WEBVTT - Ray Dalio 0:00:03.040 --> 0:00:06.280 More than fifty years ago, a young Harvard physical graduate, 0:00:06.360 --> 0:00:10.120 Ray Dalio started a hedge fund, Bridgewater. That fund became 0:00:10.280 --> 0:00:12.319 the largest hedge fund in the world and one of 0:00:12.360 --> 0:00:14.800 the most successful in the world. Over this period of time, 0:00:15.040 --> 0:00:17.280 he's writing a number of books, and his most recent 0:00:17.280 --> 0:00:19.880 book talks about his concern about debt in the United 0:00:19.920 --> 0:00:21.840 States and around the world. I had a chance to 0:00:21.880 --> 0:00:23.799 sit down with the Ray Dalio to talk about his 0:00:23.840 --> 0:00:26.840 views about investing in recent months. One of the most 0:00:26.840 --> 0:00:31.360 common things talked about is something called tariffs. What is 0:00:31.400 --> 0:00:34.519 your view on tariffs? Is it good? Economically bad? Economic? 0:00:34.960 --> 0:00:36.839 Is going to solve our budget problem because I think 0:00:36.840 --> 0:00:39.479 in the big Beautiful Bill, a lot of money that's 0:00:39.520 --> 0:00:42.320 coming in comes in from tariffs, and that helps reduce 0:00:42.360 --> 0:00:43.760 the deficit a bit. TFS. 0:00:44.479 --> 0:00:46.720 Tariffs are not bad. 0:00:47.760 --> 0:00:51.320 Throughout history, tariffs were the main source of government revenue 0:00:51.360 --> 0:00:54.960 and so on, And any form of taxes has its cost, 0:00:55.320 --> 0:00:59.280 so capital gains taxes are bad, and so on. Different 0:00:59.320 --> 0:01:04.760 things have their I think the question is how well executed, 0:01:05.080 --> 0:01:08.160 how big are they, how disruptive of they in terms 0:01:08.160 --> 0:01:11.080 of the process they can bring a significant There's something 0:01:11.080 --> 0:01:13.200 to be said for them in that they bring in 0:01:13.240 --> 0:01:16.880 a significant amount of revenue. That means that there's less 0:01:17.080 --> 0:01:20.720 that's needed elsewhere. And we're now in a different world. 0:01:21.080 --> 0:01:25.200 We're in a world where the world is almost at 0:01:25.280 --> 0:01:29.640 war self sufficiency. We have to build self sufficiency. We 0:01:29.720 --> 0:01:34.200 cannot continue to borrow or depend on imports for that. 0:01:34.560 --> 0:01:37.920 And so there's a manufacturing how do you create manufacturing 0:01:37.920 --> 0:01:40.279 in the United States and so on. There's some merit 0:01:40.360 --> 0:01:43.479 to all of those arguments. The question is whether that 0:01:43.600 --> 0:01:48.520 is done really well and so on for the whole world. Tariffs, 0:01:48.560 --> 0:01:52.040 of course, are not the ideal you would like to have. 0:01:52.120 --> 0:01:54.560 If you're deally what's best for the whole world. You 0:01:54.600 --> 0:01:58.080 would like to have the least efficient inefficiency. You'd say 0:01:58.080 --> 0:02:00.320 wherever they produce it the best, and we have it 0:02:01.240 --> 0:02:03.720 go around. But we're in a world now that we 0:02:03.800 --> 0:02:07.960 have to be realistic in terms of we cannot be 0:02:08.160 --> 0:02:11.959 dependent on importing a lot of things, and nor can 0:02:12.080 --> 0:02:15.440 the world be dependent on the value of the bonds 0:02:15.560 --> 0:02:17.679 and the debt that we're acquiring in order to pay 0:02:17.720 --> 0:02:18.240 for those things. 0:02:18.320 --> 0:02:20.920 Well, the big beautiful bill that's now being talked about, 0:02:21.480 --> 0:02:24.880 will that solve our problem or mitigated or what it? Will? 0:02:24.880 --> 0:02:25.080 It do. 0:02:25.880 --> 0:02:27.440 It's not going to solve our problem. 0:02:28.040 --> 0:02:30.639 Okay, So if that's not going to solve our problem, 0:02:31.120 --> 0:02:32.800 how are we going to solve this problem. 