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What Ray Dalio got wrong (and what happens next)
Ray Dalio expected interest rates to have a much different impact on the US economy. But that doesn’t mean the risk of a debt crisis has disappeared.
Ray Dalio’s retirement last year from the hedge fund he founded, Bridgewater Associates, has given the billionaire more time to indulge his other great passion: history.
Dalio has made a study of economic cycles over the last few centuries and credit cycles over the last 100 years, frequently warning that the build-up in debt seen across Western economies will eventually spark a major crisis.
Ray Dalio is the founder of the world’s largest hedge fund, Bridgewater.
But the veteran investor now admits he got something wrong: the stunning resilience of the private sector in the face of one of the fastest interest rate tightening cycles in living memory.
“I failed to fully appreciate how much the improved financial condition of the private sector would soften the impact of the Fed’s tightening because I was too focused on how the last 12 tightening cycles (since 1945, when the new world and currency order began) worked,” Dalio now says.
The cause of Dalio’s mistake is what he now calls the great wealth transfer, which occurred during the pandemic and saw government central banks take on debt to fund stimulus payments, and central banks print money to buy a lot of that debt.
“As a result of this co-ordinated government manoeuvre, the household sector’s balance sheets and income statements are in good shape, while the government’s are in bad shape. (this is not true in Oz)
“In the US and globally, the central governments’ balance sheets and income statements are bad and getting worse because the governments ran and are still running large deficits. They also have big losses on the government bonds they bought to fund the government debts and, with their balance sheets where they are, are losing money where interest rates are.”
Dalio’s diagnosis helps put two key recent events in global markets in context. The first is the downgrade of the US government’s credit rating by Fitch, which was directly related to the ballooning size of its deficit.
The second event is last week’s jump in 10-year US treasury yields from around 4 per cent to 4.2 per cent, after the US government said it would increase the size of a debt sale this week.
Bond yields have since retreated to 4.06 per cent after US jobs numbers came in a bit softer than expected. But as Barclays’ head of economic research, Christian Keller, says, the volatility in US Treasuries during a week when US economic data suggested the Goldilocks soft-landing was still in play, points to the potential for more volatility as investors wrestle with what the long-term health of government finances mean for asset prices.
“Such longer-term fiscal dynamics typically … are an uninspiring, dull topic, lingering in the background, and seemingly do
The economy clearly isn’t reacting in the usual way to the Fed’s tightening; it is much stronger than normal and stronger than expected. Why is that?
https://www.linkedin.com/pulse/whats-happening-economy-great-wealth-transfer-ray-dalio/?published=t
Bidenonomics is just so ridiculous. Joe Biden has trouble remembering what day it is, let alone taking an attempt to construct a "new economic theory", theory being the operative word. Just one sham after another. He should retire and focus on getting his family matters in order beofe the last train leaves the station.
The favourite 5 words at Autralian Board meetings."I am not an economist" Really its the blind leading the "blinder"
https://edition.cnn.com/2023/07/10/opinions/bidenomics-2024-presidential-election-challenge-chen/index.html
https://ground.news/article/puzder-bidenomics-spin-vs-economic-reality
It does seem the only thig you have to do to get into the House of Lords is go to an illegal set of parties and stand in the shadows of the PM, or something like that !!! LOL, of course helps if Boris is the PM...
We are doing it tough in Oz, ... Along with the 3.8 per cent growth in private sector wages, restaurant input costs have soared across the board. Retail prices for cheese are up 16 per cent in the year to June 30, oils and fat prices are up 14 per cent, bread is up 14 per cent, gas prices are up 26 per cent, and even spirits are up 11 per cent.
... there’s only so much people will pay for pasta!
The continued growth in services inflation is another factor causing angst among some economists. Service prices rose 6.3 per cent through the year, the highest rate since 2001, edging past the pace of price rises for goods. Service costs are weighing the MIners down, and they wont go away, or down, only up...as the RBA continues to put interest rates up ...
A big contributor to last month’s inflation result came from the continued rise in rents – up 2.5 per cent through the quarter and 6.7 per cent through the year – sparked by a huge mismatch between supply and demand, which is being exacerbated by the post-pandemic boom in overseas migration. Australia’s government policy on migration has led to intake or more than 400,000 in the year to June 30, and is expected to remain elevated at 315,000 this financial year...who are mostly renters, hence the increases in rent, and hence we have the Reserve Bank trying to correct for inbalances caused by Govt policy LOL
What a mess
the gnome
There is a lot I like about the results, now that I have finally caught up with them.~
Interesting to see the hedge at a $1900 POG. Then to look at the after tax IRR for Doropo at 41%., using $1900 POG The AISC is $1000 approx, and a low strip and met is fine. Hard to not see this project given a green light soon. Prep is the key to success in project start and ramp up, so I am happy to be quietly confident on this. This would make CEY a 610k ozs pa producer with a more comfortable AISC and 2 x 10 plus mine life mines in 2 jurisdictions in 2025.
