雷·达里奥论经济帝国的兴衰
https://www.investopedia.com/the-express-podcast-episode-70-5216225
Caleb Silver 的《投资百科快报》第 69 集（2022 年 1 月 17 日）
作者：CALEB SILVER 2022 年 9 月 27 日
评论人 CIERRA MURRY
欢迎登机，外面越来越滑了。 通货膨胀之风继续给市场带来寒意，消费者物价年率跃升至 7%，为 1982 年以来的最高水平。我们消费者花钱的每一种主要商品都出现了价格飙升。 12 月份零售额下降近 2%，远超预期。 我们是否在 11 月份将所有支出都提前了？ 是 Omicron 让我们远离商场还是因为价格太高？ 可能两者都有。
美国家庭拥有 162.7 万亿美元的资产。 这是历史新高。 其中60%以上是金融资产和养老基金。 其中百分之二十五是在我们的家中，对于那些拥有它们的人来说。 总负债仅为 18 万亿美元，其中大部分是学生贷款和抵押贷款。 2021 年，家庭净资产也创下历史新高，每户超过 15 万美元。 我们知道这个数字分布并不均匀，但我们希望看到这个数字继续增长。 而家庭负债率（即债务支付占可支配收入的百分比）仅为9%。 这接近多年低点。
认识雷·达里奥
雷·达里奥 (Ray Dalio) 是全球宏观投资公司、全球最大对冲基金桥水基金 (Bridgewater Associates) 的创始人、联席首席投资官兼联席董事长。 达利奥先生最初于 1975 年在纽约市的一套两居室公寓里创立了桥水基金。 如今，他拥有超过 45 年的全球宏观投资者经验。 雷是《纽约时报》畅销书《原则：生活与工作》一书的作者。 他还是一位活跃的慈善家，除了参与“捐赠誓言”之外，还对海洋学研究和保护特别感兴趣。
有宏观投资者，也有超宏观投资者，他们花了几十年的时间研究几个世纪以来的经济和市场周期。 他们能够将学到的知识转化为生活原则和精明的投资决策。 雷·达里奥（Ray Dalio）可以说是宏观投资的大祭司。 他建立了长达六十年的传奇职业生涯，期间他将自己的公司桥水资本 (Bridgewater Capital) 从他公寓里的一家小型投资店发展成为历史上最大、最成功的对冲基金之一。 他还写过畅销书，根据这些书创作了动画系列，并成为一名热心慈善家，致力于弥补美国的教育差距和海洋保护等事业。 我们非常高兴地欢迎他登上快车。 欢迎。
射线：
“谢谢你。我很高兴来到这里。”
迦勒：
“多年来，你一直是 Investopedia 的好朋友，我非常感激，而且你最近一直很忙。刚刚出版了你的最新书《应对不断变化的世界秩序的原则》，这是你的最新著作。 主要系列。是什么让你想写这个系列？是什么让你这么做的？”
射线：
“嗯，这是我正在做的一项研究，因为现在正在发生的事情是我以前从未发生过的。你知道，在我 50 多年的投资生涯中，我了解到那些让我惊讶的事情 大多数事情在我一生中没有发生过，但以前发生过。这就是为什么我研究了 2008 年发生的大萧条。嗯，今天发生的三件事是大量的债务创造， 货币化，并在某种程度上通过金融体系和我们的经济。第二个是左翼和右翼之间的内部冲突、政治冲突的数量，这肯定会对市场和税收政策等产生影响。 ……但这对我们的社会和我们的未来也有很大的影响。然后第三个是一个大国中国的崛起，挑战现有的大国和现有的世界秩序，从1945年开始。所以每个 自 1930 年至 45 年间以来，其中从未发生过这种程度的情况。 在历史上，你知道，这样的事情发生过很多次。 因此，当我思考巨大的货币化、政治冲突和中国崛起的影响时，我需要进行研究。 我需要学习足够的时间，而这些事情是循环往复的，你知道吗？ 没有哪个王朝、帝国或世界秩序能够永远持续下去。”
迦勒：
“需要明确的是，你对此感到好奇，因为你本质上是一个好奇的人，而且你是历史的学生。你也是一个投资者，需要了解这些事情才能让钱发挥作用。所以，我 我喜欢你出于所有正确的理由做这些事情的事实。让我们来谈谈一些重要的力量，你提到了其中的五个。你提到了其中的一些。
我想稍后再回到荷兰。 稍后再讨论荷兰语，因为它是如此令人着迷且重要。 但我将列出五种主要力量，然后我们将真正讨论最后两种力量，但我希望您能带领我们了解前三种力量。 第一，财务状况的好坏循环。 和我们简单谈谈这如何在书中建立某种对话。”
射线：
