by Trader Mark, Fund My Mutual Fund
It is ironic how some smaller hedge fund managers get a lot of publicity while a few of the largest rarely surface in the media. The fund manager of the largest hedge fund - and a person the casual investor probably has never heard - Ray Dalio made a rare appearance on TV today. Apparently there are some articles running around the internet speaking of such bizarre practices leading to a 30% annual turnover at his firm. That was enough to smoke him out... it is a quite lengthy and interesting interview; and frankly, anyone managing $60B is worth listening to.
24 minute interview
Some quick hits via CNBC (sorry about the caps)
Dalio on Being an Independent Thinker:
IN ORDER TO MAKE MONEY IN THE MARKET YOU HAVE TO BE AN INDEPENDENT THINKER. AND I THINK ALSO CREATIVE, YOU HAVE TO BE WILLING TO MAKE MISTAKES. AND SO THE PROCESS IS THAT ANYBODY IN THE COMPANY, IF ANYTHING DOESN'T MAKE SENSE TO THEM, THAT THEY CAN BRING UP WHAT DOESN'T MAKE SENSE TO THEM IN A NONHIERARCHAL WAY AND LOOK AT WHETHER IT'S TRUE OR NOT AND WHAT WE SHOULD DO ABOUT IT. WE PARTICULARLY LIKE LOOKING AT MISTAKES OR WEAKNESSES THAT WE HAVE IN ORDER TO GET STRONGER.
Dalio on the Dollar:
I THINK IT'S INEVITABLE THAT THE DOLLAR'S ROLE AS A WORLD CURRENCY DIMINISH FROM THE DOMINANT WORLD CURRENCY TO ONE OF A FEW AND IT WILL HAPPEN OVER A GRADUAL TIME. WE'VE BEEN VERY LUCKY, BECAUSE THE DOLLAR IS THE WORLD'S CURRENCY AND CONSIDERED THE PLACE THAT'S SAFE SO FOREIGN COUNTRIES WILL SAVE THERE AND WE'VE BEEN ABLE TO BORROW AT CHEAPER RATES THAN WE COULD HAVE OTHERWISE. AND SO THAT IS DIMINISHING.
Dalio on the World Being Broken in Two-Parts:
THE WORLD IS BROKEN INTO TWO PARTS NOW. WE HAVE THE DEBTOR-DEVELOPED WORLD. SO THE UNITED STATES, EUROPE AND JAPAN BASICALLY ARE COUNTRIES WHICH ARE OVERLY IN DEBT AND EXPENSIVE. THEN WE HAVE THE EMERGING WORLD. BASICALLY, IT'S 50-50. EMERGING WORLD NOW ACCOUNTS FOR 53% OF GDP. THE DEVELOPED WORLD IS 47% OF GDP.
Dalio on the Emerging Market:
THE ONE WORLD IS BOOMING. THE EMERGING MARKET. INFLATION RATES AND STRONG GROWTH RATE AND TIED THROUGH THIS CURRENCY LINK TO THE U.S., EUROPE AND JAPAN. AND AS A RESULT, THEY HAVE TOTALLY INAPPROPRIATE MONETARY POLICIES BECAUSE IF YOU HAVE A CURRENCY THAT'S LINKED, YOU HAVE INTEREST RATES THAT ARE LINKED. AND IT'S CREATED TOTALLY UNECONOMIC BEHAVIOR IN THOSE COUNTRIES. THIS IS GOING TO BE THE BIG NEXT SEISMIC SHIFT, I BELIEVE. I THINK THAT PROBABLY SOMETHING IN 2012 IT WILL BECOME INTOLERABLE TO MAINTAIN THOSE CURRENCY LINKS AND WE'LL PROBABLY HAVE A BIG SHIFT.
Dalio on US Equities:
U.S. EQUITIES FIRST ARE STILL COMPARATIVELY CHEAP. BUT MORE IMPORTANTLY, THE FLOWS ARE BENEFICIAL TO THEM BECAUSE U.S. EQUITIES BENEFIT FROM CURRENCY DEPRECIATIONS. I THINK, AS I SAY IN 2012, THE DEVELOPED COUNTRIES' CURRENCIES WILL DEVALUE IN RELATIONSHIP TO THE EMERGING COUNTRIES' CURRENCIES.
Copyright (c) Trader Mark, Fund My Mutual Fund