0:02:32.880 --> 0:02:35.920 We're going to do it the way that we always 0:02:35.960 --> 0:02:39.200 do it, and it's always done when countries essentially go broke, 0:02:39.919 --> 0:02:44.799 what they do is they, through a combination of devaluing 0:02:44.840 --> 0:02:51.239 the currency, printing of money there's an imbalance, print money 0:02:51.280 --> 0:02:54.239 to value the currency, and create an artificially low interest 0:02:54.320 --> 0:02:57.800 rate so that the person who's holding the bonds is 0:02:57.840 --> 0:03:01.560 receiving of artificially low in interest rate. That's the way 0:03:01.639 --> 0:03:04.880 Japan has done it with their local and that's the 0:03:04.880 --> 0:03:06.200 way we will do it. 0:03:06.400 --> 0:03:09.720 So, in other words, my grandchildren and great grandchildren not 0:03:09.800 --> 0:03:12.880 yet born are going to be paying off this debt 0:03:12.919 --> 0:03:16.040 in devalue dollars. More like going to happen faster than that. 0:03:16.080 --> 0:03:18.000 Faster than that, Oh okay, I. 0:03:17.919 --> 0:03:19.600 Think they'll probably be beyond that. 0:03:19.840 --> 0:03:22.639 What about cutting interest rates? Why doesn't the chairman of 0:03:22.680 --> 0:03:25.200 the Fed say, well, cutting interest rates will save us money. 0:03:25.200 --> 0:03:27.480 We're spending at trillion dollars now on interest for our 0:03:27.480 --> 0:03:29.760 own debt. Why don't we just lower the interest rate? 0:03:29.760 --> 0:03:30.760 Why don't we just do that? 0:03:31.040 --> 0:03:34.240 There is the real interest rate and one man's debts 0:03:34.400 --> 0:03:39.640 or another man's assets. And so if I lower the 0:03:40.080 --> 0:03:45.480 interest rate, I will reduce my desire to hold that bond. 0:03:45.960 --> 0:03:49.600 And in my opinion, when if you do that too much, 0:03:50.000 --> 0:03:55.119 you will lose the demand for those bonds you Unlike 0:03:56.000 --> 0:04:00.160 if you do create something closer to the four per 0:04:00.480 --> 0:04:06.000 cut in the expenditures, four percent increase in the tax revenue, 0:04:06.040 --> 0:04:09.080 improve the balance, then you'll have a benefit. If you 0:04:09.440 --> 0:04:12.520 try to force interest rates down, you were hurting those 0:04:12.520 --> 0:04:15.080 who were holding the bonds, and you will lose the 0:04:15.080 --> 0:04:17.840 demand for the bonds and you can create that spiral. 0:04:17.960 --> 0:04:20.599 Before we finish this discussion, I want you to just 0:04:20.720 --> 0:04:23.120 inter erupt it of for a moment and say, look, 0:04:23.360 --> 0:04:27.360 you've scared me a bit, but I need to make money. 0:04:27.360 --> 0:04:30.000 I'm an investor. What should I do to take advantage 0:04:30.040 --> 0:04:32.159 of what you just described and scared me. Should I 0:04:32.200 --> 0:04:36.040 go buy gold? Should I go buy dollars? Buy euros? 0:04:36.080 --> 0:04:36.680 What should I do? 0:04:37.000 --> 0:04:42.000 Look at the value of your portfolio in inflation adjusted terms, 0:04:42.560 --> 0:04:47.240 not in nominal terms. Okay, And the safest investment that 0:04:47.279 --> 0:04:50.920 you can get right now is an inflation index bond. 0:04:51.720 --> 0:04:55.320 Because what you'll get is it'll be indexed and you'll 0:04:55.320 --> 0:04:59.160 get a bit over two percent real return above inflation 0:04:59.440 --> 0:05:02.640 and whatever happen. So you start with what is a 0:05:02.680 --> 0:05:06.039 safe investment. The next thing I think you have to 0:05:06.080 --> 0:05:11.680 do is diversify your portfolio. We've talked about the powers 0:05:11.720 --> 0:05:15.440 of diversification. So I don't want to get anybody into 0:05:15.480 --> 0:05:17.919 one bet because I'm going to be wrong. But do 0:05:18.160 --> 0:05:23.200 consider that gold is a form of money and gold 0:05:23.560 --> 0:05:30.320 is that central banks are acquiring gold now as a diversifier, 0:05:30.880 --> 0:05:34.520 and so in your it also is negatively correlated with 0:05:34.600 --> 0:05:36.840 most of the things that you have. In