Before his presentation to the University of Texas, Bridgewater’s Ray Dalio gave a far-ranging interview to Bloomberg’s Erik Shatzker which we will have more to say about in the coming days, but the overarching theme was what to expect from markets going forward. He said that while there are “asymmetric” risks to the downside, asset prices will correct to a point where risk premiums return and investors come back, and predicted that equities will return about 4% in the long term. The concern he had was whether the slowdown in markets will have negative repercussions for the economy at a time when central bank policy is becoming less effective.
Repeating comments he has given before, Dalio said that the “next big move I believe will have to be toward quantitative easing, rather than a big tightening,’ he said in the interview. The recent developments have surprised the Fed, because it is not paying enough attention to the long-term debt cycle, adding that “If you look around the world, our risk is not inflation and our risk is not overheating economies”, something all too clear to the nearly 30% of global economies currently blanketed by negative interest rates.
He also had some rather dire comments on China which we wil get back to in a future post, but what caught our attention was the following exchange in which Dalio discussed whether ordinary investors have a chance of making money in the current market when faced with institutional behemoths like Brigewater which as the world’s biggest hedge fund manages over $150 billion.
His honesty was refreshing.
SCHATZKER: Broadly speaking, what’s going to work? And what is working, perhaps more appropriately, today?
DALIO: I think there are two ways that the average investor should think of investing. One is, are you going to create a good strategic asset allocation mix that is a balanced portfolio, that means you will not go to the betting table and bet against active investors like me? Look, I’m scared to be wrong in the markets. It is not easy to win in the market. It is more difficult to win in the markets than to compete in the Olympics.
This post was published at Zero Hedge on 03/03/2016.