Chapter 1: What is the main topic discussed in this episode?
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Today's number, 1.5. That's how many tons of beans were delivered by Grubhub across America last year, with bean sales up 135% from the year before. And in other news, investors are piling into what might be the hot new sector on Wall Street, air freshener.
Welcome to Profiteer Markets.
I'm Ed Elson. It is April 30th. Let's check in on yesterday's market vitals. The S&P 500 and the Nasdaq were flat while the Dow declined as the Federal Reserve held rates steady. The yield on 10-year treasuries hit a one-month high as traders gave up hopes for a rate cut this year. Brent crude hit the highest level since 2022 after President Trump told aides to prepare for an extended blockade.
And big tech shares were mixed as earnings started to roll in. More on that later. Okay, what else is happening? Earlier this year, legendary investor Ray Dalio declared that the world order had broken down. Since he made that claim, the national debt surpassed $39 trillion to reach a new record.
We've also gone to war with Iran, which has cost at least $25 billion so far and sent the price of oil soaring. And on top of that, new projections show that tariffs are expected to add another $1 trillion to the deficit over the next 10 years. In sum, the deficit is expanding, inflation appears to be rising, and meanwhile, the Fed is stuck holding rates at a crucial time of transition.
So we wanted to check in on all of these dynamics. So we decided to check in with the man himself, Ray Dalio, global macro investor, founder of Bridgewater Associates and New York Times bestselling author. Ray, thank you so much for joining us again on the show. I guess we should start with your main investment theme, which is the big cycle.
and the five main forces that drive the big cycle that you have been warning about for a long time. Could you just remind us what is the big cycle and what are those five forces that are moving markets?
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Chapter 2: What insights does Ray Dalio provide on the current world order?
So I guess... My takeaway is the big cycle is happening. The things that you have been talking about, they are occurring. And the question for me then becomes, well, where are we in the big cycle? What stage are we actually at? And what are these events that we have seen in the real world actually say to us? And what does it mean for investors?
We are on the brink. Now, the brink might be, I would say, particularly risky period, is between the next two elections. So after the 26th midterm election and the 28th presidential election is a riskier period, and this is a very risky period. So what I would say, if I take the monetary order risk perspective, We have debt service problems.
They have big changes, and, you know, we'll get into this. Who is earning a lot of money? Who is not earning money? How wealth has changed. For example, it's very interesting and very important. to observe that the Chinese are making a tremendous amount of money and accumulating. They're running very large surpluses with the rest of the world and accumulating a lot of dollars.
And what does that mean in terms of how those are handled? And then what does that mean for our balances and so on? But if I'm back to your, to try to be on point, I would say in the midterm elections,
We're going to there's a likelihood that the Republicans will lose the House and that there will be a great conflicts, including, you know, impeachments, investigations and so on, that the conflict is going to be material. I think that the monetary situation will be more threatening. In other words, there's itself the supply-demand that we're referring to.
You know, the United States, basically the U.S. government, spends $7 trillion. It takes in about $5 trillion. So it's 40% overspending. It has a lot of debt. And the demand for that debt is falling. And it's falling not only because of the supply-demand situation, the regular supply-demand, but we're now in a world where even wars, the worries of...
of those who are holding dollar-denominated debt, that they could be sanctioned. Imagine if you're Chinese and you're holding it, and you could have a conflict. So there are these shifts that are happening in terms of that. So that plays a role. And, of course, there is the international conflict. And of course, technology is changing at an incredible rate.
And so I think that as we take the next two to three years, it will be like going through a time warp that we're going to have a riskier period, but also a period of great changes that we, you know, are difficult to deal with. And particularly, I think the question is how you deal with that to have a well-diversified portfolio.
But in answer to your question, it's a sort of long-winded answer, but I think that we're on the brink. of some of these problems. And we are, I would say, particularly in the vicinity of two years away from what obviously is a confluence of more risks.
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Chapter 3: What are the five main forces driving the big cycle in markets?
And to have, for example, somewhere between 5% and 15% of that portfolio in that diversifies the other parts of it. I would worry about debt. And you should understand like cash, which people think is the safest investment, is the most assuredly bad investment in most times, normally, because cash has a lower return, but it's particularly a bad investment
in a period of stagflation so we're dealing with um kind of a stagflation kind of environment or an uncertain but to achieve um and debt has its challenges so i would say the most important thing is to know how to diversify well and that also includes um Local, you know, outside of the United States as well as inside of the United States.
That may seem very difficult to people because also right now there's a lot of concentration in the areas like tech. In other words, and particularly A.I., And one might figure, okay, that you're going to miss out on that.
But still the diversification is of very much importance because I think a lot of people make the mistake of thinking that because a technology is going to be a revolutionary technology throughout history, So many new technologies have been revolutionary technologies, and it's certainly the case that that'll happen.
Such periods have also been periods of bubbles that because people think, I want to bet on that technology, so they buy stocks of that sort without looking really at the price. So to create a well-balanced portfolio, what I call an all-weather portfolio, I think is the most important thing that people can do.
Lots more we could get into, but we will have to continue it another time. Ray Dalio, founder of Bridgewater Associates and New York Times bestselling author. Ray, thank you so much for joining us again on Profiteer Markets. We always love having you.
Ed, it's my pleasure.
After the break, Microsoft, Meta, Amazon, and Google report earnings. And by the way, we are heading out on tour at the end of May. So for more info and to get tickets to a show near you, head to profgmarketstour.com. Support for this show comes from Vanta. If you run a business, you don't need us to tell you that risk and regulation are rising.
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