a time 0:05:36.880 --> 0:05:39.719 of great stress, what you'll find is that the gold 0:05:39.760 --> 0:05:43.159 will do well and when the assets don't. The world 0:05:43.279 --> 0:05:46.279 used to have gold as money. That was the way, 0:05:46.360 --> 0:05:49.120 and so the world would look at things differently. They 0:05:49.160 --> 0:05:54.800 would look at the prices of things in gold terms. Now, 0:05:54.880 --> 0:05:57.400 because we have fiat money and we've become used to it, 0:05:57.680 --> 0:06:01.160 we look at the prices of things in money terms, 0:06:01.279 --> 0:06:03.520 and we look at gold that way. I think if 0:06:03.520 --> 0:06:06.800 you started to say it's money, it's a source of money, 0:06:06.960 --> 0:06:09.520 and you have that that's part of the diversify. So 0:06:09.560 --> 0:06:13.280 it would diversify your portfolio. It's a prudent thing to 0:06:13.400 --> 0:06:16.600 have somewhere between ten or fifteen percent of your portfolio 0:06:16.600 --> 0:06:17.120 and gold. 0:06:17.240 --> 0:06:20.320 For thousands of years, people have liked gold, and people 0:06:20.360 --> 0:06:22.680 still seem to like gold. Price of gold are going up. 0:06:22.880 --> 0:06:25.599 Why are people so interested in owning gold in a 0:06:25.640 --> 0:06:26.240 time like this? 0:06:27.160 --> 0:06:32.320 Since seventeen fifty eighty percent of the world's moneies have 0:06:32.440 --> 0:06:37.240 disappeared and all of those that existed have been greatly devalued. 0:06:38.800 --> 0:06:42.320 That's one of the reasons that gold is a storehold 0:06:42.360 --> 0:06:45.359 of wealth and has been for a long time. And 0:06:45.400 --> 0:06:48.000 there's a saying that gold is the only asset that 0:06:48.040 --> 0:06:50.640 you can have that's not somebody else's liability, And what 0:06:50.640 --> 0:06:53.039 they mean by that is that you don't have to 0:06:53.520 --> 0:06:57.000 receive money from somebody else. In the world that we're 0:06:57.040 --> 0:07:01.320 now in and we're seeing it internationally, worry about sanctions, 0:07:01.360 --> 0:07:05.240 there's a worry about taking gold. Those holders central banks 0:07:05.520 --> 0:07:10.160 around the world are concerned about the possibility that let's say, 0:07:10.200 --> 0:07:13.640 what happened to Russia could happen to them, and so on. 0:07:13.760 --> 0:07:17.240 So there's a diversification of that, and it creates a 0:07:17.320 --> 0:07:20.760 dynamic in and of itself because what happens is if 0:07:20.760 --> 0:07:25.520 they are switching, and they are switching to gold away 0:07:25.520 --> 0:07:28.880 from bonds and so on, then that has the effect 0:07:29.080 --> 0:07:32.840 of not only making our supply demand balance that we're 0:07:32.840 --> 0:07:36.080 talking about about the new deficit, it means that you 0:07:36.120 --> 0:07:38.760 can have the selling of gold, which makes that supply 0:07:38.840 --> 0:07:39.840 demand balance worse. 0:07:40.000 --> 0:07:40.160 Now. 0:07:40.160 --> 0:07:42.160 It used to be the case that the US dollar 0:07:42.280 --> 0:07:45.840 was backed by gold, and the US government said, if 0:07:45.880 --> 0:07:48.160 you don't like these pieces of paper, we'll give you gold, 0:07:48.440 --> 0:07:51.440 and ultimately we ended that we're never going to go 0:07:51.480 --> 0:07:51.840 back to that. 0:07:51.880 --> 0:07:55.640 Presumably right, probably, presumably that's right, but not if you 0:07:55.720 --> 0:07:59.640 watch these gold site these cycles, because you have the 0:07:59.640 --> 0:08:04.520 deval euasion, then people feel don't have confidence in the 0:08:04.520 --> 0:08:07.840 fiat system. Over a period of time and through history, 0:08:08.200 --> 0:08:11.240 they've at that point. The way that works is you 0:08:11.320 --> 0:08:13.680 print all this money, then you pray the debt with 0:08:13.760 --> 0:08:17.080 the cheap money, but nobody wants to hold it, so 0:08:17.120 --> 0:08:19.520 then they go back and link it again. It is 0:08:19.680 --> 0:08:25.080 conceivable that you can see a relinking of gold to money, 0:08:25.520 --> 0:08:26.800 but that's way in the future. 