1 00:00:03,040 --> 00:00:06,280 Speaker 1: More than fifty years ago, a young Harvard physical graduate, 2 00:00:06,360 --> 00:00:10,120 Speaker 1: Ray Dalio started a hedge fund, Bridgewater. That fund became 3 00:00:10,280 --> 00:00:12,319 Speaker 1: the largest hedge fund in the world and one of 4 00:00:12,360 --> 00:00:14,800 Speaker 1: the most successful in the world. Over this period of time, 5 00:00:15,040 --> 00:00:17,280 Speaker 1: he's writing a number of books, and his most recent 6 00:00:17,280 --> 00:00:19,880 Speaker 1: book talks about his concern about debt in the United 7 00:00:19,920 --> 00:00:21,840 Speaker 1: States and around the world. I had a chance to 8 00:00:21,880 --> 00:00:23,799 Speaker 1: sit down with the Ray Dalio to talk about his 9 00:00:23,840 --> 00:00:26,840 Speaker 1: views about investing in recent months. One of the most 10 00:00:26,840 --> 00:00:31,360 Speaker 1: common things talked about is something called tariffs. What is 11 00:00:31,400 --> 00:00:34,519 Speaker 1: your view on tariffs? Is it good? Economically bad? Economic? 12 00:00:34,960 --> 00:00:36,839 Speaker 1: Is going to solve our budget problem because I think 13 00:00:36,840 --> 00:00:39,479 Speaker 1: in the big Beautiful Bill, a lot of money that's 14 00:00:39,520 --> 00:00:42,320 Speaker 1: coming in comes in from tariffs, and that helps reduce 15 00:00:42,360 --> 00:00:43,760 Speaker 1: the deficit a bit. TFS. 16 00:00:44,479 --> 00:00:46,720 Speaker 2: Tariffs are not bad. 17 00:00:47,760 --> 00:00:51,320 Speaker 3: Throughout history, tariffs were the main source of government revenue 18 00:00:51,360 --> 00:00:54,960 Speaker 3: and so on, And any form of taxes has its cost, 19 00:00:55,320 --> 00:00:59,280 Speaker 3: so capital gains taxes are bad, and so on. Different 20 00:00:59,320 --> 00:01:04,760 Speaker 3: things have their I think the question is how well executed, 21 00:01:05,080 --> 00:01:08,160 Speaker 3: how big are they, how disruptive of they in terms 22 00:01:08,160 --> 00:01:11,080 Speaker 3: of the process they can bring a significant There's something 23 00:01:11,080 --> 00:01:13,200 Speaker 3: to be said for them in that they bring in 24 00:01:13,240 --> 00:01:16,880 Speaker 3: a significant amount of revenue. That means that there's less 25 00:01:17,080 --> 00:01:20,720 Speaker 3: that's needed elsewhere. And we're now in a different world. 26 00:01:21,080 --> 00:01:25,200 Speaker 3: We're in a world where the world is almost at 27 00:01:25,280 --> 00:01:29,640 Speaker 3: war self sufficiency. We have to build self sufficiency. We 28 00:01:29,720 --> 00:01:34,200 Speaker 3: cannot continue to borrow or depend on imports for that. 29 00:01:34,560 --> 00:01:37,920 Speaker 3: And so there's a manufacturing how do you create manufacturing 30 00:01:37,920 --> 00:01:40,279 Speaker 3: in the United States and so on. There's some merit 31 00:01:40,360 --> 00:01:43,479 Speaker 3: to all of those arguments. The question is whether that 32 00:01:43,600 --> 00:01:48,520 Speaker 3: is done really well and so on for the whole world. Tariffs, 33 00:01:48,560 --> 00:01:52,040 Speaker 3: of course, are not the ideal you would like to have. 34 00:01:52,120 --> 00:01:54,560 Speaker 3: If you're deally what's best for the whole world. You 35 00:01:54,600 --> 00:01:58,080 Speaker 3: would like to have the least efficient inefficiency. You'd say 36 00:01:58,080 --> 00:02:00,320 Speaker 3: wherever they produce it the best, and we have it 37 00:02:01,240 --> 00:02:03,720 Speaker 3: go around. But we're in a world now that we 38 00:02:03,800 --> 00:02:07,960 Speaker 3: have to be realistic in terms of we cannot be 39 00:02:08,160 --> 00:02:11,959 Speaker 3: dependent on importing a lot of things, and nor can 40 00:02:12,080 --> 00:02:15,440 Speaker 3: the world be dependent on the value of the bonds 41 00:02:15,560 --> 00:02:17,679 Speaker 3: and the debt that we're acquiring in order to pay 42 00:02:17,720 --> 00:02:18,240 Speaker 3: for those things. 43 00:02:18,320 --> 00:02:20,920 Speaker 1: Well, the big beautiful bill that's now being talked about, 44 00:02:21,480 --> 00:02:24,880 Speaker 1: will that solve our problem or mitigated or what it? Will? 45 00:02:24,880 --> 00:02:25,080 Speaker 1: It do. 46 00:02:25,880 --> 00:02:27,440 Speaker 2: It's not going to solve our problem. 47 00:02:28,040 --> 00:02:30,639 Speaker 1: Okay, So if that's not going to solve our problem, 48 00:02:31,120 --> 00:02:32,800 Speaker 1: how are we going to solve this problem. 