Why Ray Dalio Hates Money and Bonds, Says Elections Won’t Change His Perspective on the Economy

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Ray Dalio, founder, chairman and co-chief investment officer of the world’s largest hedge fund firm, Bridgewater Associates, has had a tough 2020. Bridgewater’s flagship fund has been deeply negative, although competing hedge funds have managed to outperform the market, during the initial crisis of the coronavirus pandemic.

Still, Dalio has an enviable track record over his four decades in the business, and he’s more provocative than ever. In an interview with Barry Ritholtz, chief investment officer of Ritholtz Wealth Management, he alludes to the difficulties his business is facing. “The pandemic took me by surprise. I thought I didn’t have an advantage over the pandemic, and that was stupid, ”he said.
Dalio and Ritholtz discussed at length the construction of the portfolio. Bonds are too volatile for the low yields they offer – “the one-day price change is greater than the one-year yield,” said Dalio. Cash is not an alternative either. “It doesn’t have volatility, but what it does is – like now it’s like a negative two percent a year,” he said, referring to the inflation that is eroding his value. “It is therefore this non-volatile hidden tax at a rate of 2% per year. You look at the combined effect of one or two or three percent a year on your life, and it’s huge. ” “Balance is the most important thing. So you don’t want money, I think. I don’t think you want bonds, and I think you want alternative wealth stores, but diversified wealth, ”he said. By diversification, he means not only different stocks and sectors, but also currency diversification and country diversification.
Or

GCZ20

,
Dalio said it’s not a good performing asset, but it is an effective diversifier. Real estate, on the other hand, is not a good store of wealth because it is not liquid. Cryptocurrencies like bitcoin

BTCUSD

suffer from three problems – they are difficult to deal with, they are very volatile and they risk being banned by governments.
Dalio said next week’s election likely won’t cause him to rethink his view of the economy. “If I were to take both sides, we’ll have big deficits and monetization. Both sides will have an aggressive Chinese policy, I think. But a party will be more capitalist and let’s say favor the asset holders. One will be more to the left and will promote redistribution, ”he said.
The biggest problem, said Dalio, is whether the country can be reunited. The capitalists “understand productivity and so on, but they don’t know how to divide the pie properly. And the socialists or those who are more left have a problem producing so much increase in productivity.

The buzz
The COVID-19 situation in Europe is worsening, with Germany bearing the brunt of closing its restaurants for a month, as French President Emmanuel Macron is due to deliver an overnight speech describing new restrictions. In the United States, hospitalizations increased by at least 10% last week in 32 different states, according to a Bloomberg News analysis.
Six days before the election, former Vice President Joe Biden has a 66% chance of beating President Donald Trump, according to London betting markets.
Microsoft

MSFT

was headlining the companies that announced Tuesday night, the software giant reporting better-than-expected earnings and revenue in the first quarter of the fiscal year. Like many of its competitors, Microsoft was driven by demand for its cloud service offering.

General Electric Conglomerate

GIVE

reported better than expected third quarter profit and revenue. Boeing aircraft manufacturer

BA

and Mastercard credit card processor

MA

Also included in Wednesday’s earnings releases, along with Ford Motor Co.

FB

and Visa credit card processor

V

report after closing.
Facebook CEOs

FB

,
Twitter

TWTR

,
and Google’s proprietary Alphabet

GOOG

will face a Senate hearing on the law that protects their social media sites from being held accountable for content posted by their users.
David Einhorn, founder of Greenlight Capital, says the market peaked on September 2 and the stock bubble is already bursting.
The steps

In short, ugly. European stocks fell, with the UK FTSE 100

UKX

hitting its lowest level since mid-April.
Futures on the Dow Jones Industrial Average

YM00

fell almost 500 points.
The dollar

DXY

increased, and the yield on the 10-year Treasury

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slipped to 0.76%.
Table

Deutsche Bank strategists say that the idea that there is a trade-off between policymakers between low unemployment and low transmission rates doesn’t quite match what happened during the second European wave of COVID-19. The countries already hardest hit were more closed. “It appears that some countries are simply struggling more than others to contain the virus for reasons that seem more structural than just the degree of openness. A little like [non-accelerating inflation rates of unemployment] structurally vary from economy to economy, some countries seem in a structural position to maintain flatter curves with fewer economic restrictions than others, ”they say. Oddly enough, the mobility of the euro area, while declining due to the second wave, has always been higher than in the United States until Sunday, they add.
Random readings
Los Angeles Dodgers third baseman Justin Turner was pulled from what turned out to be the final game of the World Series after the team found out he had contracted COVID-19.
Trump’s campaign site was briefly hacked by cryptocurrency crooks.
Fossils suggest that a bird with a wingspan of 21 feet could fly.
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