0:08:27.200 --> 0:08:30.360 Since the beginning of this year, the dollar against the 0:08:30.360 --> 0:08:33.800 basket of currencies is down about ten percent. Many people 0:08:33.800 --> 0:08:37.000 are worried that they might continue that way devalued. Some 0:08:37.040 --> 0:08:38.600 people say it's not a bad thing because we can 0:08:38.640 --> 0:08:41.960 sell things more cheaply overseas and increase our exports. But 0:08:42.400 --> 0:08:45.040 if people are worried about the dollar going down in value, 0:08:45.200 --> 0:08:48.120 what would you suggest they do buy other currencies or 0:08:48.200 --> 0:08:50.640 go buy things that are not dollar denominated. 0:08:50.760 --> 0:08:54.400 I think their concern would be some version very similar 0:08:54.440 --> 0:08:57.600 to the seventies you just talked about. I remember I 0:08:57.640 --> 0:08:59.600 was clerking on the floor of the New York Stock 0:08:59.640 --> 0:09:03.480 Exchange John August fifteenth, nineteen seventy one, and that is 0:09:03.520 --> 0:09:07.559 when Richard Nixon got on the television and he said, 0:09:07.840 --> 0:09:10.360 in his polite way, this was a wonderful move. But 0:09:11.080 --> 0:09:15.520 the money that you thought you had, the gold was money, 0:09:16.440 --> 0:09:19.600 and what at the time people thought were real, the 0:09:19.640 --> 0:09:21.800 money that we're used to, they would say, or like 0:09:21.880 --> 0:09:23.680 checks in the checkbook. They said, you're not going to 0:09:23.679 --> 0:09:26.800 get your money, you can keep the checks. At that point, 0:09:27.240 --> 0:09:30.440 then we began the seventies, and the seventies was a 0:09:30.520 --> 0:09:34.000 period in which there was both stagflation. The thing that 0:09:34.040 --> 0:09:38.120 we have to worry about is a stagflationary environment because 0:09:38.200 --> 0:09:41.800 all the currencies went down. So when you were looking 0:09:41.840 --> 0:09:45.559 at diversification. The problems that we're talking about are not 0:09:45.679 --> 0:09:49.000 just American problems. We have a significant problem. But if 0:09:49.200 --> 0:09:55.760 they're European problems, they're Japanese problems. There's Chinese problems. No, 0:09:56.600 --> 0:10:00.280 we've lived on promises to be able to take that 0:10:00.480 --> 0:10:03.800 dead asset and converted into money, and now there's not 0:10:03.960 --> 0:10:07.560 enough money to go around. So I would say that 0:10:07.600 --> 0:10:11.040 when you ask the question, would I value in relationship 0:10:11.120 --> 0:10:15.320 to other currencies? Probably, but the other currencies won't want 0:10:15.440 --> 0:10:18.320 much of an appreciation, and so that's why I'm saying 0:10:18.360 --> 0:10:21.600 that something like gold will be the better performing currency. 0:10:21.760 --> 0:10:23.960 Some people worry about this and can tell us whether 0:10:24.000 --> 0:10:26.680 this is realistic or not. In nineteen eighty five, there 0:10:26.679 --> 0:10:29.960 was something called Applause Accords where the United States government 0:10:31.120 --> 0:10:34.080 agreed with other governments that we were going to devalue 0:10:34.120 --> 0:10:37.360 the dollar illegally officially, and it was done in secret. 0:10:37.480 --> 0:10:40.440 Nobody knew it was coming. Is that possibly that the 0:10:40.480 --> 0:10:42.800 government of the United States could again agree with other 0:10:42.840 --> 0:10:44.920 governments we're going to devalue the dollar further. You think 0:10:44.960 --> 0:10:46.560 that's unlikely these days? 0:10:47.160 --> 0:10:49.520 No, I think it's a possibility. Yes. 0:10:49.880 --> 0:10:54.080 It's so interesting in history when you look at what 0:10:54.800 --> 0:11:01.000 happens when governments are in certain positions through history, they 0:11:01.080 --> 0:11:05.560 do the same things, okay, And that means that a 0:11:05.600 --> 0:11:09.040 move like that, or even there could be foreign exchange controls, 0:11:09.040 --> 0:11:11.400 there can be different ways. 0:11:12.640 --> 0:11:15.360 That that that happens. 