Gyroscopic Investing

MG posted this Ray Dalio link in the Hand Holding thread and I thought it should have its own thread. I'm posting it in this section because he's really talking about asset (stock & bond) values and also mentions gold:

https://www.linkedin.com/pulse/remarks- ... -ray-dalio

Of particular interest to PP'ers:

"At the same time, as bonds become a very bad deal and central banks try to push more money into the market and yields go even lower and price risks increase further, savers might decide to go elsewhere. At existing rates of central bank buying—which I believe will be required for the foreseeable future—central banks are going to start to hit the limits of their existing constraints. Those limits were put into place because they originally thought that they were prudent but they are going to have to go buy other things. Right now, a number of the riskier assets look attractive in relationship to bonds and cash, but not cheap in relationship to their risks. If this continues, holding non-financial storeholds of wealth like gold could become more attractive than holding long duration fiat currency flows with negative yields (which is what bonds are), especially if currency volatility picks up."

But read the whole link. It's not long and the ending is unfortunately abrupt. And there's an excellent - if politically untenable - "counterpoint" in the comments section.

Thoughts?


Edited to fix link!

MangoMan wrote:Barrett, your link above is 404.

Thanks pug. Have fixed it in my post as well lest folks lose interest right off the bat.

barrett wrote:Thoughts?

Dalio's "How the Economic Machine Works" isn't quite operationally accurate so he has a bit of some weird ideas on how he thinks the economy works, especially with debt cycles that don't exist.

I think Dalio's implication is we're at the end game of monetary policy and that the tools left available will just destroy capitalism. He didn't outright say that to a bunch of central bankers, of course, but that is the implication. Central bankers are not the sharpest tools in the shed.

I don't know if his "pushing on a string" about 1935+ is accurate or not. What I do know is the 1930's were a decade of sovereign debt defaults (which is massively deflationary to confidence) and in 1937 after years of inflation we imposed austerity in the USA by reigning in fiscal policy. How this interacts with his "pushing on a string" claim I'm unsure of.

But he does completely ignore the role of technology. The old people deflationary pressure and lack of human labor to meet all their needs will just inspire innovation in automation (FinTech, HealthTech, etc.), robotics (warehousing, self-driving trucks, etc.) and energy efficiency (EV's, solar, etc). We're already seeing that occur. Walmart just wiped out half the cashier stands at one of my local stores in favor of self-checkout lanes. That's the legacy of a $15 minimum wage for work that isn't simply worth it. The private sector is doing all it can to hold down inflation and that will be great for purchasing power unless the government intervenes and screws it up (i.e. helicopter money).

How is he determining how long these debt cycles are

Also here's his 300 page essay
http://www.economicprinciples.org/wp-co ... agings.pdf

Wish it were an audio book

boglerdude wrote:How is he determining how long these debt cycles are

Also here's his 300 page essay
http://www.economicprinciples.org/wp-co ... agings.pdf

Wish it were an audio book

I got a hypothesis that either he can't outright come out and say there is a 51.6 year cycle composed of six 8.6 year business cycles or he is looking at indirect effects and sniffing around the black hole in the nether region.