49 00:02:32,880 --> 00:02:35,920 Speaker 3: We're going to do it the way that we always 50 00:02:35,960 --> 00:02:39,200 Speaker 3: do it, and it's always done when countries essentially go broke, 51 00:02:39,919 --> 00:02:44,799 Speaker 3: what they do is they, through a combination of devaluing 52 00:02:44,840 --> 00:02:51,239 Speaker 3: the currency, printing of money there's an imbalance, print money 53 00:02:51,280 --> 00:02:54,239 Speaker 3: to value the currency, and create an artificially low interest 54 00:02:54,320 --> 00:02:57,800 Speaker 3: rate so that the person who's holding the bonds is 55 00:02:57,840 --> 00:03:01,560 Speaker 3: receiving of artificially low in interest rate. That's the way 56 00:03:01,639 --> 00:03:04,880 Speaker 3: Japan has done it with their local and that's the 57 00:03:04,880 --> 00:03:06,200 Speaker 3: way we will do it. 58 00:03:06,400 --> 00:03:09,720 Speaker 1: So, in other words, my grandchildren and great grandchildren not 59 00:03:09,800 --> 00:03:12,880 Speaker 1: yet born are going to be paying off this debt 60 00:03:12,919 --> 00:03:16,040 Speaker 1: in devalue dollars. More like going to happen faster than that. 61 00:03:16,080 --> 00:03:18,000 Speaker 1: Faster than that, Oh okay, I. 62 00:03:17,919 --> 00:03:19,600 Speaker 2: Think they'll probably be beyond that. 63 00:03:19,840 --> 00:03:22,639 Speaker 1: What about cutting interest rates? Why doesn't the chairman of 64 00:03:22,680 --> 00:03:25,200 Speaker 1: the Fed say, well, cutting interest rates will save us money. 65 00:03:25,200 --> 00:03:27,480 Speaker 1: We're spending at trillion dollars now on interest for our 66 00:03:27,480 --> 00:03:29,760 Speaker 1: own debt. Why don't we just lower the interest rate? 67 00:03:29,760 --> 00:03:30,760 Speaker 1: Why don't we just do that? 68 00:03:31,040 --> 00:03:34,240 Speaker 3: There is the real interest rate and one man's debts 69 00:03:34,400 --> 00:03:39,640 Speaker 3: or another man's assets. And so if I lower the 70 00:03:40,080 --> 00:03:45,480 Speaker 3: interest rate, I will reduce my desire to hold that bond. 71 00:03:45,960 --> 00:03:49,600 Speaker 3: And in my opinion, when if you do that too much, 72 00:03:50,000 --> 00:03:55,119 Speaker 3: you will lose the demand for those bonds you Unlike 73 00:03:56,000 --> 00:04:00,160 Speaker 3: if you do create something closer to the four per 74 00:04:00,480 --> 00:04:06,000 Speaker 3: cut in the expenditures, four percent increase in the tax revenue, 75 00:04:06,040 --> 00:04:09,080 Speaker 3: improve the balance, then you'll have a benefit. If you 76 00:04:09,440 --> 00:04:12,520 Speaker 3: try to force interest rates down, you were hurting those 77 00:04:12,520 --> 00:04:15,080 Speaker 3: who were holding the bonds, and you will lose the 78 00:04:15,080 --> 00:04:17,840 Speaker 3: demand for the bonds and you can create that spiral. 79 00:04:17,960 --> 00:04:20,599 Speaker 1: Before we finish this discussion, I want you to just 80 00:04:20,720 --> 00:04:23,120 Speaker 1: inter erupt it of for a moment and say, look, 81 00:04:23,360 --> 00:04:27,360 Speaker 1: you've scared me a bit, but I need to make money. 82 00:04:27,360 --> 00:04:30,000 Speaker 1: I'm an investor. What should I do to take advantage 83 00:04:30,040 --> 00:04:32,159 Speaker 1: of what you just described and scared me. Should I 84 00:04:32,200 --> 00:04:36,040 Speaker 1: go buy gold? Should I go buy dollars? Buy euros? 85 00:04:36,080 --> 00:04:36,680 Speaker 1: What should I do? 86 00:04:37,000 --> 00:04:42,000 Speaker 3: Look at the value of your portfolio in inflation adjusted terms, 87 00:04:42,560 --> 00:04:47,240 Speaker 3: not in nominal terms. Okay, And the safest investment that 88 00:04:47,279 --> 00:04:50,920 Speaker 3: you can get right now is an inflation index bond. 89 00:04:51,720 --> 00:04:55,320 Speaker 3: Because what you'll get is it'll be indexed and you'll 90 00:04:55,320 --> 00:04:59,160 Speaker 3: get a bit over two percent real return above inflation 91 00:04:59,440 --> 00:05:02,640 Speaker 3: and whatever happen. So you start with what is a 92 00:05:02,680 --> 00:05:06,039 Speaker 3: safe investment. The next thing I think you have to 93 00:05:06,080 --> 00:05:11,680 Speaker 3: do is diversify your portfolio. We've talked about the powers 94 00:05:11,720 --> 00:05:15,440 Speaker 3: of diversification. So I don't want to get anybody into 95 00:05:15,480 --> 00:05:17,919 Speaker 3: one bet because I'm going to be wrong. But do 96 00:05:18,160 --> 00:05:23,200 Speaker 3: consider that gold is a form of money and gold 97 00:05:23,560 --> 00:05:30,320 Speaker 3: is that central banks are acquiring gold now as a diversifier, 98 00:05:30,880 --> 00:05:34,520 Speaker 3: and so in your it also is negatively correlated with 99 00:05:34,600 --> 00:05:36,840 Speaker 3: most of the things that you have. In a time 100 00:05:36,880 --> 00:05:39,719 Speaker 3: of great stress, what you'll find is that the gold 101 00:05:39,760 --> 00:05:43,159 Speaker 3: will do well and when the assets don't. The world 102 00:05:43,279 --> 00:05:46,279 Speaker 3: used to have gold as money. That was the way, 103 00:05:46,360 --> 00:05:49,120 Speaker 3: and so the world would look at things differently. They 104 00:05:49,160 --> 00:05:54,800 Speaker 3: would look at the prices of things in gold terms. Now, 105 00:05:54,880 --> 00:05:57,400 Speaker 3: because we have fiat money and we've become used to it, 106 00:05:57,680 --> 00:06:01,160 Speaker 3: we look at the prices of things in money terms, 107 00:06:01,279 --> 00:06:03,520 Speaker 3: and we look at gold that way. I think if 108 00:06:03,520 --> 00:06:06,800 Speaker 3: you started to say it's money, it's a source of money, 109 00:06:06,960 --> 00:06:09,520 Speaker 3: and you have that that's part of the diversify. So 110 00:06:09,560 --> 00:06:13,280 Speaker 3: it would diversify your portfolio. It's a prudent thing to 111 00:06:13,400 --> 00:06:16,600 Speaker 3: have somewhere between ten or fifteen percent of your portfolio 112 00:06:16,600 --> 00:06:17,120 Speaker 3: and gold. 113 00:06:17,240 --> 00:06:20,320 Speaker 1: For thousands of years, people have liked gold, and people 114 00:06:20,360 --> 00:06:22,680 Speaker 1: still seem to like gold. Price of gold are going up. 115 00:06:22,880 --> 00:06:25,599 Speaker 1: Why are people so interested in owning gold in a 116 00:06:25,640 --> 00:06:26,240 Speaker 1: time like this? 117 00:06:27,160 --> 00:06:32,320 Speaker 3: Since seventeen fifty eighty percent of the world's moneies have 118 00:06:32,440 --> 00:06:37,240 Speaker 3: disappeared and all of those that existed have been greatly devalued. 