“你知道，这很简单。如果你的支出超过收入，并且你在借贷，你就会产生债务，而债务是另一个人的金融资产。如果你大规模这样做，那就是 用真实的美元偿还——换句话说，硬通货——当你这样做时，它是刺激的，当你偿还时，它是令人沮丧的。你可以在那里获得购买力，但当你偿还时，它会令人沮丧。所以我们看到了一个循环 “债务相对于收入、相对于 GDP 而言会上升。然后你需要越来越低的偿债成本。”
“因此，例如，自 1980 年以来，每一次利率的周期性高峰和周期性低谷都低于之前的利率，直到我们实现零利率。然后，每一次量化宽松的规模都比之前的更大，并且推动了经济增长。” 现金和债券的实际回报率降至显着的负值，这使得它们缺乏吸引力，但借贷起来却很困难。这创造了大量现金，然后流通并创造对金融资产的需求，并且通货膨胀具有滞后性 .所以这个循环，如果你看到这个循环一遍又一遍地发生，我们也许会讨论它会导致什么，那就是动态。
“所以我们现在看到这种情况发生在所有事情上。你想借现金或使用现金，或者每个人都有足够的购买力，因为他们给了我们这么多钱。但这会贬值货币的价值。这对于拥有它来说并不好 金融债务资产，因此每个人都进入股票，这种运动随后创造了一个循环，在这个循环中，个人开始意识到，当他们持有这些现金和债券时，他们正在因通货膨胀而亏损，并且他们认为现金是安全的。 大多数投资者认为现金是安全的地方，大多数投资者通过拥有多少钱来判断自己有多富有。”
投资者继续将资金投入美国股市，由于对经济长期增长的担忧，美元持续下跌，资金正在从现金中流出。
“他们不以通胀调整后的角度看待一切，但当你发生这种转变时，就像我们现在正在发生这种转变一样，他们开始意识到，随着通胀上升，持有这些资产并不有吸引力，然后他们开始 出售更多。因此，当你出现巨额赤字时，这意味着你必须出售大量债务，政府就会这样做，而持有者会出售你的债券。存在严重的供需不平衡，导致大量出售债券 债务（新债务和不想再持有的旧债务）......这意味着央行处于困境，因为无论是利率，如果他们不提供， 弥补供需缺口——利率会大幅上升并导致经济停摆——或者他们必须弥补缺口并进入那里并进行更多印钞。这种循环以各种形式一再发生 千百年来。”
迦勒：
“是的，但这听起来与我们现在正在经历的非常非常相似。”
射线：
“完全正确。因为你看到心理发生了变化。人们不再谈论通货膨胀。美联储说的是暂时的通货膨胀。创造更多的信贷资金并将其提供给人们消费，这并不是暂时的。 换句话说，如果货币和信贷购买力的增长远远超过生产的商品数量，你就会得到这个。”
“这就是我们现在所拥有的动力，你开始在信贷市场和销售中看到这一点，这创造了动力。所以我们正处于周期中的一个点，现在你正在 央行或美联储将开始紧缩。而紧缩的幅度将非常小，无法弥补通货膨胀。不够。如果你知道，四次加息，它不会让你接近 利率——补偿通货膨胀的利率。但从某种意义上说，保持平衡是必要的，因为我们需要非常低的实际利率来应对债务失衡。
Ray Dalio on the Rise and Fall of Economic Empires
https://www.investopedia.com/the-express-podcast-episode-70-5216225
Episode 69 of The Investopedia Express with Caleb Silver (Jan. 17, 2022)
Welcome aboard, and it's getting slippery out there. The winds of inflation continue to blow an icy chill across the markets as consumer prices jumped to 7% on an annualized basis, the highest level since 1982. The price spikes have been across every key commodity where we consumers spend our money. Retail sales for December dropped almost 2%, much more than forecast. Did we pull all of that spending forward in November? Did Omicron keep us from the mall or was it high prices? Probably both.
