Ray Dalio, the founder of Bridgewater, the world’s largest hedge fund, was at the Council on Foreign Relations discussing his macro approach and his general view of the world. It’s a rare look at his thinking. He has a way of looking at the world that is very similar to my own. Although I don’t entirely agree with his specific views I think that his top down macro view is absolutely the right way to understand the “machine”.
Some of the highlights:
- De-leveragings are common occurrences. We can learn from past boom/bust cycles.
- The economic machine is simply a summation of transactions.
- The economic cycle is largely based on credit expansions as a part of these transactions.
- The boom is caused by the credit boom.
- The bust is an inevitable result of the credit boom.
- Some booms are bigger than others and result in more prolonged de-leveragings. That’s where Europe and the USA are now.
- Germany is more likely to leave the Euro than Greece is.
- China is likely to slow much more substantially.
- Austerity will send the US economy into recession.
- Buy gold. he says: “If you’re going to own currency, it’s not sensible not to own gold”.
See the full interview here:
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.