119 00:06:38,800 --> 00:06:42,320 Speaker 3: That's one of the reasons that gold is a storehold 120 00:06:42,360 --> 00:06:45,359 Speaker 3: of wealth and has been for a long time. And 121 00:06:45,400 --> 00:06:48,000 Speaker 3: there's a saying that gold is the only asset that 122 00:06:48,040 --> 00:06:50,640 Speaker 3: you can have that's not somebody else's liability, And what 123 00:06:50,640 --> 00:06:53,039 Speaker 3: they mean by that is that you don't have to 124 00:06:53,520 --> 00:06:57,000 Speaker 3: receive money from somebody else. In the world that we're 125 00:06:57,040 --> 00:07:01,320 Speaker 3: now in and we're seeing it internationally, worry about sanctions, 126 00:07:01,360 --> 00:07:05,240 Speaker 3: there's a worry about taking gold. Those holders central banks 127 00:07:05,520 --> 00:07:10,160 Speaker 3: around the world are concerned about the possibility that let's say, 128 00:07:10,200 --> 00:07:13,640 Speaker 3: what happened to Russia could happen to them, and so on. 129 00:07:13,760 --> 00:07:17,240 Speaker 3: So there's a diversification of that, and it creates a 130 00:07:17,320 --> 00:07:20,760 Speaker 3: dynamic in and of itself because what happens is if 131 00:07:20,760 --> 00:07:25,520 Speaker 3: they are switching, and they are switching to gold away 132 00:07:25,520 --> 00:07:28,880 Speaker 3: from bonds and so on, then that has the effect 133 00:07:29,080 --> 00:07:32,840 Speaker 3: of not only making our supply demand balance that we're 134 00:07:32,840 --> 00:07:36,080 Speaker 3: talking about about the new deficit, it means that you 135 00:07:36,120 --> 00:07:38,760 Speaker 3: can have the selling of gold, which makes that supply 136 00:07:38,840 --> 00:07:39,840 Speaker 3: demand balance worse. 137 00:07:40,000 --> 00:07:40,160 Speaker 2: Now. 138 00:07:40,160 --> 00:07:42,160 Speaker 1: It used to be the case that the US dollar 139 00:07:42,280 --> 00:07:45,840 Speaker 1: was backed by gold, and the US government said, if 140 00:07:45,880 --> 00:07:48,160 Speaker 1: you don't like these pieces of paper, we'll give you gold, 141 00:07:48,440 --> 00:07:51,440 Speaker 1: and ultimately we ended that we're never going to go 142 00:07:51,480 --> 00:07:51,840 Speaker 1: back to that. 143 00:07:51,880 --> 00:07:55,640 Speaker 3: Presumably right, probably, presumably that's right, but not if you 144 00:07:55,720 --> 00:07:59,640 Speaker 3: watch these gold site these cycles, because you have the 145 00:07:59,640 --> 00:08:04,520 Speaker 3: deval euasion, then people feel don't have confidence in the 146 00:08:04,520 --> 00:08:07,840 Speaker 3: fiat system. Over a period of time and through history, 147 00:08:08,200 --> 00:08:11,240 Speaker 3: they've at that point. The way that works is you 148 00:08:11,320 --> 00:08:13,680 Speaker 3: print all this money, then you pray the debt with 149 00:08:13,760 --> 00:08:17,080 Speaker 3: the cheap money, but nobody wants to hold it, so 150 00:08:17,120 --> 00:08:19,520 Speaker 3: then they go back and link it again. It is 151 00:08:19,680 --> 00:08:25,080 Speaker 3: conceivable that you can see a relinking of gold to money, 152 00:08:25,520 --> 00:08:26,800 Speaker 3: but that's way in the future. 153 00:08:27,200 --> 00:08:30,360 Speaker 1: Since the beginning of this year, the dollar against the 154 00:08:30,360 --> 00:08:33,800 Speaker 1: basket of currencies is down about ten percent. Many people 155 00:08:33,800 --> 00:08:37,000 Speaker 1: are worried that they might continue that way devalued. Some 156 00:08:37,040 --> 00:08:38,600 Speaker 1: people say it's not a bad thing because we can 157 00:08:38,640 --> 00:08:41,960 Speaker 1: sell things more cheaply overseas and increase our exports. But 158 00:08:42,400 --> 00:08:45,040 Speaker 1: if people are worried about the dollar going down in value, 159 00:08:45,200 --> 00:08:48,120 Speaker 1: what would you suggest they do buy other currencies or 160 00:08:48,200 --> 00:08:50,640 Speaker 1: go buy things that are not dollar denominated. 