When one of the world’s most successful investors says The World Has Gone Mad and the System Is Broken, you listen. That’s exactly what Ray Dalio did in a piece published on LinkedIn just a few days ago. We’ve summarized his views and shared an interview that further colors his viewpoints.
Mr. Dalio’s views summarized
At its core, Mr. Dalio’s article lays out the following concerns:
- The price of money is low and the supply is high, leading to either the acceptance of low returns or incremental risk-taking
- This mal-investment is evidenced by recent failures, like WeWork, where investors buy into a “dream” rather than future or current profitability and sustained value creation
- Large government deficits will require more debt issuance which should increase rates, at a time when rising rates “would be devastating for markets and economies because the world is so leveraged long”
- This results in a “dynamic in which sound finance is being thrown out the window”
- More and more pension and healthcare liabilities will come due while investment targets are not being met, meaning they will be underfunded
- Changing demographics result in “fewer earners having to support a larger population of baby boomers needing healthcare, there isn’t enough money to fund these obligations either.”
His piece ends with a scary reminder about inequality and its likely trajectory, which dovetails with the work we’re doing at CNote to build a more inclusive economy and fight against this growing wealth transfer to the top:
“At the same time as money is essentially free for those who have money and creditworthiness, it is essentially unavailable to those who don’t have money and creditworthiness, which contributes to the rising wealth, opportunity, and political gaps.”
Shortly after authoring the piece above, Mr. Dalio spent the better part of fifteen minutes further illuminating his views and the likely outcomes he sees based on the current situation.
If you’re looking to gain a better understanding of the current global economic situation and the likely path forward, this is definitely worth a watch.