Ray Dalio: prediction

Transcript context

…The very first sentence of the introduction in your book is this: “The times ahead will be radically different from those we’ve experienced in our lifetimes, though similar to many times in history.” Do we see this today in current market prices? And if so, which ones? We certainly see it today in market prices and in everything that’s happening. There are three — sometimes, maybe we could stretch that to five — big things that are happening. They are reflected in market prices and the dynamics behind them, and their change will be reflected in changes in market prices. Those three big ones are, first, that which is happening with money and credit. In other words, when you get close to a zero interest rate, and you spend a lot more money than you earn, then the government does that, that means that a lot of money is printed, and it moves its way through the system in a way that is reflected in market prices. That is what is happening now. The second is the very large internal conflicts that we’re having that are due to wealth gaps, political gaps, and so on, that influence the left and the right and the dynamic between them, that affects tax policies, that affects capital flows and the like. They’re reflected in market prices and will change as those circumstances change. The third big influence is the rise of a great power, China, to challenge the existing leading power and the existing world order. That is being reflected in market prices but will be reflected more as those circumstances change. Those are the three big influences — to answer your questions — that are reflected, maybe not yet adequately, and we have to look ahead of what things will change. The other two that have been reflected through history — and I didn’t have a full appreciation of until I studied the last 500 years of history — those two are technology and inventiveness changes. We’re accelerating the rate at which they are occurring. That adaptability and change is affecting our lives in big ways, so you cannot ignore the technologically and inventiveness changes. The fifth is acts of nature. The one thing that was interesting to me when I studied the last 500 years of history is that acts of nature — and they could be climate-related droughts and floods and pandemics — had cost more lives and toppled more civilizations than anything else, including wars. They are something that comes along irregularly. When you have the pandemic or the drought or that event that comes along once in 100 years or so, they have had big effects, too, so pandemic is a reminder of those. Those are the drivers, and they will remain the main drivers, and as they change, prices will continue to change. If I look today, say, at equities prices, they seem fine. If I look at the 10-year yield for the US, it’s not crazy high. Should I just assume that these matters are more or less going to work out fine, given those market prices? Or are those prices wrong?…

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