United States households are sitting on $162.7 trillion. That's an all-time high. More than 60% of that is in financial assets and pension funds. Twenty-five percent of that is in our homes, for those that own them. Total liabilities are only $18 trillion, and most of that is in student loans and mortgages. Household net worth also topped a record high in 2021, hitting more than $150,000 per household. We know that's not evenly distributed, but we like to see this number continuing to grow. And the household debt ratio, which is the percentage of debt payments as a percent of disposable income, is only 9%. That's near multi-year lows.
Meet Ray Dalio
Ray Dalio is the founder, co-chief investment officer, and co-chairman of Bridgewater Associates, a global macro investment firm and the world’s largest hedge fund. Mr. Dalio originally started Bridgewater in 1975 out of a two bedroom apartment in New York City. Today, he has over 45 years of experience as a global macro investor. Ray is the author of the #1 New York Times Bestseller Principles: Life and Work. He is also an active philanthropist with a particular interest in oceanographic research and conservation, in addition to participating in The Giving Pledge.
There are macro investors, and then there are ultra-macro investors who have spent decades studying economic and market cycles going back for centuries. And they're able to process their learnings into principles to live by and into savvy investing decisions. Ray Dalio is arguably the high priest of macro investing. He's built a legendary career spanning six decades in which he grew his firm, Bridgewater Capital, from a small investment shop in his apartment into one of the largest and most successful hedge funds in history. He's also written bestselling books, created an animated series based on those books, and become a devoted philanthropist to causes including repairing the educational gaps in America and ocean conservation. And we are so delighted to welcome him aboard the Express. Welcome.
Ray:
"Thank you. I'm delighted to be here."
Caleb:
"You've been such a good friend to Investopedia over the years, and I so appreciate that, and you've been staying very busy lately. Just released your latest book, Principles for Dealing with a Changing World Order, the latest in your Principal series. What made you want to write this one? What brought you to it?"
Ray:
"Well, it was a research study that I was doing because there are things that are happening now that never happened in my lifetime before. And I learned, you know, over my over 50 years of investing, that the things that surprised me the most were things that didn't happen to me, in my lifetime, but happened before. That's why I studied the Great Depression, which happened in 2008. Well, the three things that are happening today are an enormous amount of debt creation that is being monetized and is passing through the financial system and our economy, in a way. The second is the amount of internal conflict, political conflict, between the left and the right, which certainly has bearing on the markets and tax policies and all of that. But it also has a lot of bearing on our society and our future. And then the third was the rise of a great power, China, to challenge the existing great power and the existing world order, which began in 1945. And so each of them did not happen to these degrees since the 1930 to '45 period. And in history, you know, it happened many times. So I needed to study as I think about the effects of great monetization and the political conflict and the rise of China. I needed to study enough time, and these things go in cycles, you know? No dynasty or empire or world order has lasted forever."
Caleb:
"To be clear, you're curious about this because you're a curious person by nature and you're a student of history. You're also an investor who needs to understand these things to put money to work. So, I love the fact that you're doing these things for all the right reasons. Let's talk about some of the big forces, you named five of them. You mentioned a few of them off the top. I want to come back to Holland in a little bit. Talk about the Dutch later because it's so fascinating and important. But the big five forces, I'm going to list them, and then we're going to talk really about the last two, but I'd love you to take us through the first three. The first, the cycle of good and bad finances. Talk to us about that briefly about how that sets up sort of the dialog in the book."
Ray:
"You know, it's very simple. If you're spending more than you're earning and you're borrowing, you're producing debt, and debt is another person's financial assets. And if you do that in a big way and that's paid back with real dollars—in other words, hard dollars—it's stimulative when you do it and it's depressing when you pay back. You can get buying power out there, but then when you pay back it's depressing. So we see a cycle in which debt rises relative to incomes, relative to GDP. And then you need lower and lower debt service costs."
"So, since 1980, for example, every cyclical peak and cyclical trough in interest rates was lower than the one before it until we had zero interest rates. And then every quantitative easing has been larger than the one before it, and it has pushed the returns on cash and bonds down to significantly negative real rates that makes them unattractive to own and terrific to borrow with. And that has created a lot of cash that then passes through and creates that demand for financial assets, and with a lag in inflation. So that cycle, and if you watch that cycle happen over and over, and we'll maybe we'll talk about where that leads, that is that dynamic.
