Case Studies; Ray Dalio Interview

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Live like you will die tomorrow and learn like you will live forever–The Two-Penny Philosopher

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19 responses to “Case Studies; Ray Dalio Interview

  1. John,

    Nice find on these. One thing, have you been able to track down Donald Yacktman’s presentation?


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  3. Thanks for the interview link. What do you think of this?

    • I will take a look. Certainly credit creation creates cycles. Back to you after I read through these.

    • After viewing the video: I have several questions:

      1. Chicken and Egg. Spending drives the economy? Says Law: production drives the economy. Wouldn’t you like an infinite supply of goods and services or more than you have now? If so, you can’t spend what you don’t earn/produce.

      2. Why the cycles? Don’t people learn? What is causing such missed signals?

  4. Hi John,

    I recall you mentioned you were tentatively going to publish your investing handbook last week. I’m sure things are busy, but just wondering if you had an updated estimate for when we can get our first look at your book. Hoping to have lots of reading material for when I hit the beach for vacation next week!

  5. Does EVERYONE agree with Ray Dalio’s analysis?

  6. While interesting and mostly correct, the video fails to address the central truth of the last 30 years, i.e. despite the huge increases in worker productivity, the wealthy have gotten ever-more-fabulously-wealthier and the rest of America has stagnated at best.

    • Dear Tin man:

      Than ks for posting. One of our goals on this learning blog is to become better thinkers/communicators. So you agree that spending 70% drives the U.S. economy? Why not 100%. How can people spend more? You make an assertion–which I agree with by the way–you say, “The video fails to address the central truth of the last 30 years, i.e. despite the huge increases in worker productivity, the wealthy have gotten ever-more-fabulously-wealthier and the rest of America has stagnated at best.”

      But can’t I say, “Elephants can fly.” What evidence and reason behind this assertion? WHY are the rich getting richer and the poor poorer? (Hint: crony capitalism/the Fed). Think of the Cantillion effects.

      You do what I and others do, “Make an assertion assuming it is self-evident, but not providing reasoning behind it.” For example, I believe the middle class and poor are getting hurt by the Fed’s interference into the monetary system. By the Fed’s creation of fiat money and suppression of short term interest rates, the economy has ongoing misallocations of capital which weakens employment and productivity. Also, money gets injected first into the hands of bankers and Wall Street who benefit first while the poor receive the injection of fiat money last after prices have already adjusted while their income stagnates.

      You may disagree but at least there is a basis for disagreement/agreement/argument.

  7. Thanks for the thoughtful response. First, the alternative to fiat money is what? I hope you’re not suggesting return to the gold standard. Nor does the problem lie mainly with the money supply being shortstopped by bankers nor the Fed’s tinkering with interest rates. That’s only been an issue since 2008. We could talk about the lessons of the Great Depression and Obama’s underwhelming fiscal stimulus but again, that’s recent developments.

    The hammering of the middle class began in the 80’s with the Reagan tax cuts and the evisceration of unions and the social safety net. I think the skyrocketing cost of college, limiting the ability of poorer children to move up the ladder, has exacerbated the problem. It is clearly NOT about misallocation of capital weakening employment and productivity: productivity has been steadily increasing for decades as the video showed. Employment was very strong straight through the 90’s. Meanwhile, CEO pay at American firms has risen 725 percent, more than 127 times faster than worker pay over the same time period. Now THAT’S American Exceptionalism.

  8. No, I do not advocate a return to a gold standard. Why not get the govt. out of money printing? Why not let individuals decide what money they will use? Gold, Bitcoins, or whatever the market chooses. The govt. just protects against fraud and breach of contract. Free market (individuals). You could use some stable good like gold that is traded electronically between individuals by iphone. Your coffee costs a nanogain of gold, for example.

    I don’t understand your point about shortstopped money? The Fed tinkering with interest rates–wouldn’t that affect investment decisions. Would you adjust your investments at a 15% near-term interest rate vs. 0000000005%? Why the bubble in internet stocks in 2000 and real estate in 2006 and stocks now?

    Why is CEO pay growing faster than workers?

  9. Tin man: You are concerned about the poor man getting screwed. How can you not be protesting in the streets against the FED? The Fed is destroying the middle class by destroying the dollar through debasement. How does a widow on a fixed income do with inflation of 15% per year? 50% per year?

    See all three episodes of

    All fiat currencies in the HISTORY of MANJOND has always declined to ZERO. NOT one has maintained its initial value much less survived.