0:11:15.480 --> 0:11:19.079 Now, my perception is that people in Washington always say, well, 0:11:19.120 --> 0:11:21.880 if a situation was that bad, the bond market would collapse. 0:11:22.160 --> 0:11:24.400 And then the bond market people say, well, the situation 0:11:24.440 --> 0:11:26.880 that bad, Congress wouldn't do this, and they both kind 0:11:26.880 --> 0:11:29.679 of blame each other for not doing anything. Why hasn't 0:11:29.720 --> 0:11:32.720 the bond market collapsed? Ever, the fact that we have 0:11:32.800 --> 0:11:34.880 all this debt over all these years. 0:11:34.679 --> 0:11:38.480 You don't like to say I've experienced this many times. 0:11:40.720 --> 0:11:44.280 I did this analysis in two thousand and seven and eight, 0:11:44.360 --> 0:11:47.480 I went to Congress and everybody said they asked me 0:11:47.559 --> 0:11:50.400 the same question, but we had the problem. Same thing 0:11:50.480 --> 0:11:54.160 happened in Europe. So there's a supply demand, there's a saying. 0:11:54.960 --> 0:12:00.360 You know that everything goes slowly until it happens all 0:12:00.400 --> 0:12:04.680 at once when the problem happens. You know, these things 0:12:04.679 --> 0:12:05.840 happen like that. 0:12:06.480 --> 0:12:08.800 How long did it take you to write this book? 0:12:08.840 --> 0:12:13.040 This is how many books have you now written? For four, Okay, 0:12:13.240 --> 0:12:14.640 And how long did it take to write a book 0:12:14.720 --> 0:12:15.839 like this? 0:12:15.840 --> 0:12:18.360 This is research that I've done over a long period 0:12:18.400 --> 0:12:21.320 of time, So putting it together and getting it out, 0:12:21.400 --> 0:12:24.920 you know, I would say at part time basis, maybe 0:12:25.120 --> 0:12:25.720 over a year. 0:12:26.200 --> 0:12:28.319 Hey, so you built the biggest hedge fund in the world. 0:12:29.080 --> 0:12:31.640 What's the relative pleasure of building the biggest hedge fund 0:12:31.679 --> 0:12:35.000 in the world versus writing a book that's a bestseller? 0:12:35.080 --> 0:12:37.920 As you would know, probably it's a stage in life thing. 0:12:38.360 --> 0:12:41.000 You know, there's a stage in life where you know, 0:12:41.080 --> 0:12:43.880 you compete and you build something, and then there's a 0:12:43.880 --> 0:12:46.199 stage in life where you're passing things along. 0:12:46.840 --> 0:12:47.080 You know. 0:12:47.480 --> 0:12:49.760 So at this stage in life, you and your way, 0:12:49.880 --> 0:12:53.000 me and my way. It's a great, great joy to 0:12:53.080 --> 0:12:56.360 be able to pass along what I've learned. So I'm 0:12:56.400 --> 0:12:56.880 loving it. 0:12:57.080 --> 0:13:00.320 This book is designed to make people feel good or 0:13:00.360 --> 0:13:01.120 to scare. 0:13:00.840 --> 0:13:03.880 People, neither. 0:13:04.880 --> 0:13:08.520 I wanted to convey the mechanics the cause effect relationships 0:13:09.040 --> 0:13:11.559 so that people can understand what's going on and then 0:13:11.679 --> 0:13:16.080 navigating it. I think it's a book that will make 0:13:16.120 --> 0:13:19.440 people worry. But I have a principle which is, if 0:13:19.440 --> 0:13:21.560 you worry, you don't have to worry. And if you 0:13:21.559 --> 0:13:25.200 don't worry. You need to worry, because if you worry 0:13:25.240 --> 0:13:29.240 about something, then maybe you'll prevent what you're worrying about. 