"So we are seeing it happen right now in everything. You want to borrow cash or use cash, or everybody's got enough buying power because they've given us all this money. But it depreciates the value of money. It's not good for owning financial debt assets, and so everybody goes into stocks, and that movement then creates a cycle in which individuals then start to realize that they're losing money to inflation when they're holding these cash and bonds and they think that cash is safe. Most investors think that cash is the safe place to be, and most investors judge how rich they are by how much money they have."
Investors continue to put money to work in U.S. equity markets, and money is flowing out of cash as the U.S. dollar continues to drop amid concerns about the long term growth of the economy.
"They look at everything not in inflation-adjusted terms, but when you have that shift, like we're having that shift now, then they begin to realize as inflation picks up, that holding those assets is not attractive and then they start to sell more. So, when you run large deficits and it means you have to sell a lot of debt, the government does, and you get selling by those who are holders. There's a big supply-demand imbalance that says a lot of selling of debt (that which is new debt and that which is old that doesn't want to be held anymore)... and that means that the central bank is put in a position that's difficult because either rates, if they don't provide, make up that supply-demand gap—rates would rise a lot and shut things down—or they have to make up the gap and come in there and do more printing of money. And that cycle has happened over and over again in its various forms for thousands of years."
Caleb:
"Yeah, but it sounds very, very similar to what, kind of, we're experiencing right about now."
Ray:
"Exactly right. Because you're seeing that there's a change in psychology. People didn't talk about inflation. The Fed said temporary inflation. There's nothing temporary about creating a lot more money in credit and giving it to people to get spent. If the money and credit buying power, in other words, is increased a lot more than the quantity of goods produced, you're going to get this."
"And so that's the dynamic that we have now, and you're starting to see that in the credit markets and the selling of that, and that creates the dynamic. So we're at a point in the cycle where now you're going to get the beginning of central bank or the Fed tightening. And the amounts of that tightening will be very small to compensate for inflation. Inadequate. If you took, you know, four rate rises, it's not going to get you anywhere near the interest rate—a rate that would compensate for inflation. But it's necessary in a sense to keep the balance OK because we need very low real interest rates in order to deal with the debt imbalance. And that's the dynamic. So as you extrapolate that forward, I would not have had the same level of understanding if I didn't see that cycle happen over and over again."
Caleb:
"Let's get to two and three: the cycle of internal order and disorder and the cycle of external order and disorder. They are similar but different. I assume by internal disorder, and having read what you wrote, we're talking about income inequality. We're talking about a polarization of society that is really rooted in money."
Ray:
Right. Through history, when these three things come together, it's a bad combination because there's a financial problem. And then the nature of the cycle of capitalism is a fabulous way to make money. And at the same time, it creates wealth gaps. So as part of that cycle, it makes money unequally and it creates opportunity gaps too because rich people have more opportunity to give their kids better educations and other things, and it creates resentments. So it lies beneath the surface. It's not a problem when there's a boom. But when you get into a situation where there's difficult times financially and so on, then that begins to produce a conflict of the same kind of conflict that we're seeing now."
"You could see, for example, in the 1800s, going from 1850 to 1900, that capitalism unleashed the talents to produce the Industrial Revolutions. And with that, the creation of great productivity. But with that, it also created what was called the Gilded Age. And in the United States, we called it the Gilded Age, it was called the Belle Epoque in Europe—the big, big wealth gaps that became quite flashy. And then that became the robber baron era in which the capitalists were held in disdain. And then you had the Panic of 1907. And then if I take from 1910 to 1945, almost all wealth was destroyed. And you had in the world, really, a very big conflict between taking the wealth (i.e, communism and fascism), and you had a battle that ended a period that really almost wiped out all wealth."
"In the book, I show that. There's a chapter on investing, and it shows that if you started in 1900, what that picture would have been like. And to see these things in cycles, you know, makes that clear. The classic signs of it is that populism of the left and populism of the right develops, and a populist is a person who is going to fight for that side. They're no longer a person that's going to compromise. The system of democracy is based on compromising to work out something that works out for most people. This is now a win-at-all-costs type of environment."
