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Ian Campbell

Ian Campbell

Through his www.BusinessTransitionSimplified.com website and his Business Transition & Valuation Review newsletter Ian R. Campbell shares his perspectives on business transition, business valuation and world…

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Ray Dalio (Bridgewater Associates) on Deleveraging (and other things)

Why read: Ray Dalio is one of the world's most successful money manager. He is a 'plain talker' and I think very good thinker.

Commentary: While an hour is a long time to commit to listen to an interview, this is one lengthy interview that I suggest you take the time to listen to at least parts of it, and think about what Dalio says. In particular, you might want to listen at:

  • minute 19 where he discusses what he thinks will happen in Europe, where he seems to think 2 trillion euros will be lost, and discusses who may bear those losses;

  • minute 23 where he discusses deleveraging and printing money, and the importance of whether a country is able to print money unilaterally (such as the U.S.), or whether a country can't unilaterally do that (such as Spain and Italy as Eurozone members);

  • minute 27 where he expresses what he thinks will happen in the U.S.;

  • minute 34 where he speaks to the issue of whether the financial markets currently are disconnected from what is going on in the world economy;

  • minute 40 where Dalio, in response to a question about inflation, says he believes there is a natural deflationary tendency that arises out of deleveraging;

  • minute 47 where he discusses gold, says he owns some, and that there is no sensible reason not to own gold. He says he views it as diversifier and alternate form of cash;

  • minute 48 where he says that most investors should not play a non-diversified market game, but should look to a balanced risk strategy that reflects four types of assets - and says this is explained on the Bridgewater website.

You can visit Bridgewater Associates website here, and read or print (at no cost) a four page PDF titled 'Risk Parity is about Balance'. To access that paper, click on 'Site Map' (bottom of home page), then click on Risk Parity & Portfolio Construction White Papers. You will taken to a webpage that asks for your name, e-mail address and agreement with Bridgewater's disclaimer. You will then be taken to a webpage where you can access the PDF.

Bridgewater is said to manage about U.S.$130 billion. That is a huge responsibility, and it seems evident to me that Mr. Dalio strongly believes that to be the case. Accordingly, in what I see as very turbulent and uncertain economic times it is not terribly surprising to me that:

  • Mr. Dalio in his remarks speaks in quite general terms - the exception being that he expressed a specific (positive) view with respect to physical gold ownership; and,

  • as a result, it is necessary to 'read between Mr. Dalio's lines' and reach your own conclusion with respect to what he likely thinks are 'most probable outcomes.

I consider the latter exercise to be one 'well worth doing', and recommend it to you.

Topical Reference: Ray Dalio talks about delivering and a lot of other things, from Also Sprach Analyst, Ray Dalio, September 13, 2012 - video watching and listening time 30 minutes plus a further 37 minutes of questions and answers.

 

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