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Dalio

Posted: Tue Mar 14, 2023 3:53 pm
by vnatale
Dalio's response could definitely be cited as partial support for the Permanent Portfolio.

Vinny


Q:If technology is deflationary and wants to bring prices of everything lower forever, how does that work over time with our current debt based money system that requires prices to rise forever. Who are the winners and losers if we don't move to a money system that can allow for deflation?

A:While most people have strong temptations to answer questions even when they don't have good answers so they give guesses, we are more sensible to recognize that what we don't know is greater than what we do know. I know that whatever success I had in life has been more due to my knowing how to deal with what I don't know than anything I know. You and I agree that great technological advances are deflationary, and these are likely to come at the same time as the debt and will likely create a debt problem that will probably be dealt with a lot of printing of money that will be inflationary. You ask the question of which one of these forces will dominate the other. I don't know. So, to me the question is: if we don't know how those forces will eventually net out, what should we do?

In my opinion we should be well-diversified. Keep in mind what I call the holy grail of investing, which is to have 10 to 15 good, uncoordinated return streams. Simply said: hold a well-balanced portfolio that holds both assets that do well when there are great productivity gains (equities, especially those that produce benefit from new technologies that produce leaps in productivity) and assets that do well when there is the devaluation of money.

Re: Dalio

Posted: Tue Mar 14, 2023 6:59 pm
by Smith1776
I’ve been meaning to catch dalio on an AMA for yeaaarrss now.

I’ve wanted to ask him point blank to what degree he attributes his thinking to Harry Browne. I’ll get ‘em one of these days.

Re: Dalio

Posted: Wed Mar 15, 2023 10:47 am
by glennds
Smith1776 wrote:
Tue Mar 14, 2023 6:59 pm
I’ve been meaning to catch dalio on an AMA for yeaaarrss now.

I’ve wanted to ask him point blank to what degree he attributes his thinking to Harry Browne. I’ll get ‘em one of these days.
He's commented in the past 24 hours on the SVB situation, calling it the canary in the coal mine. He points to it as support for his theories on economic and debt cycles and expects more turbulence. He may be right but he may be wrong. A few days ago Michael Burry came out calling SVB the new Enron moment and look for a WorldCom to follow. Then he backtracked on those comments and changed his mind yesterday.

But to your point, I have always believed there to be a lot of overlap between HB's thinking and Ray Dalio's, but I think they have very different methods so I don't know if Ray would be a big fan of the PP as it is constructed. It would be interesting to know.

I think the bigger question is whether the way financial markets work today are different enough from HB's time that he himself would see deficiencies in the PP. Think about it, interest rates, the US dollar, the financial health of the US Govt, equity valuations, the effect of paper and derivatives on the gold market. These conditions are all very different today than when HB was living.

Re: Dalio

Posted: Wed Mar 15, 2023 3:34 pm
by Smith1776
I've rebalanced within the equity portion of my portfolio internally by buying up more value stocks (which have a high concentration in banks) in light of this news.

By greedy when others are fearful.. rebalancing does just that. O0

Re: Dalio

Posted: Wed Mar 15, 2023 10:30 pm
by ppnewbie

Re: Dalio

Posted: Wed Mar 15, 2023 10:39 pm
by vnatale


Thanks for this.

His concluding paragraph is quite similar to what I put here from him at the start of this topic.

"Please understand that I’m not sure of anything. That’s why I believe that the key to good investing lies in achieving balance of uncorrelated good return streams so that one’s portfolio has little or no bias to go up and down as conditions get better and worse. As I have stated repeatedly, this risk reduction can be done without reducing expected returns. So that’s what I think and what I recommend doing. "

"In my opinion we should be well-diversified. Keep in mind what I call the holy grail of investing, which is to have 10 to 15 good, uncoordinated return streams. Simply said: hold a well-balanced portfolio that holds both assets that do well when there are great productivity gains (equities, especially those that produce benefit from new technologies that produce leaps in productivity) and assets that do well when there is the devaluation of money."