An Incredible Talk With Ray Dalio At The 2013 Dealbook Conference | Exploring Markets

An Incredible Talk With Ray Dalio At The 2013 Dealbook Conference


Here are some quotes and notes from Ray Dalio that stood out:

There's a lot of merit behind Bitcoin. Currencies are Dalio's thing. But that's a whole conversation. He needs to understand Bitcoin more.
Everybody has an opinion about what is going to happen next but no one spends enough time reaching an agreement about how the economy works. Encourage everyone to learn Dalio's model at www.economicprinciples.org 
At its simplest form the economy is a system of goods and services in exchange for money or credit.

Monitoring credit and spending seems to be a very important aspect for understanding cycles of the economy. 
Debt can't rise relative to income indefinitely. 
View transactions at the micro level, each transaction should examined individually not collectively as a whole. 
The Fed's quantitative easing is losing its impact. It's seeing a diminishing marginal utility. 
Dalio seems to think the Fed's greatest impact was the wealth effect. Increasing the price of financial assets for the wealthy so that they get richer and trickle down the stimulus throughout the economy via spending, more transactions, and liquidity.
These things are a cycle and happen over and over again. 
The Fed has done a masterful job at alleviating the debt crisis. 
On intermediate debt cycle: We've gone from a recession to the middle part of the cycle, we're just crossing the line. We are not at overcapacity yet, which is the late part of the cycle when the central bank should tighten. 
On long-term debt cycle: Debt to GDP is falling gradually. Which is good. The key to keeping it down is to keep nominal interest rates below nominal growth rates. Debt will compound by the nominal interest rate. 
The Fed has run policy in a way that nominal growth is greater than the burden of interest on compounding that debt. That's why deb to GDP is falling. 
The federal reserve will not be able to raise interest rates for a number of years.
Most investors won't be able to produce alpha. Dalio has 1500 pros at Bridgewater. (You don't want to play against them.) 
Three ways to get rid of high levels of debt in the government. Or deleveraging: Austerity, which means you spend a lot less. The problem with this is one man's spending is another man's income. The second way is to restructure debt. So stretch out interest payments or write down debt. This is a negative wealth effect. In this instance one man's debts are another man's assets. The third way is to print money. This is inflationary, it increases demand and supply of money. 
The best way to deleverage is to achieve a balance between the printing of money and restructuring of debt. So that they essentially cancel each other out but better prepare governments or companies for the future. 
Mediation eliminates the stress and emotions. It brings equanimity. Dalio does it twice a day. Considers it the best investment. It inspires creativity, open-mindedness, and spontaneity. It's great for health. 
Meditation is the biggest gift Dalio can give to anyone. 
Anyone can start the next Bridgewater. It's just about imagination, insight, and integrity. 
You have to work in a place that allows you to be yourself and flourish. 
There is no bias to bonds in the all weather fund. Dalio wants to put the same amount of risk into different asset classes. Stocks have a volatility that is about twice of bonds. For that reason Dalio has more bonds than stocks, but that does not mean he's overweight or underweight bonds and stocks. 
The market discounts expectations.   
In France debt is rising faster than income. There's going to be a rise in debt service payments in France. That's going to start to hurt the economy, and constrict it. The debt will need to be rolled over. And if it continues to get rolled over it will get more and more difficult to roll over because it will compound. That will produce a funding gap and wider credit spreads. That's the start of a financial crisis. In addition it's put France in the category of Southern European countries. It's changed the dynamic of the ECB and Europe. All of this is occurring at the isolation of Germany.