Loading ...Paradigm Shifts – Ray Dalio
Its the weekend. Students of the market (we, the Goldbugs) ought to take a few moments to study, to reflect on where we are, how we got here, and where we might be going.
Ray Dalio is an American billionaire investor, hedge fund manager, and philanthropist. Here he is sharing secrets of investment success. His most recent essay titled “Paradigm Shifts” should be, IMO, required reading.
PARADIGM SHIFTS
Identify the paradigm you’re in, examine if and how it is unsustainable, and visualize how the paradigm shift will transpire when that which is unsustainable stops.
https://www.linkedin.com/pulse/paradigm-shifts-ray-dalio
THE ESSAY CONCLUDES…
Most people now believe the best “risky investments” will continue to be equity and equity-like investments, such as leveraged private equity, leveraged real estate, and venture capital, and this is especially true when central banks are reflating. As a result, the world is leveraged long, holding assets that have low real and nominal expected returns that are also providing historically low returns relative to cash returns (because of the enormous amount of money that has been pumped into the hands of investors by central banks and because of other economic forces that are making companies flush with cash). I think these are unlikely to be good real returning investments and that
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those that will most likely do best will be those that do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold.
Additionally, for reasons I will explain in the near future, most investors are underweighted in such assets, meaning that if they just wanted to have a better balanced portfolio to reduce risk, they would have more of this sort of asset. For this reason, I believe that it would be both risk-reducing and return-enhancing to consider adding gold to one’s portfolio. I will soon send out an explanation of why I believe that gold is an effective portfolio diversifier.
All very true, but paradigm shifts can take decades. I remember the same suggestion 10 years ago. It is coming, it’s just a question of when.
It already begin. read my comment with Bloomberg post. It takes only a small company to go under like in 2008- Lehmun Brothers. to take down the whole market.
In 1998 Long term Capital hedge fund came very close. But Uncle Alan saved it with US tax payers money. Bailed them out with $2.5 Billion cash infusion. So much for Socialism???LOL
This is how it happens- paradigm shift:
A Leveraged Loan Collapses and Reveals Key Risk in Credit Market
“But in the past week it abruptly — and alarmingly — caught the attention of Wall Street. Almost overnight, a $693 million loan Clover took to the market five years ago lost about a third of its value. The startling nosedive stung even sophisticated investors, people who deal in the arcane business of trading corporate loans.”…
“It immediately became a real life example of the perils of investing these days in the $1.3 trillion market for leveraged loans, where a global chase for yield has allowed an explosion in borrowing and lax underwriting. In a market where trading can be thin — and at a time when illiquidity is suddenly becoming a prominent concern in credit circles — the episode shows how loans to highly leveraged companies can quickly implode when fortunes change.”
https://www.bloomberg.com/news/articles/2019-07-16/a-leveraged-loan-collapses-and-reveals-key-risk-in-credit-market
Post on Credit spread tells the story. SPX and DJI are at the highest yet the credit spread is heading down- warning bells are sounding loud and clear. Yet including here on this forum up up up in the market ??