Interesting to see the increase in tonnage coming from undergoound...at lower grade, but going owner operated is a far better way to go ...
just over 6,000 km2 of mineralised exploration permits, is a sound position to grown organically from.
I like the liquidiy, and would hate them to go and ruin the company on MandA
best
the gnome
Thanks Steve
Perhpas \I will become a day trader, none of this long term BS.
The levels of uncertainty not to mention lying and loss of trust is bewildering.
Here is some of the new entertainment in USA ... which passes for politics, or political comedy or something like that
The “Facebook Files” story Jordan went on to tell revealed a worst-case scenario for modern digital censorship, in which the White House not only strong-armed Facebook to remove content, but did so over exactly the kind of speech the Constitution was designed to protect, political satire. Not only that, but the White House’s demand had clear political motivation. A law professor would have a difficult time scripting an episode more directly offensive to the First Amendment.
https://www.racket.news/p/the-new-facebook-files-show-everything?utm_source=substack&utm_medium=email
|Just hopeless ...
best
the gnome
Interesting notes Torn,
In Oz, there is a lot of pain, which seems to be driven from the mass immigration program the government has been running, This has spiked rental prices, putting renters in pain, and the interest rates which result from the Reserve Bank
response to Inflation (which has house prices and rents as a significant driver, courtesy of govt)...so a very large % of houses are feeling stress which is impacting on purchases, and on the story goes.~
The upward trend in salaries and wages, without anything close to a productivity increase is also creating significant pain
Hard not to see a drop in confidence
Ladies and gentlemen
I have been asked for a long while, to write about my travels and "adventures" in Africa, and more loosely in the Exploration and Mining Industry. A few of you would no doubt know that I have been there !!!
I have always politely refused, saying I have not got time (of course there are other issues!!!). But it looks like I might have time and this is now, "on the agenda"
Ladies and Gentlemen, Indulgence please,
I recall my constant shocks on the journey into Africa and indeed into West Africa. How people who are so poor, yet seem be so happy...its not meant to work like that, and of course it does not really..but then again it does.
How when confronted by me, does a young man (robber, thug, terrorist, speak to a journalist) tell the story that he feels he has been born in a prison, has committed no crime, can see out the windows (into our magnificent world) but there is no door to get out and he lives in poverty. He cannot marry the love of his life as he has not money and no future. He picks up a gun. Asks me,would I do differently. I say no.
Remembering, change when it is too fast for people to understand, is counter productive and can be very destructive and deadly. There is a lovely word called onboarding!
Present democracy has it that politicians need no qualification's so what does one expect and what does one get. And of course Democracy is what we want, or is it, What is it? A t-shirt?
I ask, gently, what is the future if West Africa, Is there hope or despair?
If interested let me know. I am sure some of you have direct experiences. Some have other views
Openings up to you ....
The Gold Gnome
Thanks Mr T
I have noted the waste issue, and I dont want to be labour, as the management and Board could if they wanted to. But it does seem to get everyone, no where. The things to watch
> Operating Mining costs and sub partioning such that we can see the total cost per unit, and how it is ocmomposed, tracked (etc)
> Discovery cost per ounce in the Mining Lease
> Ditto for the Exploration leases
> What the order of magnitude value they are adding in each $1m spent on Exploration
> Diversification efforts (not including Cote Ivoire) Are they doing anything serious, where, when and how much invested
and so on ...
This is not a ra ra effort on my behalf ...
The Gnome
To be fair Cowichan
There is a fair amount of difference between Wahgnion and Konkera (etc)
Wahgnion is a going concern, plant and equipment, good met, good reserve, good exploration upside
Konkera ia about the opposite
Apples and Apples, or Apples and Oranges
NOTE I DO THINK THE CEO CAN DO A LOT MORE TO DRIVE VALUE TO THE CEY SHAREHOLDERS !!!
cheers
the Gnome
And in terms of jurisdictions, spare a thought for the penal colony of Australia, still doing purgatory for the sins of our grandfathers (I still dont know who he was?!), or something like that. We have THE VOICE referendum coming up, which will ultimately will see a TREATY drawn up between the Indigenous Nation (which has never existed mind you, but lets not get bogged down in reality, ideaology is far more exictinig) So if land access is difficult now, it is only going to get a lot more difficult, and we could well end up where we were 50,000 years ago? LOL Mining? Not here!