0:13:29.440 --> 0:13:33.040 When did you decide to become a writer as opposed 0:13:33.080 --> 0:13:35.480 to just an investor? I mean a lot of great 0:13:35.880 --> 0:13:38.840 hedge funt investors just keep sitting in front of screens 0:13:38.880 --> 0:13:40.800 and so forth. When did you say I want to 0:13:40.800 --> 0:13:43.080 do more than sitting in front of screens. Was that 0:13:43.400 --> 0:13:47.359 a couple of years before you decided to exit Bridgewater? 0:13:48.280 --> 0:13:51.200 No, it was maybe thirty five forty years ago. What 0:13:51.320 --> 0:13:55.360 I learned was that if I was whenever I was 0:13:55.400 --> 0:13:59.400 making decisions, if I would pause and reflect and write 0:13:59.400 --> 0:14:03.319 down the cry that I would use to make that decision, 0:14:03.679 --> 0:14:05.800 it would make me think more deeply about it. And 0:14:05.880 --> 0:14:08.520 then I learned that I could put those into code 0:14:09.160 --> 0:14:11.360 and then back test them so I would know how 0:14:11.400 --> 0:14:14.640 my decision making would work. And so right from then 0:14:14.760 --> 0:14:17.920 thirty five years ago, that's how really I built Bridgewater 0:14:18.200 --> 0:14:22.240 was what are the criteria? Test the criteria over a 0:14:22.280 --> 0:14:24.760 period of time, and then form a game plan. So 0:14:25.080 --> 0:14:27.640 I'd say, thirty five years ago, I've written down I 0:14:27.680 --> 0:14:28.960 call these things principles. 0:14:29.280 --> 0:14:32.920 I've written down. Probably you know, I don't know a 0:14:33.000 --> 0:14:34.320 thousand of them or something. 0:14:34.520 --> 0:14:38.960 For those who haven't followed the hedge fund world. You're 0:14:38.960 --> 0:14:42.240 from Long Island, you went to Long Island University. You 0:14:42.280 --> 0:14:44.440 would say you were not a superstar in high school. 0:14:44.720 --> 0:14:47.480 On the contrary, but you did very well at Long 0:14:47.480 --> 0:14:50.080 Island University, and eventually you got in the Harvard Business 0:14:50.120 --> 0:14:53.520 Goal and you started your career, and your career almost 0:14:53.600 --> 0:14:56.840 went south when you punched your boss in the mouth, right, No, 0:14:57.000 --> 0:14:57.360 that was. 0:14:57.640 --> 0:15:02.520 My opportunities began, and I got fired when I got fired, 0:15:03.000 --> 0:15:04.680 then I got fired. 0:15:04.680 --> 0:15:07.840 You started your own firm, and you borrowed some money 0:15:07.880 --> 0:15:10.120 at some point from your father because the firm hadn't 0:15:10.160 --> 0:15:12.760 done that well. And what did you ever think that 0:15:12.840 --> 0:15:14.520 maybe you weren't going to make it? And at the 0:15:14.560 --> 0:15:15.760 point did you were? 0:15:15.800 --> 0:15:18.640 So yeah, let me tell you about that incident because 0:15:18.960 --> 0:15:22.760 it was one of the worst cases and one of 0:15:22.800 --> 0:15:27.120 the best cases for me. So this is nineteen eighty 0:15:27.240 --> 0:15:30.720 eighty one, and I had calculated that the United States 0:15:30.840 --> 0:15:32.680 lent more money to countries than they're going to be 0:15:32.720 --> 0:15:35.880 able to pay back, and that there would be a 0:15:35.880 --> 0:15:41.480 big debt crisis, and then in that happened Volker type money. 0:15:42.120 --> 0:15:48.240 Nineteen eighty two, Mexico defaults on its dead and I 0:15:48.320 --> 0:15:51.760 got a lot of attention because I anticipated this and 0:15:52.200 --> 0:15:55.120 I thought I was right and I couldn't have been 0:15:55.120 --> 0:15:55.640 more wrong. 0:15:55.720 --> 0:15:56.760 I thought we were going to have a. 0:15:56.680 --> 0:15:59.760 Big economic crisis because of this, and what happened in 0:15:59.760 --> 0:16:04.440 stead was the stock market went up, they eased monetary policy, 0:16:05.000 --> 0:16:07.400 and I have a terrible. 0:16:07.080 --> 0:16:09.200 Mistake and it cost me money. 