Thread by @trengriffin

1/ Ray Dalio to Tyler Cowen who cites random walk macro literature:

"The market is like a poker game. I’ve played for over 50 years. It’s a zero-sum game relative to what’s priced in, and the smart people take money away from those who are less smart.” conversationswithtyler.com/episodes/ray-d…

2/ Dalio: “That’s the way it works. I wouldn’t be in the business — I wouldn’t be on your podcast,  unless that was true. There are many people who write finance papers, and there are people who make money in the markets. I can’t speak for those who are writing finance papers.”

3/ Ray Dalio argues that three big phenomena happening now are particularly important:
a. Zero interest rates with actions to finance debt;
b. The internal conflict between left and right, rich and poor a political polarization; and,
c. The rise of China.

4/ The danger is people reading Dalio's book will shut down and refuse to consider all arguments if their issue isn’t discussed first. "When you have a large gap of people at each other's throats, you create a risk of an internal conflict, the risk of some kind of civil war.”

5/ I am will produce tweet storm report below on Ray Dalio’s ideas and new book. If you disagree with Ray’s ideas, take it up with him. I don’t agree with Dalio on some issues related to China and otherwise. There will be links to the sources at the end of the tweetstorm.

6/ "Central bankers, especially the Fed, are between a rock and a hard place. They need to tighten quite a lot to restrain inflation, yet if they do they will hurt the economy."

7/ "Imagine what would happen if there was a tightening of monetary policy in the classic way of first causing asset prices to go down and then the economy to contract.”

7/ "People are at each other’s throats and they’ve been given a lot of money. I’m afraid of another economic downturn. We can’t even get along on whether we can wear masks or not.”

8/ "You can’t allow another economic downturn. You can’t raise interest rates enough to bite. Interest rates have to be significantly below both the inflation rate and the nominal GDP growth rate.”

8/ / “Producing money doesn’t take money away from anyone so it’s politically easier because it’s a hidden tax. Nobody’s complaining about where the money came from. If you get it through taxes, everybody squawks." Ray Dalio

9/ "One has to grow the pie well, be productive and divide the pie well so productivity and benefits of it are for the majority of people. Central banks want to stretch the money and credit cycle to make it last for as long as it can because it is better than the alternative.”

10/ "Today it doesn’t cost anything to borrow. Right now if you take out debt, you have practically no interest rate and principal payments can be deferred, so money is essentially free. The cost of money negative and below the nominal growth rate."
Ray Dalio

11/"It's very profitable to borrow and invest in anything that can grow at the inflation rate or more. That’s what’s priced into the markets now. If they raise interest rates to be higher than is priced in,asset prices will go down and there will be more of an economic problem."

12/ "There's a tradeoff: You can't raise living standards by just creating money and credit, if you don't raise productivity more than that because that’s just more money chasing the same amount of goods. It will affect financial markets and the inflation rate.” Ray Dalio

13/ "We are spending more than we are earning by a lot— individuals and the country as a whole. That won’t raise living standards in an important way. As inflation then begins to bite, it has political consequences." Ray Dalio

14/ Real short-term interest rates are significantly negative. Even real bond yields  are negative. Some people make the mistake of thinking that they are getting richer because they are seeing their assets go up in price without seeing how their buying power is being eroded."

15/ "Debt is both a good and bad thing. Being able to create debt gives you buying power. Being able to print the world’s currency — such as when we were in the COVID crisis — and being able to print the currency that, around the world, will be accepted." Ray Dalio

16/ "The buyer of debt is owns your promise to deliver currency. When you have the world’s reserve currency, it allows you to get into more debt. Now, getting into more debt has historically, if not done correctly or not done sustainably  creates [problems]." Ray Dalio

17/ "Those obligations to deliver currency and pay back can produce different types of problems in the future. Debt is very short-term stimulative, and it’s longer-term depressing, and the ability to do that and have others take on our liability [isn't unlimited].” Ray Dalio

18/ "Most likely you’re going to see disagreements between the federal government and state governments on what is states’ rights that probably won’t be all settled legally, so they will be settled through tests of power."
Ray Dalio

19/ "There will be places that people won’t want to be because it’ll be threatening. People will want to be with their own kind.” The United States has not yet crossed the line into the sixth phase, but internal conflict is high and rising." Ray Dalio

20/ "The rise of a great power, China, to challenge the existing leading power and the existing world order is being reflected in market prices, but will be reflected more as those circumstances change.” 
 
"There are five kinds of war, and they’re not all shooting wars." Dalio

21/ "There’s a trade war, there’s a technology war, there’s a geopolitical war, there’s a capital war and there could be a military war. We are certainly, in varying degrees, in the first four of those types of wars. There's a good reason to worry about the fifth type of war.”

22/ "View cash as not the safest asset, but a very bad asset, because it has a very significantly negative yield relative to inflation. You will lose buying power. Pay attention to inflation and have a liquid and diversified portfolio of assets.”  Ray Dalio

23/ "The times ahead will be radically different from those we’ve experienced in our lifetimes, though similar to many times in history. We’re accelerating the rate at which they are occurring." Ray Dalio

24/ End of book/Ray Dalio idea report.

Sources:
 
prnewswire.com/news-releases/…
 
finance.yahoo.com/video/influenc….
 
linkedin.com/pulse/inflatio…
 
cnbc.com/2021/11/30/ray…
 
finance.yahoo.com/video/influenc…
 
podcasts.apple.com/us/podcast/bri…