Ray Dalio

I think a lot of investors make the mistake of thinking, I want to buy good things. That's a great company. But a great company that gets expensive is much worse than a bad company that's really cheap. So you have to look at pricing. This is all part of the cycle. Everybody says that's great and it's going to be great for the future. And like You know, like the Internet and dot com. It was great.

It's great. OK, but the price has to be paid attention to. And I'm particularly concerned of those companies at a time when we are in a situation with the interest rates operating as we write. In other words, this looks quite alike like 1998 or 99, where the assets of the new hot thing.

It's great. OK, but the price has to be paid attention to. And I'm particularly concerned of those companies at a time when we are in a situation with the interest rates operating as we write. In other words, this looks quite alike like 1998 or 99, where the assets of the new hot thing.

Yeah, so are hot. The prices are high. Yeah. And you have a rising interest rate environment. That is a classic issue. Yeah. So we have to pay attention to the interest rates and the pricing of those assets. And you have to think where is next. The other thing is, I think diversification is very, very important because everybody's leveraged long.

Yeah, so are hot. The prices are high. Yeah. And you have a rising interest rate environment. That is a classic issue. Yeah. So we have to pay attention to the interest rates and the pricing of those assets. And you have to think where is next. The other thing is, I think diversification is very, very important because everybody's leveraged long.

Everybody thinks, you know, I'm going to buy assets that are going to go up. And if they're good, I'm going to do that in a leveraged way. So the world is so leveraged long, you have to pay at least as much attention to correlation. So that's why when I look at something like gold or these uncorrelated assets, it's interesting.

Everybody thinks, you know, I'm going to buy assets that are going to go up. And if they're good, I'm going to do that in a leveraged way. So the world is so leveraged long, you have to pay at least as much attention to correlation. So that's why when I look at something like gold or these uncorrelated assets, it's interesting.

As you add it into the portfolio, it reduces the risk of the portfolio. So you have to pay attention to the uncorrelated assets in that kind of an environment. And those could be geographically looked at. So that's part of portfolio construction.

As you add it into the portfolio, it reduces the risk of the portfolio. So you have to pay attention to the uncorrelated assets in that kind of an environment. And those could be geographically looked at. So that's part of portfolio construction.

Equity prices, just to keep in mind, there's many times... equity prices and inflation adjusted, therefore purchasing power times have declined 60 or 70%.

Equity prices, just to keep in mind, there's many times... equity prices and inflation adjusted, therefore purchasing power times have declined 60 or 70%.

And from 1966, until 1984, you had a negative real return.

And from 1966, until 1984, you had a negative real return.

Yeah, so I'm glad you're bringing it up. I think it's super important too. And I just want to emphasize, you have to look at your returns in real dollars, right? What can you buy? What can you get? Or what can you buy? Yeah. It's funny because I watch the value go up and down, even the currency go up and down, and it's a distorted perspective.

Yeah, so I'm glad you're bringing it up. I think it's super important too. And I just want to emphasize, you have to look at your returns in real dollars, right? What can you buy? What can you get? Or what can you buy? Yeah. It's funny because I watch the value go up and down, even the currency go up and down, and it's a distorted perspective.

It's like being on a boat that's going up and down and judging the land to be volatile.

It's like being on a boat that's going up and down and judging the land to be volatile.

Just to be clear, 100% does not mean 100% probability of it happening. It means 100%. That's the highest that it's ever been. it's at the kind of maximum. But yeah, just to describe it, the longer term risk gauge is taking existing amounts, projecting those two things that I've described before, the supply demand and the debt service creating the squeeze.

Just to be clear, 100% does not mean 100% probability of it happening. It means 100%. That's the highest that it's ever been. it's at the kind of maximum. But yeah, just to describe it, the longer term risk gauge is taking existing amounts, projecting those two things that I've described before, the supply demand and the debt service creating the squeeze.

So think of it as going into your doctor and having him give you your test results and how much plaque is in there and what it's looking like and how you did on your stress test and what your arteries are looking like and what your condition is. That's what the first measure is. The second is you're in a seizure.