0:16:09.280 --> 0:16:11.160 I was so broke that I had to borrow four 0:16:11.200 --> 0:16:14.040 thousand dollars from my dad in order to pay for 0:16:14.160 --> 0:16:18.440 family bills. And this was painful, and that changed my 0:16:18.520 --> 0:16:20.240 approach to everything two ways. 0:16:20.320 --> 0:16:20.840 Two ways. 0:16:21.360 --> 0:16:25.520 First, it made me think, how do I know I'm right? 0:16:25.640 --> 0:16:28.720 It gave me the humility I needed to balance with 0:16:28.760 --> 0:16:31.880 my audacity, and it let me understand how do I 0:16:31.920 --> 0:16:35.240 play this game going forward? And I understood the power 0:16:35.680 --> 0:16:40.400 of diversification and how diversification could reduce risk by up 0:16:40.440 --> 0:16:44.160 to eighty percent without reducing returns. And that was then 0:16:44.280 --> 0:16:47.200 the bottom of Bridgewater, and then from then on it 0:16:47.280 --> 0:16:50.280 was straight because of the lesson I learned. Writing down 0:16:50.360 --> 0:16:52.920 these things and these experiencing and making the most out 0:16:52.960 --> 0:16:56.880 of mistakes as learning experiences has been sir an investor. 0:16:56.960 --> 0:16:59.520 You always have ups and downs. Nobody does everything perfectly, 0:16:59.600 --> 0:17:00.840 not even buffet right. 0:17:00.960 --> 0:17:04.639 But you know what changed that from that point the 0:17:04.720 --> 0:17:09.879 returns were in my thirty some one years since of 0:17:10.000 --> 0:17:13.840 doing that, since that point, it was I think about 0:17:13.880 --> 0:17:19.520 eleven point eight percent return with no year down significantly 0:17:20.440 --> 0:17:26.439 other than two thousand, twenty twenty during COVID and that 0:17:26.560 --> 0:17:28.840 was down thirteen percent, but the other years were down 0:17:28.920 --> 0:17:32.960 like two percent. Because I learned the power of diversification. 0:17:33.280 --> 0:17:36.840 You know, one of the things about diversification is that 0:17:37.720 --> 0:17:42.080 you can reduce the returns the risks without reducing the 0:17:42.160 --> 0:17:48.600 turn My mantra is fifteen good uncorrelated return streams because 0:17:49.960 --> 0:17:52.960 if you if they engineered to have about the same 0:17:53.400 --> 0:17:56.920 expect the return and you have that kind of diversification, 0:17:57.280 --> 0:18:00.440 you will lower the risk by about eighty percent, which 0:18:00.920 --> 0:18:03.879 raises the return to risk ratio by a factor of five. 0:18:04.359 --> 0:18:08.919 So that's the power of the game plan. That's what 0:18:09.040 --> 0:18:09.399 helped me. 0:18:09.560 --> 0:18:11.600 You want to get the deficit down the three percent 0:18:11.640 --> 0:18:14.560 of GDP? Yeah, you want to do it three ways. 0:18:14.840 --> 0:18:19.960 Cut the interest rates, cut spending, and increase. 0:18:19.640 --> 0:18:22.480 Taxes each bi mondus amounts right, and do it. 0:18:22.440 --> 0:18:26.320 Over three years, yes, three, three to three. Okay, what's 0:18:26.359 --> 0:18:27.480 the chance of that happening? 0:18:30.680 --> 0:18:31.679 Okay, five percent? 0:18:32.200 --> 0:18:34.160 Right, you've been in Washington. 0:18:34.320 --> 0:18:36.400 I was in Washington the other day. 0:18:36.400 --> 0:18:38.760 Okay, and members of Congress tell you this is a 0:18:38.800 --> 0:18:40.399 brilliant idea. We wish we had thought of it, and 0:18:40.400 --> 0:18:41.040 we're going to do this. 0:18:41.560 --> 0:18:44.399 I'll tell you what members of Congress tell me, which 0:18:44.440 --> 0:18:49.679 is very interesting both sides. Nobody agree. Nobody disagrees with 0:18:49.720 --> 0:18:53.000 what I just said. It's very interesting. They all agree 0:18:53.320 --> 0:18:55.600 that has to go to three percent. They all agree 0:18:55.640 --> 0:18:58.120 it has to come from those three things and so on. 0:18:58.520 --> 0:19:01.919 And then they say, but I can't say that because 0:19:01.960 --> 0:19:08.000 we're now in an absolutist political environment in which if 0:19:08.040 --> 0:19:12.240 I say they want the public, my electorate wants me 0:19:12.320 --> 0:19:15.200 to say, I will take a pledge of no new taxes. 