161 00:08:50,760 --> 00:08:54,400 Speaker 3: I think their concern would be some version very similar 162 00:08:54,440 --> 00:08:57,600 Speaker 3: to the seventies you just talked about. I remember I 163 00:08:57,640 --> 00:08:59,600 Speaker 3: was clerking on the floor of the New York Stock 164 00:08:59,640 --> 00:09:03,480 Speaker 3: Exchange John August fifteenth, nineteen seventy one, and that is 165 00:09:03,520 --> 00:09:07,559 Speaker 3: when Richard Nixon got on the television and he said, 166 00:09:07,840 --> 00:09:10,360 Speaker 3: in his polite way, this was a wonderful move. But 167 00:09:11,080 --> 00:09:15,520 Speaker 3: the money that you thought you had, the gold was money, 168 00:09:16,440 --> 00:09:19,600 Speaker 3: and what at the time people thought were real, the 169 00:09:19,640 --> 00:09:21,800 Speaker 3: money that we're used to, they would say, or like 170 00:09:21,880 --> 00:09:23,680 Speaker 3: checks in the checkbook. They said, you're not going to 171 00:09:23,679 --> 00:09:26,800 Speaker 3: get your money, you can keep the checks. At that point, 172 00:09:27,240 --> 00:09:30,440 Speaker 3: then we began the seventies, and the seventies was a 173 00:09:30,520 --> 00:09:34,000 Speaker 3: period in which there was both stagflation. The thing that 174 00:09:34,040 --> 00:09:38,120 Speaker 3: we have to worry about is a stagflationary environment because 175 00:09:38,200 --> 00:09:41,800 Speaker 3: all the currencies went down. So when you were looking 176 00:09:41,840 --> 00:09:45,559 Speaker 3: at diversification. The problems that we're talking about are not 177 00:09:45,679 --> 00:09:49,000 Speaker 3: just American problems. We have a significant problem. But if 178 00:09:49,200 --> 00:09:55,760 Speaker 3: they're European problems, they're Japanese problems. There's Chinese problems. No, 179 00:09:56,600 --> 00:10:00,280 Speaker 3: we've lived on promises to be able to take that 180 00:10:00,480 --> 00:10:03,800 Speaker 3: dead asset and converted into money, and now there's not 181 00:10:03,960 --> 00:10:07,560 Speaker 3: enough money to go around. So I would say that 182 00:10:07,600 --> 00:10:11,040 Speaker 3: when you ask the question, would I value in relationship 183 00:10:11,120 --> 00:10:15,320 Speaker 3: to other currencies? Probably, but the other currencies won't want 184 00:10:15,440 --> 00:10:18,320 Speaker 3: much of an appreciation, and so that's why I'm saying 185 00:10:18,360 --> 00:10:21,600 Speaker 3: that something like gold will be the better performing currency. 186 00:10:21,760 --> 00:10:23,960 Speaker 1: Some people worry about this and can tell us whether 187 00:10:24,000 --> 00:10:26,680 Speaker 1: this is realistic or not. In nineteen eighty five, there 188 00:10:26,679 --> 00:10:29,960 Speaker 1: was something called Applause Accords where the United States government 189 00:10:31,120 --> 00:10:34,080 Speaker 1: agreed with other governments that we were going to devalue 190 00:10:34,120 --> 00:10:37,360 Speaker 1: the dollar illegally officially, and it was done in secret. 191 00:10:37,480 --> 00:10:40,440 Speaker 1: Nobody knew it was coming. Is that possibly that the 192 00:10:40,480 --> 00:10:42,800 Speaker 1: government of the United States could again agree with other 193 00:10:42,840 --> 00:10:44,920 Speaker 1: governments we're going to devalue the dollar further. You think 194 00:10:44,960 --> 00:10:46,560 Speaker 1: that's unlikely these days? 195 00:10:47,160 --> 00:10:49,520 Speaker 2: No, I think it's a possibility. Yes. 196 00:10:49,880 --> 00:10:54,080 Speaker 3: It's so interesting in history when you look at what 197 00:10:54,800 --> 00:11:01,000 Speaker 3: happens when governments are in certain positions through history, they 198 00:11:01,080 --> 00:11:05,560 Speaker 3: do the same things, okay, And that means that a 199 00:11:05,600 --> 00:11:09,040 Speaker 3: move like that, or even there could be foreign exchange controls, 200 00:11:09,040 --> 00:11:11,400 Speaker 3: there can be different ways. 201 00:11:12,640 --> 00:11:15,360 Speaker 2: That that that happens. 202 00:11:15,480 --> 00:11:19,079 Speaker 1: Now, my perception is that people in Washington always say, well, 203 00:11:19,120 --> 00:11:21,880 Speaker 1: if a situation was that bad, the bond market would collapse. 204 00:11:22,160 --> 00:11:24,400 Speaker 1: And then the bond market people say, well, the situation 205 00:11:24,440 --> 00:11:26,880 Speaker 1: that bad, Congress wouldn't do this, and they both kind 206 00:11:26,880 --> 00:11:29,679 Speaker 1: of blame each other for not doing anything. Why hasn't 207 00:11:29,720 --> 00:11:32,720 Speaker 1: the bond market collapsed? Ever, the fact that we have 208 00:11:32,800 --> 00:11:34,880 Speaker 1: all this debt over all these years. 209 00:11:34,679 --> 00:11:38,480 Speaker 3: You don't like to say I've experienced this many times. 210 00:11:40,720 --> 00:11:44,280 Speaker 3: I did this analysis in two thousand and seven and eight, 211 00:11:44,360 --> 00:11:47,480 Speaker 3: I went to Congress and everybody said they asked me 212 00:11:47,559 --> 00:11:50,400 Speaker 3: the same question, but we had the problem. Same thing 213 00:11:50,480 --> 00:11:54,160 Speaker 3: happened in Europe. So there's a supply demand, there's a saying. 