better and b) simultaneously, the large need for money to fund liabilities will contribute to the 'big squeeze"'
"There will have to be some combination of large deficits that are monetised, currency depreciations, and large tax increases, and these circumstances will likely increase the conflicts between the capitalist haves and the socialist have-nots"
"In such a world, storing one's money in cash and bonds will no longer be safe"
"It is also a good time to ask what will be the next-best currency or storehold of wealth to have when most reserve currency central bankers want to devalue their currencies in a fiat currency system"

Ray Dalio will be speaking at this year's Sohn Hearts & Minds Investment Leaders Conference.

This article was written by Nathan Crooks and published in the AFR on July 18.
Licensed by Copyright Agency. You must not copy this work without permission.

Disclaimer: This material has been prepared by Australian Financial Review, published on Jul 18, 2019. HM1 is not responsible for the content of linked websites or content prepared by third party. The inclusion of these links and third-party content does not in any way imply any form of endorsement by HM1 of the products or services provided by persons or organisations who are responsible for the linked websites and third-party content. This information is for general information only and does not consider the objectives, financial situation or needs of any person. Before making an investment decision, you should read the relevant disclosure document (if appropriate) and seek professional advice to determine whether the investment and information is suitable for you.

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