    I doubt we will have a dollar in 50 years.

    Read Mises on Money and Credit or
    google: Rothbard whathas the govt. done to our money.

    What did you learn?

    • Some great links being shared here! It’s been interesting to study them. I am left with more questions than when I started. Which is good.

      With regards to inflation/debasement of the currency: It makes a lot of sense that gainers of inflation are those who get to the money first. And vice versa for the losers. Very interesting.

      But if you have money saved up you stand to lose a part of that money through debasement of the currency. This hurts the rich/savers. The best protection against inflation has been to invest in stocks.

      A poor citizen doesn’t get hurt like this. In fact he stands to gain if the government spends this money on investments and welfare in general.

      So it seems to me that inflation through expanded money supply works both for and against the poor as well as the rich.

      Do you believe that the have nots lose more than they gain by the currency debasing?
      (and thus the haves are the winners perhaps since they can protect themselves through investments….?)

      • Dear Rojo:

        As I like to state, who cares about my opinion; what matters is human action or economic law (how the world works)

        Inflation confers no social benefit (actually a negative social benefit as will be mentioned later); instead it redistributes the wealth in favor of the first-comers and at the expense of the laggards in the race. And inflation is, in effect, a race–to see who can get the new money earliest like borrowers on Wall Street who use leverage (private equity). The latecomers–the ones stock with the loss-are often called the “fixed income groups.” People on salaries, pensions, annuities.

        Inflation distorts that keystone of our economy: business calculation. Since prices do not all change uniformly and at the same speed, it becomes difficult for business to separate the lasting from the transitional, and gauge truly the demands of consumers or the cost of their operations. See Buffett’s article on How Inflation Swindles the Equity Investor on this blog–use search box.

        If you want to understand the fiat currency/credit crisis we are currently in AND wish to become a better investor read:

        Rothbard’s, What Has The Government Done To Our Money

        Start with that and if you want to delve further I can recommend another book. If you read critically that book, you will become a much better investor. I will PAY YOU to prove otherwise.

        Let’s talk again after you read the book–about an afternoon’s reading. Hope that helps………

  10. Hi again John,

    The book was a very interesting read. It left me with some questions of which the most important ones (is inflation necessarily bad?) were answered in Warren Buffett’s fantastic article.

    Warren sums it up very well here I think:

    ”Large gains in real capital, invested in modern production facilities, are required to produce large gains in economic well-being. Great labor availability, great consumer wants, and great government promises will lead to nothing but great frustration without continuous creation and employment of expensive new capital assets throughout industry.

    To understand the impact of inflation upon real capital accumulation, a little math is required. Come back for a moment to that 12% return on equity capital. Such earnings are stated after depreciation, which presumably will allow replacement of present productive capacity — if that plant and equipment can be purchased in the future at prices similar to their original cost.

    Let’s assume that about half of earnings are paid out in dividends, leaving 6% of equity capital available to finance future growth. If inflation is low — say, 2% — a large portion of that growth can be real growth in physical output. For under these conditions, 2% more will have to be invested in receivables, inventories, and fixed assets next year just to duplicate this year’s physical output — leaving 4% for investment in assets to produce more physical goods. The 2% finances illusory dollar growth reflecting inflation and the remaining 4% finances real growth. If population growth is 1%, the 4% gain in real output translates into a 3% gain in real per capita net income. That, very roughly, is what used to happen in our economy.

    Now move the inflation rate to 7% and compute what is left for real growth after the financing of the mandatory inflation component. The answer is nothing — if dividend policies and leverage ratios remain unchanged. After half of the 12% earnings are paid out, the same 6% is left, but it is all conscripted to provide the added dollars needed to transact last year’s physical volume of business.”

  11. It’s been very interesting reading about inflation, money and money supply etc. I feel I’ve learned a lot more than I did at University regarding these subject. To their defence, there probably isn’t enough time to delve into inflation, money and money supply as deep as this when there are a lot of other subject we also have to cover within a specific time period. You had another book you recommended?

    Other questions:
    How can we protect ourselves from inflation? How can we win the race? (You have to play the hand you were dealt!)
    As far as I know fractional banking has been alive and kicking for a long time. Would credit not become sparse in a non fractional system? Credit is of course an important way for efficiently allocating capital. On the other hand I’d imagine low or non inflation would help keep rates down.
    Why don’t we see higher inflation today? Are deflationary aspects like cutting spending, reducing debt, redistributing wealth offsetting inflationary policies (printing) at the moment?

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