214 00:11:54,960 --> 00:12:00,360 Speaker 3: You know that everything goes slowly until it happens all 215 00:12:00,400 --> 00:12:04,680 Speaker 3: at once when the problem happens. You know, these things 216 00:12:04,679 --> 00:12:05,840 Speaker 3: happen like that. 217 00:12:06,480 --> 00:12:08,800 Speaker 1: How long did it take you to write this book? 218 00:12:08,840 --> 00:12:13,040 Speaker 1: This is how many books have you now written? For four, Okay, 219 00:12:13,240 --> 00:12:14,640 Speaker 1: And how long did it take to write a book 220 00:12:14,720 --> 00:12:15,839 Speaker 1: like this? 221 00:12:15,840 --> 00:12:18,360 Speaker 3: This is research that I've done over a long period 222 00:12:18,400 --> 00:12:21,320 Speaker 3: of time, So putting it together and getting it out, 223 00:12:21,400 --> 00:12:24,920 Speaker 3: you know, I would say at part time basis, maybe 224 00:12:25,120 --> 00:12:25,720 Speaker 3: over a year. 225 00:12:26,200 --> 00:12:28,319 Speaker 1: Hey, so you built the biggest hedge fund in the world. 226 00:12:29,080 --> 00:12:31,640 Speaker 1: What's the relative pleasure of building the biggest hedge fund 227 00:12:31,679 --> 00:12:35,000 Speaker 1: in the world versus writing a book that's a bestseller? 228 00:12:35,080 --> 00:12:37,920 Speaker 3: As you would know, probably it's a stage in life thing. 229 00:12:38,360 --> 00:12:41,000 Speaker 3: You know, there's a stage in life where you know, 230 00:12:41,080 --> 00:12:43,880 Speaker 3: you compete and you build something, and then there's a 231 00:12:43,880 --> 00:12:46,199 Speaker 3: stage in life where you're passing things along. 232 00:12:46,840 --> 00:12:47,080 Speaker 2: You know. 233 00:12:47,480 --> 00:12:49,760 Speaker 3: So at this stage in life, you and your way, 234 00:12:49,880 --> 00:12:53,000 Speaker 3: me and my way. It's a great, great joy to 235 00:12:53,080 --> 00:12:56,360 Speaker 3: be able to pass along what I've learned. So I'm 236 00:12:56,400 --> 00:12:56,880 Speaker 3: loving it. 237 00:12:57,080 --> 00:13:00,320 Speaker 1: This book is designed to make people feel good or 238 00:13:00,360 --> 00:13:01,120 Speaker 1: to scare. 239 00:13:00,840 --> 00:13:03,880 Speaker 2: People, neither. 240 00:13:04,880 --> 00:13:08,520 Speaker 3: I wanted to convey the mechanics the cause effect relationships 241 00:13:09,040 --> 00:13:11,559 Speaker 3: so that people can understand what's going on and then 242 00:13:11,679 --> 00:13:16,080 Speaker 3: navigating it. I think it's a book that will make 243 00:13:16,120 --> 00:13:19,440 Speaker 3: people worry. But I have a principle which is, if 244 00:13:19,440 --> 00:13:21,560 Speaker 3: you worry, you don't have to worry. And if you 245 00:13:21,559 --> 00:13:25,200 Speaker 3: don't worry. You need to worry, because if you worry 246 00:13:25,240 --> 00:13:29,240 Speaker 3: about something, then maybe you'll prevent what you're worrying about. 247 00:13:29,440 --> 00:13:33,040 Speaker 1: When did you decide to become a writer as opposed 248 00:13:33,080 --> 00:13:35,480 Speaker 1: to just an investor? I mean a lot of great 249 00:13:35,880 --> 00:13:38,840 Speaker 1: hedge funt investors just keep sitting in front of screens 250 00:13:38,880 --> 00:13:40,800 Speaker 1: and so forth. When did you say I want to 251 00:13:40,800 --> 00:13:43,080 Speaker 1: do more than sitting in front of screens. Was that 252 00:13:43,400 --> 00:13:47,359 Speaker 1: a couple of years before you decided to exit Bridgewater? 253 00:13:48,280 --> 00:13:51,200 Speaker 3: No, it was maybe thirty five forty years ago. What 254 00:13:51,320 --> 00:13:55,360 Speaker 3: I learned was that if I was whenever I was 255 00:13:55,400 --> 00:13:59,400 Speaker 3: making decisions, if I would pause and reflect and write 256 00:13:59,400 --> 00:14:03,319 Speaker 3: down the cry that I would use to make that decision, 257 00:14:03,679 --> 00:14:05,800 Speaker 3: it would make me think more deeply about it. And 258 00:14:05,880 --> 00:14:08,520 Speaker 3: then I learned that I could put those into code 259 00:14:09,160 --> 00:14:11,360 Speaker 3: and then back test them so I would know how 260 00:14:11,400 --> 00:14:14,640 Speaker 3: my decision making would work. And so right from then 261 00:14:14,760 --> 00:14:17,920 Speaker 3: thirty five years ago, that's how really I built Bridgewater 262 00:14:18,200 --> 00:14:22,240 Speaker 3: was what are the criteria? Test the criteria over a 263 00:14:22,280 --> 00:14:24,760 Speaker 3: period of time, and then form a game plan. So 264 00:14:25,080 --> 00:14:27,640 Speaker 3: I'd say, thirty five years ago, I've written down I 265 00:14:27,680 --> 00:14:28,960 Speaker 3: call these things principles. 266 00:14:29,280 --> 00:14:32,920 Speaker 2: I've written down. Probably you know, I don't know a 267 00:14:33,000 --> 00:14:34,320 Speaker 2: thousand of them or something. 268 00:14:34,520 --> 00:14:38,960 Speaker 1: For those who haven't followed the hedge fund world. You're 269 00:14:38,960 --> 00:14:42,240 Speaker 1: from Long Island, you went to Long Island University. You 270 00:14:42,280 --> 00:14:44,440 Speaker 1: would say you were not a superstar in high school. 271 00:14:44,720 --> 00:14:47,480 Speaker 1: On the contrary, but you did very well at Long 272 00:14:47,480 --> 00:14:50,080 Speaker 1: Island University, and eventually you got in the Harvard Business 273 00:14:50,120 --> 00:14:53,520 Speaker 1: Goal and you started your career, and your career almost 274 00:14:53,600 --> 00:14:56,840 Speaker 1: went south when you punched your boss in the mouth, right, No, 275 00:14:57,000 --> 00:14:57,360 Speaker 1: that was. 276 00:14:57,640 --> 00:15:02,520 Speaker 3: My opportunities began, and I got fired when I got fired, 277 00:15:03,000 --> 00:15:04,680 Speaker 3: then I got fired. 