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Ray Dalio

@RayDalio

Feb 3

That is because all investments are exchanges of lump-sum payments today for future payments. (1/7)

What these future cash payments will be is determined by growth and inflation, what risk investors are willing to take in investing in them as compared to having cash in hand is the risk premium, (2/7)

and what they are worth today, which is called their “present value,” is determined by the discount rate. (3/7)

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Ray Dalio

@RayDalio

Jan 26

I threw a lot at you in the last post. You might want to watch again slowly so you can see if the sequence makes sense to you. (1/8)

To summarize, around the upward trend of productivity gains that produce rising wealth and better living standards, there are cycles that produce prosperous periods of building in which the country is fundamentally strong because (2/8)

there are relatively low levels of indebtedness, relatively small wealth, values, and political gaps, people working effectively together to produce prosperity, good education and infrastructure, strong and capable leadership, (3/8)

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Ray Dalio

@RayDalio

Jan 20

While historians assign dates to the beginnings and ends of civil wars, they are arbitrary. The truth is that almost no one at the time knows that a civil war has begun or that it has ended, but they know when they are in them. (1/5)

For example, many historians have designated July 14, 1789, as the day the French Revolution began because a mob stormed an armory and prison called the Bastille. (2/5)

But nobody at the time thought it was the beginning of the French Revolution or had any idea how terribly brutal that civil war and revolution would become. (3/5)

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Ray Dalio

@RayDalio

Jan 19

These changes are the natural consequence of needing to make big changes that can’t be made within the existing system. Almost all systems encounter them. (1/4)

That is because almost all systems benefit some classes of people at the expense of other classes, which eventually becomes intolerable to the point that there is a fight to determine the path forward. (2/4)

When the gaps in wealth and values become very wide and bad economic conditions ensue so that the system is not working for a large percentage of the people, the people will fight to change the system. (3/4)

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Ray Dalio

@RayDalio

Jan 13

Interest rates are shown in these charts that go back to 1900. They show real (i.e., inflation-adjusted) bond yields, nominal (i.e., not inflation-adjusted) bond yields, and nominal and real cash rates for the US, Europe, and Japan at the time of my writing. (1/4)

As you can see they were much higher and now they are very low. Real yields of reserve currency sovereign bonds, at the time of my writing this, are near the lowest ever, and nominal bond yields are around 0 percent, also near the lowest ever. (2/4)

As shown real yields of cash are even lower, though not as negative as they were in the 1930–45 and 1915–20 great monetization periods. Nominal cash yields are near the lowest ever. (3/4)

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Ray Dalio

@RayDalio

Jan 6

I hope you will take this one year anniversary of the January 6th events to reflect on what caused them and where we seem to be headed. The events didn’t come out of the blue. (1/5)

They were clearly emerging from years before as an extension of a pattern that has happened many times in history due to causes that are essentially the same as those that caused January 6th. (2/5)

By connecting the dots back through time, we can see the causes and effects and imagine where we could be headed. We can see that the order we have assumed would never change could change in profoundly disruptive ways. (3/5)

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