[Study Notes] “What coronavirus means for the global economy” by Ray Dalio

It’s my takeaways from watching Ray Dalio’s video: https://youtu.be/yrxYhv2O3wU

Q: What should we concern?

A: Income hit and balance sheets. It’s similar to 1930–1945. America is printing money and the borrowing will leave us a lot of debt and monetization. The key is who will pay the bills. Collaboration between entities can happen.

Q: Any patterns?

A: There’re four things that are driving forces of our economy:

1. Productivity: comes from people learning and inventing. It grows slowly but stable, about 1%-2% per year.
2. Short-term debt cycle: 8–10 years.
3. Long term debt cycle: the long-term debt cycle goes on about once every 50 to 75 years is when you begin a new type of money and new type of credit. The Bretton Woods monetary system created a new monetary system in 1945. So they wiped out pretty much the old money or they largely disposed of it and they began a new and that’s the new world order which was the American world order and we see still 70% money and credit that exists are still dollars and what you have traditionally is the breakdown.
4. Politics: Politics is largely how we deal with each other.

Internal politics is how do you deal with the wealth gap & the values gap. Do you have a common mission. Do we have an American dream we can agree on. Gap led to revolutions. Sometimes peaceful revolutions and sometimes disruptive, e.g., Hitler came to power because of that gap.

External politics: between countries. A rising country challenge the existing country. How they deal with each other. It’s a stress test (every 75 years)

Q: In the high-level, do you think we’re heading to a global depression.

A: Yes, but be careful about the word “depression”.

Something happened in the 1930, so just to repeat 1929 to 1932, there was a a fall in the economy and a double-digit unemployment rates and a magnitude a fall in the economy like about 10%. Do I think we’re in that? Yes!

How was that dealt with 1933 what they did is they printed a lot of money and the government came out with the same type of programs that we’re now. yes. same thing: zero interest rates hit zero, same dynamics. Yes

Then there’s the money causes an expansion from that point how long does it take for the stock market to exceed its highs or how long does it take for the economy to exceed its former highs…Yes, we’re in.

There’s a structure to that so yes this is not a recession. This is a breakdown and an operation. I just describing in terms of how it dealt with the production of money and credit and all of that. Yes, we’re in.

Q: how difficulty is the near future? Your previous answer is vigorously. It’s a stronger than people in the market seem to believe. You think it will take longer than 1 year to be back where you’re.

A: I can only describe what we see. We see something like 20 trillion dollars of losses. You do not have money and your business can fail you know this we this all around. There can be failures.

Our hospital can go broke because this is terribly costly for hospitals. They will not fully covered the losses. The hospital will go broke even though we know that they need them so you have to go entity by entity. And then you’ll go through the process of who will pay the losses. It’s also related to whether the virus not come again.

Q: Whether this is bigger than 2008?

A: It will be much worse than 2008. At 2008, there’s only banks. Now there’re all the little business beyond banks. Buy financial assets won’t work.

Q: What organizations/companies have the best prospects of bribing going forward.

A:

1. Food and supplement: meat, potatoes, etc
2. Innovators.

Q: Technology’s impact on market

A: Algorithm is very useful. But pure ML for markets won’t work. You must have the cause-effect understanding.

Q: How individual investors should deal with their investment/401k?

A: Know how to diversify well and in a balanced way. Diversify it in asset classes, in countries, in currencies. 0-sum.

It’s important that do not think that cash is a safe investment. cash is a seductive investment because it doesn’t have as much volatility but it taxes you and your buying power by 2% a year. Do you have a little bit gold, do you have a little bit acid in case this monetary system breaks down and money is redefined.

Diversify well, be humble and be conscious of the dangers of cash.

Q: How capitalism needs to be reformed on the wealth gap?

A: Support education, which will grows the productivity. The gain we can earn is more than education expense.