278 00:15:04,680 --> 00:15:07,840 Speaker 1: You started your own firm, and you borrowed some money 279 00:15:07,880 --> 00:15:10,120 Speaker 1: at some point from your father because the firm hadn't 280 00:15:10,160 --> 00:15:12,760 Speaker 1: done that well. And what did you ever think that 281 00:15:12,840 --> 00:15:14,520 Speaker 1: maybe you weren't going to make it? And at the 282 00:15:14,560 --> 00:15:15,760 Speaker 1: point did you were? 283 00:15:15,800 --> 00:15:18,640 Speaker 3: So yeah, let me tell you about that incident because 284 00:15:18,960 --> 00:15:22,760 Speaker 3: it was one of the worst cases and one of 285 00:15:22,800 --> 00:15:27,120 Speaker 3: the best cases for me. So this is nineteen eighty 286 00:15:27,240 --> 00:15:30,720 Speaker 3: eighty one, and I had calculated that the United States 287 00:15:30,840 --> 00:15:32,680 Speaker 3: lent more money to countries than they're going to be 288 00:15:32,720 --> 00:15:35,880 Speaker 3: able to pay back, and that there would be a 289 00:15:35,880 --> 00:15:41,480 Speaker 3: big debt crisis, and then in that happened Volker type money. 290 00:15:42,120 --> 00:15:48,240 Speaker 3: Nineteen eighty two, Mexico defaults on its dead and I 291 00:15:48,320 --> 00:15:51,760 Speaker 3: got a lot of attention because I anticipated this and 292 00:15:52,200 --> 00:15:55,120 Speaker 3: I thought I was right and I couldn't have been 293 00:15:55,120 --> 00:15:55,640 Speaker 3: more wrong. 294 00:15:55,720 --> 00:15:56,760 Speaker 2: I thought we were going to have a. 295 00:15:56,680 --> 00:15:59,760 Speaker 3: Big economic crisis because of this, and what happened in 296 00:15:59,760 --> 00:16:04,440 Speaker 3: stead was the stock market went up, they eased monetary policy, 297 00:16:05,000 --> 00:16:07,400 Speaker 3: and I have a terrible. 298 00:16:07,080 --> 00:16:09,200 Speaker 2: Mistake and it cost me money. 299 00:16:09,280 --> 00:16:11,160 Speaker 3: I was so broke that I had to borrow four 300 00:16:11,200 --> 00:16:14,040 Speaker 3: thousand dollars from my dad in order to pay for 301 00:16:14,160 --> 00:16:18,440 Speaker 3: family bills. And this was painful, and that changed my 302 00:16:18,520 --> 00:16:20,240 Speaker 3: approach to everything two ways. 303 00:16:20,320 --> 00:16:20,840 Speaker 2: Two ways. 304 00:16:21,360 --> 00:16:25,520 Speaker 3: First, it made me think, how do I know I'm right? 305 00:16:25,640 --> 00:16:28,720 Speaker 3: It gave me the humility I needed to balance with 306 00:16:28,760 --> 00:16:31,880 Speaker 3: my audacity, and it let me understand how do I 307 00:16:31,920 --> 00:16:35,240 Speaker 3: play this game going forward? And I understood the power 308 00:16:35,680 --> 00:16:40,400 Speaker 3: of diversification and how diversification could reduce risk by up 309 00:16:40,440 --> 00:16:44,160 Speaker 3: to eighty percent without reducing returns. And that was then 310 00:16:44,280 --> 00:16:47,200 Speaker 3: the bottom of Bridgewater, and then from then on it 311 00:16:47,280 --> 00:16:50,280 Speaker 3: was straight because of the lesson I learned. Writing down 312 00:16:50,360 --> 00:16:52,920 Speaker 3: these things and these experiencing and making the most out 313 00:16:52,960 --> 00:16:56,880 Speaker 3: of mistakes as learning experiences has been sir an investor. 314 00:16:56,960 --> 00:16:59,520 Speaker 1: You always have ups and downs. Nobody does everything perfectly, 315 00:16:59,600 --> 00:17:00,840 Speaker 1: not even buffet right. 316 00:17:00,960 --> 00:17:04,639 Speaker 3: But you know what changed that from that point the 317 00:17:04,720 --> 00:17:09,879 Speaker 3: returns were in my thirty some one years since of 318 00:17:10,000 --> 00:17:13,840 Speaker 3: doing that, since that point, it was I think about 319 00:17:13,880 --> 00:17:19,520 Speaker 3: eleven point eight percent return with no year down significantly 320 00:17:20,440 --> 00:17:26,439 Speaker 3: other than two thousand, twenty twenty during COVID and that 321 00:17:26,560 --> 00:17:28,840 Speaker 3: was down thirteen percent, but the other years were down 322 00:17:28,920 --> 00:17:32,960 Speaker 3: like two percent. Because I learned the power of diversification. 323 00:17:33,280 --> 00:17:36,840 Speaker 3: You know, one of the things about diversification is that 324 00:17:37,720 --> 00:17:42,080 Speaker 3: you can reduce the returns the risks without reducing the 325 00:17:42,160 --> 00:17:48,600 Speaker 3: turn My mantra is fifteen good uncorrelated return streams because 326 00:17:49,960 --> 00:17:52,960 Speaker 3: if you if they engineered to have about the same 327 00:17:53,400 --> 00:17:56,920 Speaker 3: expect the return and you have that kind of diversification, 328 00:17:57,280 --> 00:18:00,440 Speaker 3: you will lower the risk by about eighty percent, which 329 00:18:00,920 --> 00:18:03,879 Speaker 3: raises the return to risk ratio by a factor of five. 330 00:18:04,359 --> 00:18:08,919 Speaker 2: So that's the power of the game plan. That's what 331 00:18:09,040 --> 00:18:09,399 Speaker 2: helped me. 332 00:18:09,560 --> 00:18:11,600 Speaker 1: You want to get the deficit down the three percent 333 00:18:11,640 --> 00:18:14,560 Speaker 1: of GDP? Yeah, you want to do it three ways. 334 00:18:14,840 --> 00:18:19,960 Speaker 1: Cut the interest rates, cut spending, and increase. 