The politicians have lost there way more than usual such that Mining Majors are now getting more concerned than usual
HP launches High Court challenge to public holiday precedent
David Marin-Guzman
Jul 12, 2023 – 4.35pm
Share
BHP is calling on the High Court to overturn a sweeping precedent requiring bosses to ask staff if they want to work public holidays before rostering them on, warning it will create roster uncertainty for much of the economy.
The mining giant has sought special leave to appeal this year’s full Federal Court ruling that found its labour hire arm, Operation Services, breached the Fair Work Act by requiring 85 miners to work on Christmas Day and Boxing Day...
and so on, and so forth
Thanks goodness for Single Malt
best
the gnome
I think CEY are in a very interesting of not excellent position.
They are in Egypt, they do know how it works and how not, they have systems, people, processes in place which work. They have highly prospective ground, including some excellent high grade ore, which could last for decades.
I would understand that substantive Mining newcomers, would be very apprensive of making a committment which in essence would be of the order of 20-30 years, when there is so much uncertainty and ineptitude on display because of the government. The Govt needs some help, needs to listen, and needs to act to make mining investment a far better propositon to long term investors.
If CEY can hold the line, maintain and expand their position, things could unfold to their advantage.
Like to have a punt in the Sudan, or Ethiopia? A splash in Burkina? Lose your shirt in Zimbabwe, or be nationalised in your favourite South American nation ...
Strange world, things are not all bad for CEY
best
the gnome
Cowichan
The common person is not buying gold at a scale that moves the dial. Never been this way
The commodity traders are in and out like Jack Flash and can trade on a scale that will turn the dial. Why do they trade? To make money and commissions. Been this way for decades
The economist led Central Banks (who influence traders) are meshed into hype and ideaoligies, and basically know not what they do.
The politicians need no education, degrees, industry acumen or industry experience. Just a lot of popularity ... and they set various policis which incluence economies
And the circus creates near chaos and somehow people are amazed
Good luck punters. I just go "long" through the noise
cheers and beers
The Gnome
There are no limits on the amount of fiat money which can be issued, and this has been going on for decades. It is the only way the economies can be managed. Money is an efficient payment mechanism for goods and services and not store of wealth. Why people are continually confused about this is beyond me. The results are a continual depreciation of the value of the exchange mechanism (money) ...
Gold is a store of weath, an exchange mechanism, and has utility because of its exveptional physical and chemical
characteristics
I dont agree witht he Govt approaches on Covid and still don't.
Any approach to a pandemic must be based on rigorous science, not politisation, fear mongering, exploitation of mass hysteria, and the endless talking heads, who know nothing and say less.
I still listen to those with unusual but severe heart conidtions, who have taken early retirement, as they cannot do anything less. A very fit friend in his early 60's spent 9 months in hosital critical care after taking his 2nd vaccine. Invalided out of employment now, as just has not the energy. Another, had severe heart conditions after his Vacc shots, which then saw him rapidly "tranisiton to retirement" from the UK Special Forces ?
More to tell, but really the whole affair is anything but fair and transparent. Why dont we leanr from mistakes of the past?
Now you know?
Good luck
The Gnome
Very interesting trying to "balance" all of the paper stuff (Fiat currencies.) It reeks of fabulous poiliics, and hopeless logic
Get into real assetts as soon as possbile and ont forget gold
Tech stocks led the way again, with Tesla’s winning streak now stretching to 13 consecutive trading days, as it added 3.6 per cent. The gains over that 13-day period now sit at a mind-blowing 41.45 per cent, adding $US300 billion ($443 billion) to the market capitalisation of Elon Musk’s giant?!
What’s happened to Tesla’s stock neatly encapsulates the speculative forces pushing Wall Street higher. There’s been precious little news (?) for the stock to trade on – aside from a promising deal on electric vehicle charges, a nothing-burger visit to China by Musk and Ark Invest’s Cathie Wood talking Tesla up for the umpteenth time (yawn?) – and yet the standard-bearer for tech speculation among retail investors is up 41.5 per cent in a touch over two weeks...and where is the reality, the substance, lotsof smokes and mirrors?!
It’s becoming clear that the combination of cooling inflation, the return of retail investors and professional investors buying tech to make up for their poor performance can keep pushing this rally along.
The latest Bank of America Fund Manager Survey showed on Tuesday night, fund managers are deploying cash but remain underweight stocks and have crowded into two assets: institutional-grade bonds and big tech.
Otherwise, sentiment remains stubbornly low, with particular bearishness around economic growth.
Thre i a tremendous push on wage and salary increases, with NO eidence of any productivity increases. This is where the battle is going to happen, and it wont be a great result...
fingers crossed
the gnome