"For example, it's entirely possible that in the 2024 election neither side will accept losing it. I mean, think about that. So, that is a level of conflict right now that both sides are dealing with. And then the middle is lost because the mode is 'you have to pick a side.' History has shown us this in the French Revolution, the Russian Revolution, the Chinese revolution, the Cuban Revolution. You have to get on one of those sides and fight for that side. You can't be in the middle and that raises the conflict. That means that is a threat. So, you see in the 1930 to '45 period, democracies chose to be autocracies because this conflict got so bad that, you know, the leader, the populations, the actual parliament said we need stronger controls. So that is the type of situation that history has shown. And there's a dot plot here, you know? January 6 is just a dot. So you can watch those things and seeing it over and over again, it's almost like watching the movie happen for, you know, the 20th time."
Caleb:
"Right. But as Mark Twain would say, 'history maybe doesn't repeat itself, but it does rhyme.' Let's talk about the external order and disorder you're talking about. How does that influence things?"
Ray:
"Always through history, the rise of the great power to challenge an existing great power and their rules. When we say a world order, it's the way the world operates. So, for example, in 1945, the United States was the big winner of the war. It was an economic winner as well as a military winner because we accumulated 80% of the world's gold. And that was, at the time, gold was the world's money. So we had 80% of the world's gold, we had dominant military, and we had a dominant economy, nearly half the world's economy. And so that's the reason that the United Nations is in New York and the World Bank and IMF are in Washington, D.C. We had an American world order."
"And then history has shown that, as there is competition in economics, that others rise and gain more wealth and power. And as a result of that, they become comparable powers. I measured powers in eight different types of powers in the book, so I just wanted to measure them. And so you could see them objectively changing, and you could see how China's power in all of its types of power are rising significantly relative to the United States to make it a comparable power. And because China has a population that's more than four times the United States'. If it raises per capita income to half the United States, it will be twice the size, and economically twice the size means the power to be in all respects, militarily, technology-wise, and so on."
"So through history, there are five types of conflicts between countries, and we can call them conflicts, competitions, or wars. But there's a trade war, there's a technology war, there's a geopolitical influence war, there's a capital war, and there's a military war, or could be a military war. And so we are seeing all of those. We certainly are in the first four types of wars. And then there's a risk of the other war, as there is a fight. And so you're seeing it partially there and you're seeing China allied with Russia in terms of an alliance. And that's also historical because to have other countries ally against the dominant powers is normal in history and you're seeing that dynamic happen."
"That's the dot plot, so everything I've said is accurate and measurable. That doesn't mean it's necessarily destined, but we have to watch the cause-effect relationship and the dot plot so we could talk about what that might be. That's number three. Number four that you're referring to, because I didn't know about number four until I studied history, but number four is acts of nature in the form of these occasionally big acts of nature, such as pandemics, droughts, and floods."
Caleb:
"Yeah, that's exactly where I wanted to go, because we have been victims, arguably, of acts of nature in the form of COVID-19, in the form of a global pandemic. Though you could say that humans moving into animal territory maybe made that happen. And then climate change, which is also, a lot of it, is manmade. You can't argue with the science here. So, let's talk about acts of nature and how these play in."
Ray:
"Well, it was interesting to me because I didn't know about them. I didn't really think about them. But what you see is that through history that has killed more people and toppled more societies than the first three. When it happens at the same time as the first three, you know, it's a lot of bad stuff happening and having bad effects. So it's not something that I've been able to see in patterns. In other words, the once-in-100-year flood, the once-in-100-year hurricane. But I have done studying with climate specialists and there are increasing risks of this."
"For example, sea level rising, combined with the risk of the one-in-100 year hurricane or something like that, could be a significant risk. I'm not predicting that, but I am saying that it's not like they're going down. The risks are not going down. I'm sorry for all those risks, and I know it sounds really terribly gloomy what I'm seeing. I have just learned in history that I must be as objective as possible, not be colored by good or bad, and those things are certainly worrying.
"But the fifth thing is optimistic. I mean, meaning number five, and having proven more powerful than the other four, is man's ability to adapt and develop technologies and so on. You'll see in the book, you have seen in the book, that we have all these charts that show each of the things I've just mentioned. And then there's charts that I show, which are life expectancy and per capita income. And when you see those others in the chart, there are maybe five or 10 year plunges, but hardly anything and they hardly show up in the charts relative to the force of improvement. And we have a lot of ability with the technologies, man's ability to weather artificial intelligence to raise his capacities to do other things, and there's adaptability."