335 00:18:19,640 --> 00:18:22,480 Speaker 2: Taxes each bi mondus amounts right, and do it. 336 00:18:22,440 --> 00:18:26,320 Speaker 1: Over three years, yes, three, three to three. Okay, what's 337 00:18:26,359 --> 00:18:27,480 Speaker 1: the chance of that happening? 338 00:18:30,680 --> 00:18:31,679 Speaker 2: Okay, five percent? 339 00:18:32,200 --> 00:18:34,160 Speaker 1: Right, you've been in Washington. 340 00:18:34,320 --> 00:18:36,400 Speaker 2: I was in Washington the other day. 341 00:18:36,400 --> 00:18:38,760 Speaker 1: Okay, and members of Congress tell you this is a 342 00:18:38,800 --> 00:18:40,399 Speaker 1: brilliant idea. We wish we had thought of it, and 343 00:18:40,400 --> 00:18:41,040 Speaker 1: we're going to do this. 344 00:18:41,560 --> 00:18:44,399 Speaker 3: I'll tell you what members of Congress tell me, which 345 00:18:44,440 --> 00:18:49,679 Speaker 3: is very interesting both sides. Nobody agree. Nobody disagrees with 346 00:18:49,720 --> 00:18:53,000 Speaker 3: what I just said. It's very interesting. They all agree 347 00:18:53,320 --> 00:18:55,600 Speaker 3: that has to go to three percent. They all agree 348 00:18:55,640 --> 00:18:58,120 Speaker 3: it has to come from those three things and so on. 349 00:18:58,520 --> 00:19:01,919 Speaker 3: And then they say, but I can't say that because 350 00:19:01,960 --> 00:19:08,000 Speaker 3: we're now in an absolutist political environment in which if 351 00:19:08,040 --> 00:19:12,240 Speaker 3: I say they want the public, my electorate wants me 352 00:19:12,320 --> 00:19:15,200 Speaker 3: to say, I will take a pledge of no new taxes. 353 00:19:15,400 --> 00:19:19,000 Speaker 3: So because of that absolute if you don't take a pledge, 354 00:19:19,080 --> 00:19:22,200 Speaker 3: then it's like this with the constituents. The constituents say 355 00:19:22,560 --> 00:19:26,040 Speaker 3: something like, are you telling me that you're going to 356 00:19:26,160 --> 00:19:30,399 Speaker 3: compromise with those people and you're going to raise my taxes? Okay, 357 00:19:30,560 --> 00:19:33,000 Speaker 3: no way, I don't want you in government. And so 358 00:19:33,280 --> 00:19:35,640 Speaker 3: they won't convey what they truly believe. 359 00:19:36,160 --> 00:19:39,320 Speaker 1: What about yourself? Why don't you go into government? Why 360 00:19:39,320 --> 00:19:42,040 Speaker 1: have you thought about you're being secretary Treasury, chairman of 361 00:19:42,040 --> 00:19:44,520 Speaker 1: the Federal Reserve, run for the Senate or something, and 362 00:19:44,720 --> 00:19:46,640 Speaker 1: solve those problems while you're in government. Have you ever 363 00:19:46,680 --> 00:19:48,120 Speaker 1: thought of that scares. 364 00:19:47,800 --> 00:19:48,760 Speaker 2: The Daylight's Adam. 365 00:19:51,000 --> 00:19:55,080 Speaker 3: Let me say, I have the greatest appreciation and respect 366 00:19:55,480 --> 00:19:58,359 Speaker 3: for those who go into public service and serve in 367 00:19:58,440 --> 00:20:02,320 Speaker 3: this kind of an environment. And I think there's a 368 00:20:02,400 --> 00:20:06,159 Speaker 3: question of whether with the population. It's not just a 369 00:20:06,280 --> 00:20:10,400 Speaker 3: leadership question, it's a can you lead question? You can 370 00:20:10,440 --> 00:20:14,320 Speaker 3: bring capable people into that job. But we're in a 371 00:20:14,400 --> 00:20:17,840 Speaker 3: situation where everybody's fighting over every decision all the time 372 00:20:18,160 --> 00:20:22,280 Speaker 3: and will tear everybody down if they're so it's a 373 00:20:22,359 --> 00:20:23,359 Speaker 3: very difficult situation. 374 00:20:23,359 --> 00:20:25,280 Speaker 1: Now somebody is watching, they say, I want to be 375 00:20:25,320 --> 00:20:28,280 Speaker 1: the next Ray Dalio who builds a gigantic hedge fund, 376 00:20:28,440 --> 00:20:32,760 Speaker 1: does well financially, well respected by people, writes best selling books. 377 00:20:33,080 --> 00:20:35,560 Speaker 1: What's the secret to that? What do you do? 378 00:20:35,840 --> 00:20:38,359 Speaker 3: Make your work and your passion the same thing, and 379 00:20:38,440 --> 00:20:41,359 Speaker 3: don't forget about the money part. In other words, I 380 00:20:41,359 --> 00:20:43,720 Speaker 3: didn't work for money, but I had a passion. I 381 00:20:43,720 --> 00:20:46,879 Speaker 3: fell in love with the game of investing, and I 382 00:20:46,920 --> 00:20:49,040 Speaker 3: think you have to make your work and your passion 383 00:20:49,160 --> 00:20:51,760 Speaker 3: the same thing. But you do have to pay attention 384 00:20:51,880 --> 00:20:54,120 Speaker 3: to the money part, because if you're not earning an 385 00:20:54,119 --> 00:20:57,520 Speaker 3: adequate amount of money, then that's a problem. So and 386 00:20:57,560 --> 00:21:00,200 Speaker 3: I don't think the best life is for them those 387 00:21:00,240 --> 00:21:02,680 Speaker 3: who will make the most amount of money. There's a 388 00:21:02,800 --> 00:21:06,920 Speaker 3: very low correlation between the level of happiness or well 389 00:21:06,960 --> 00:21:09,760 Speaker 3: being past the basic level of income. 