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Deep Thoughts by Ray Dalio

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.
Some more specific calls:
  • 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:


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