"So I think when I look at all of those, I think if we worry enough, we don't have to worry. And if we don't worry, we need to worry. If we worry enough about the internal conflicts and the external conflicts and so on, and we work well together, the population has more resources in total than it has ever had to be able to create a better set of circumstances if we deal with that well. And history has not been encouraging in that regard, but that has that ability. That adaptability is a very powerful force. So even as an investor like, I think, 'well, what are the assets that are going to be safe?' But I also think, 'how do I make sure I'm on the cutting edge of those sort of new technologies?' Because I really do believe that over the long run is the greatest force."
Caleb:
"Well you apologize earlier for sounding a little bit terrifying, but you're an optimist because you are an investor, you're a realist also because you are an investor. So the macro view and your forces and your history lessons here that you've combined and and put together in this great book, it's a little terrifying and maybe a little paralyzing for individual investors who want to put money to work to build wealth. And this is this conversation you have and I've had for years, so they can afford their time. We're not talking about the great retirement on the beach. This is the whole point. At the same time, this is what you do. You're an investor. You've been investing through these cycles for 60 years. How would you invest now if you have at least 10 years in the market, right?"
Ray:
"I've been very lucky to have gone from having no money to then having a lot of money over that period, in the right order. So I've experience them all, and I remember that the first thing is I started to count how many weeks, months, and then years did I have in savings so that if nothing came in that I could take care of my family and that I would be good, you know, to secure the worst case scenario. If you want to know why I've been so successful, mostly, it's not been because of what I know as much as it's because I know to handle what I don't know and to make sure that I take care of the bottom and that there's no whatever the worst case scenarios are."
"And I found that the best way to do that is to build that kind of a portfolio that I'm OK and that my family will be OK. And I took that whatever that number was, and I cut it in half assuming that I could lose half to inflation or the market. And the answer that I found, most importantly, was excellent diversification. If you can create excellent diversification of roughly equally balanced things, then you can significantly, meaning up to 80%, reduce your risk without reducing your return. The power of understanding how to do that, that's why I came up with this all weather portfolio, which is essentially a technique which is risk parity—it's been called when it's been adopted by others, but to be able to balance investments so that that can happen."
"And so I would say, knowing that what you don't know is greater than what you do know and the markets discount things, that the starting point should be that risk balancing and that the worst asset class, the least safe asset class, is cash, particularly now. So stay out of cash and now, with negative real returns, stay out of minimized bonds. Think about maybe whether inflation-indexed bonds are better than nominal bonds. But anyway, creating a well-diversified portfolio: Now that well-diversified portfolio doesn't mean just asset classes. It means countries, it means currencies to achieve that kind of balance, then you take deviations from that based on your tactical bets and do that in a highly diversified way too. That's what has worked for me, and I want to pass along."
Caleb:
"Well, folks, we're going to link to Ray's description of the All-Weather portfolio. We have it on our YouTube channel. We have it on Investopedia.com too. It's one of the most popular videos we have because years ago, Ray was good enough to stop by the office and walk us through it on the whiteboard. So fascinating. And Ray, you know, you've been doing this investing for quite a long time. I know you bought your first stock when you were just 12 years old. You remember what that was and what brought you to buy that stock, and did you make money on it?"
Ray:
"Yeah, it's funny. I was caddying and doing odd jobs like mowing lawns and so on at the time, and I would take my little money and what happened at the time, it was the time in the 60s where the stock market was really hot, so everybody was talking about it. And I opened a brokerage account and the first stock I bought was the only stock that I heard of that was selling for less than $5 dollars a share. And I figured my only investment criteria was I want less than $5 dollars this year. Well, that meant I could buy more shares. So if it went up, I would make more money. That was my dumb investment naive thing."
Caleb:
"You didn't have fractional shares at the time."
Ray:
"Right. And then and of course, it's a wrong concept, but the only company I'd ever heard of that was selling less than $5 per share... North East Airlines was the name of the company and it was about to go bankrupt. But another company acquired it and it tripled. And I thought, 'hey, this is easy. I like this.' And then, of course, I learned this game is anything but easy. But that was my first one, and it hooked me. I loved the game, so it was like, for me, playing a game, video game and so on, but with money. And if I made money, that was great. So I was hooked."
Caleb:
"Right? Look where you are now. That turned out to be a pretty good decision. I want to ask who's been your greatest investing influence throughout your career? Who is that person or persons who just got you at the right moment with the right advice and just open the world up for you in this way?"