390 00:21:10,080 --> 00:21:15,520 Speaker 1: The highest Really, you're just telling me that, now, wow, well. 391 00:21:15,359 --> 00:21:20,000 Speaker 3: We know that which has the highest level of happiness 392 00:21:20,280 --> 00:21:23,399 Speaker 3: and well being generally is a sense of community. Do 393 00:21:23,440 --> 00:21:26,480 Speaker 3: you have a sense of community your friends in that community. 394 00:21:26,680 --> 00:21:29,640 Speaker 3: But anyway, I would say, don't over exaggerate the power 395 00:21:29,680 --> 00:21:31,560 Speaker 3: of money. You need to have enough and you have 396 00:21:31,640 --> 00:21:36,119 Speaker 3: to pursue your passion. And you know, have enough money 397 00:21:36,119 --> 00:21:40,000 Speaker 3: and if if it's if it's it's never work. If 398 00:21:40,080 --> 00:21:41,280 Speaker 3: you're pursuing your passion. 399 00:21:41,320 --> 00:21:44,080 Speaker 1: What do you think is the best investment vehicle for 400 00:21:44,160 --> 00:21:49,000 Speaker 1: a middle class American? That is risk adverse and inflation 401 00:21:49,080 --> 00:21:53,480 Speaker 1: index bond, which is index fund tips. 402 00:21:53,200 --> 00:21:59,520 Speaker 3: Treasury inflation protected securities, because it will guarantee you a 403 00:21:59,600 --> 00:22:03,400 Speaker 3: real return. And I don't think that you should be 404 00:22:04,080 --> 00:22:07,320 Speaker 3: speculating in the markets because there's a zero sum game 405 00:22:07,359 --> 00:22:08,800 Speaker 3: and you'll probably be the loser. 406 00:22:09,000 --> 00:22:11,119 Speaker 1: So, as we get ready to celebrate next year the 407 00:22:11,119 --> 00:22:13,960 Speaker 1: two hundred and fiftieth anniversary of this country, are you 408 00:22:14,040 --> 00:22:16,760 Speaker 1: optimistic about our future or is the debt problem so 409 00:22:17,000 --> 00:22:19,439 Speaker 1: concerning to you? You're not optimistic about our future. 410 00:22:19,760 --> 00:22:22,399 Speaker 3: I think it's a time horizon we're going to go. 411 00:22:22,920 --> 00:22:27,080 Speaker 3: I think we can deal with this. I think it 412 00:22:27,240 --> 00:22:29,760 Speaker 3: comes down to how we are with each other. But 413 00:22:29,920 --> 00:22:33,520 Speaker 3: we will go through this and we will get to 414 00:22:33,560 --> 00:22:34,320 Speaker 3: the other side. 415 00:22:35,320 --> 00:22:37,440 Speaker 1: And when you go meet with members of Congress or 416 00:22:37,480 --> 00:22:40,399 Speaker 1: other people in government and you talk about these serious 417 00:22:40,400 --> 00:22:42,720 Speaker 1: issues of debt and depicts and so forth, do they 418 00:22:42,800 --> 00:22:44,480 Speaker 1: listen and then they say, by the way, what should 419 00:22:44,520 --> 00:22:45,840 Speaker 1: I do with my own money? They ever ask you 420 00:22:45,880 --> 00:22:48,080 Speaker 1: how they should invest their money, or they never ask 421 00:22:48,119 --> 00:22:51,480 Speaker 1: you for investment tips, not typically. Now, what about when 422 00:22:51,480 --> 00:22:53,239 Speaker 1: you go to a cocktail party, people ask you for 423 00:22:53,359 --> 00:22:54,800 Speaker 1: investment ideas all the time. 424 00:22:55,160 --> 00:22:57,760 Speaker 2: Here and there. I guess, let me reverse the question, 425 00:22:57,840 --> 00:22:58,600 Speaker 2: what do they do with you? 426 00:22:59,320 --> 00:23:02,320 Speaker 1: Well, I'm not as good an investor as you are. 427 00:23:01,280 --> 00:23:04,080 Speaker 2: So well it worked out pretty good. 428 00:23:04,160 --> 00:23:11,000 Speaker 1: They mostly say to me, do you know Ray Dalio. So, Ray, look, 429 00:23:11,040 --> 00:23:14,119 Speaker 1: I'd like to congratulate you on your incredible success. You 430 00:23:14,240 --> 00:23:17,080 Speaker 1: came from very modest means, worked your way up fifty 431 00:23:17,160 --> 00:23:19,600 Speaker 1: years as an investor, built the biggest hedge fund in 432 00:23:19,640 --> 00:23:22,480 Speaker 1: the world, and you've contributed a lot to endowments and 433 00:23:22,480 --> 00:23:24,719 Speaker 1: others who've been your investors. So you should be very 434 00:23:24,720 --> 00:23:26,800 Speaker 1: proud of what you've achieved. And now I hope you 435 00:23:26,800 --> 00:23:29,320 Speaker 1: can make some progress in Washington. I've been living there 436 00:23:29,320 --> 00:23:31,000 Speaker 1: for a while. It's not that easy to make progress, 437 00:23:31,000 --> 00:23:33,600 Speaker 1: as you know, but hopefully you'll continue and maybe some 438 00:23:33,640 --> 00:23:35,400 Speaker 1: people will say they don't want to get reelected, they 439 00:23:35,400 --> 00:23:38,159 Speaker 1: just want to do the right thing. Hopefully you'll commit them. 440 00:23:38,280 --> 00:23:44,800 Speaker 1: Thanks very much, Thank you. Thanks for listening to hear 441 00:23:44,840 --> 00:23:47,359 Speaker 1: more of my interviews. You can subscribe and download my 442 00:23:47,480 --> 00:23:50,840 Speaker 1: podcast on Spotify, Apple, or wherever you listen.