0:19:15.400 --> 0:19:19.000 So because of that absolute if you don't take a pledge, 0:19:19.080 --> 0:19:22.200 then it's like this with the constituents. The constituents say 0:19:22.560 --> 0:19:26.040 something like, are you telling me that you're going to 0:19:26.160 --> 0:19:30.399 compromise with those people and you're going to raise my taxes? Okay, 0:19:30.560 --> 0:19:33.000 no way, I don't want you in government. And so 0:19:33.280 --> 0:19:35.640 they won't convey what they truly believe. 0:19:36.160 --> 0:19:39.320 What about yourself? Why don't you go into government? Why 0:19:39.320 --> 0:19:42.040 have you thought about you're being secretary Treasury, chairman of 0:19:42.040 --> 0:19:44.520 the Federal Reserve, run for the Senate or something, and 0:19:44.720 --> 0:19:46.640 solve those problems while you're in government. Have you ever 0:19:46.680 --> 0:19:48.120 thought of that scares. 0:19:47.800 --> 0:19:48.760 The Daylight's Adam. 0:19:51.000 --> 0:19:55.080 Let me say, I have the greatest appreciation and respect 0:19:55.480 --> 0:19:58.359 for those who go into public service and serve in 0:19:58.440 --> 0:20:02.320 this kind of an environment. And I think there's a 0:20:02.400 --> 0:20:06.159 question of whether with the population. It's not just a 0:20:06.280 --> 0:20:10.400 leadership question, it's a can you lead question? You can 0:20:10.440 --> 0:20:14.320 bring capable people into that job. But we're in a 0:20:14.400 --> 0:20:17.840 situation where everybody's fighting over every decision all the time 0:20:18.160 --> 0:20:22.280 and will tear everybody down if they're so it's a 0:20:22.359 --> 0:20:23.359 very difficult situation. 0:20:23.359 --> 0:20:25.280 Now somebody is watching, they say, I want to be 0:20:25.320 --> 0:20:28.280 the next Ray Dalio who builds a gigantic hedge fund, 0:20:28.440 --> 0:20:32.760 does well financially, well respected by people, writes best selling books. 0:20:33.080 --> 0:20:35.560 What's the secret to that? What do you do? 0:20:35.840 --> 0:20:38.359 Make your work and your passion the same thing, and 0:20:38.440 --> 0:20:41.359 don't forget about the money part. In other words, I 0:20:41.359 --> 0:20:43.720 didn't work for money, but I had a passion. I 0:20:43.720 --> 0:20:46.879 fell in love with the game of investing, and I 0:20:46.920 --> 0:20:49.040 think you have to make your work and your passion 0:20:49.160 --> 0:20:51.760 the same thing. But you do have to pay attention 0:20:51.880 --> 0:20:54.120 to the money part, because if you're not earning an 0:20:54.119 --> 0:20:57.520 adequate amount of money, then that's a problem. So and 0:20:57.560 --> 0:21:00.200 I don't think the best life is for them those 0:21:00.240 --> 0:21:02.680 who will make the most amount of money. There's a 0:21:02.800 --> 0:21:06.920 very low correlation between the level of happiness or well 0:21:06.960 --> 0:21:09.760 being past the basic level of income. 0:21:10.080 --> 0:21:15.520 The highest Really, you're just telling me that, now, wow, well. 0:21:15.359 --> 0:21:20.000 We know that which has the highest level of happiness 0:21:20.280 --> 0:21:23.399 and well being generally is a sense of community. Do 0:21:23.440 --> 0:21:26.480 you have a sense of community your friends in that community. 0:21:26.680 --> 0:21:29.640 But anyway, I would say, don't over exaggerate the power 0:21:29.680 --> 0:21:31.560 of money. You need to have enough and you have 0:21:31.640 --> 0:21:36.119 to pursue your passion. And you know, have enough money 0:21:36.119 --> 0:21:40.000 and if if it's if it's it's never work. If 0:21:40.080 --> 0:21:41.280 you're pursuing your passion. 0:21:41.320 --> 0:21:44.080 What do you think is the best investment vehicle for 0:21:44.160 --> 0:21:49.000 a middle class American? That is risk adverse and inflation 0:21:49.080 --> 0:21:53.480