Ray:
"I would say Paul Volcker in terms of macroeconomics and going through it. I watched the macroeconomics, you know, from August 15, 1971, the dollar's devaluation. President Nixon gets on the television. Paul Volcker was undersecretary of the Treasury at the time, and the United States defaulted on its obligation to turn the cash into gold. And I clerked on the floor of the stock exchange, and that was a big learning experience. Because the stock market went up a lot, I thought it would go down a lot. But Paul Volcker... and by the way, that was the first time I realized I needed to study what happened in history. The same thing that happened with Nixon getting on the television and severing the link with gold and then printing a lot of money was the exact same thing that on March 5, 1933, Roosevelt did. And that was mainly the thing that I needed to understand what happened in our history. But Paul Volcker is a man who I've admired and became a good friend as he went through that. I would say he had an influence on me."
Caleb:
"One of our tallest Fed chairman and one of our toughest had to deal with some real inflation. People think we got inflation now. Paul Volcker was dealing with a bear of an inflation problem back when he was the Fed chair. Ray, you know, we're a website built on our investing terms. That's how we were created. I know you've got so many in your book, but I know there's probably one that really speaks to your heart. What's your favorite investing term and why?"
When you look around the world, 7% inflation in the U.S., while pretty high, is nothing compared to Venezuela, where inflation is over 100%.12Argentina at over 51% and Turkey at 36%.34 The lowest inflation rate out there, Japan, is at 0.6%.5
Ray:
"Diversify! It's a way that you can substantially reduce your risks without reducing your expected returns if you know how to do that. Because every risk equals a risk of ruin. Now, just to give you an idea, of course, let's say you have a well-used standard deviation as a measure of risk. It's not the best measure of risk, but if you have a 15% standard deviation—stock market has, you know, 18% standard deviation, something like that, it varies—that means that on a two standard deviation event, which you will have, that you will lose over 30–40% of your money. Now there's an amount that you cannot lose, like around 30 or 40%, and successfully recover. Think about it this way. If you lose half your money, it takes 50% loss, takes 100% return to make up. You lose more than that, and you know, increasingly you don't have the capacity to make it up. So, you have to look at the risk of ruin. So how do you reduce your risk without reducing your return? And if you know how to do it well, then you can achieve that."
Caleb:
"That's a beautiful term. I love the way you explain it and you're right, and that's what your all-weather portfolio is all about. And that's kind of the way you've been building your career. Ray Dalio, the chairman of Bridgewater Associates, the chief investment officer, also the author of a great new book, The Principles for Dealing with a Changing World Order. You're an educator, you're a giver. Ray. we are so delighted to have you on the express. Thanks for spending time with us and for being such a good friend to Investopedia."
Ray:
"Thank you. You're a good friend to me, too, and I so I appreciate it, and I so admire what you're doing in educating so many people. It's just so important. Thank you."
Term of the Week: Risk Weighted Averages
It's terminology time. Time for us to get smart with the investing term we need to know this week. This week's term comes to us from Christina in New York City. What's up, neighbor? Christina suggests risk-weighted average and we like that term. But first, we have to understand what risk-weighted assets are.
Risk weighted assets, according to Investopedia, are used to determine the minimum amount of capital that must be held by banks and other financial institutions in order to reduce the risk of insolvency. The capital requirement is based on a risk assessment for each type of bank asset. For example, a loan that is secured by a letter of credit is considered to be riskier and thus requires more capital than a mortgage loan that is secured with collateral. Basel III is the banking set of regulations sets the guidelines around risk-weighted assets that banks need to hold. And in the U.S. we have the Dodd-Frank Act, which also specifies how much capital U.S. banks need.
So how do you calculate average risk? While we do that by multiplying the exposure amount by the relevant risk weight for the type of loan or asset, a bank repeats this calculation for all of its loans and assets and then add them together to calculate total risk-weighted assets. Well, according to the most recent stress tests on U.S. banks conducted by the Federal Reserve back in June, banks' risk-weighted averages are in pretty good shape. They have sufficient assets to back their exposure. But there's a growing drumbeat inside the Fed and around global banking for more climate-based stress tests. How much exposure do global banks have to climate disasters? That's going to be a new and intense focus of central banks around the world. And if you want to learn more about it, listen to episode one of the Green Investor podcast powered by Investopedia, wherever you get your pod on. We get into that topic a lot. Good suggestion, Christina.
