What Ray Dalio said this week about future US economy / ... REI

Question

Ray Dalio is one of the few guys I follow - he built the world's largest hedge fund Bridgewater and wrote one of my favorite books: Principles.

This week he commented on the US-Chinese trade issues and the devaluation of the Yuan. I have been on record and I remain bullish for real estate in the US in general; and in particular for Milwaukee, which seems to be re-inventing itself. Even though we are technically long overdue for a correction, supply/demand and cost of new construction have not changed and it will take years to balance out and allow the housing market to soften. And even then I don't see prices come down much, based on how stable home prices were in the last 5 recessions, except the last one of course. So I'll keep buying, next one on Tuesday. What do you guys think?

Here is the link:

https://www.linkedin.com/posts...

And here is his post:

Tyler Kastelberg · Answer

@Marcus Auerbach

Very interesting read! Thanks for sharing.

Andrew C. · Answer

Interesting to look at the past focus and then look at it in the present tense and state of the US/World Today.  How's the US Economy looking NOW!?  Ray certainly didn't predict a virus, but that was just the match that set off the rest of the fiscal issues in the US/World that has us in this exponential money printing, QE attempts and purported "bail outs".

I think congress forgets you can't spend your way out of debt (including nearly 20 years of war that we "put on the credit card" rather than pay for it as we spent it).  A capitalist corporate society is not predicated on bail outs, but it's predicated on Fiscal Conservatives who will survive and thrive via bankruptcy, mergers, and buyouts, not "bail outs".  Those companies who are heavily debt leveraged and who don't have sound balance sheets are supposed to be engulfed by companies that were led and managed responsibly.

So many places to go with a conversation like this.  I'm not advocating that no one should ever need help, but there have been long standing issues with the way our country's fiscal policy and management has been allowed to occur, for decades.  If everyone in the US ran their household budget the way the government/state/feds run a budget, run up debt, sell more and more bonds, and print more and more money - everyone would be broke.

Ultimately, there's only one fundamental way to balance a debt-laden budget: Increase Revenue (taxes/fees in the case of government) and CUT Spending!

Devon Kyle · Answer

If you want to have the best insight into the global macro economies with the real players (like Dalio), take a look a realvision tv. You can watch a number of their interviews for free on Youtube including guest like Kyle Bass, Jim Rogers etc.

Brock Mogensen · Answer

Love Ray's insight on economic trends!  One of the few people I trust to make predictions.

Bryan Devitt · Answer

@Marcus Auerbach you're forgetting one major part of supply and demand... the ability to purchase. The housing shortage won't be fixed any time soon, even in a downturn, but what will change is how many people can afford rent or get mortgages. Even if the amount of housing stays the same, if the buyer/renter pool shrinks then it changes the equation dramatically

Marcus Auerbach · Answer

@Robert C. yes true, that's why I try to keep in mind what has happened in 2008-2012 and build my business so it can weather a strom like that; even prosper. I sometimes wish I could go back, with what I know today and buy more vigerousley. It won't happen, but I still want to be prepared. We maintain a very heathy equity share in our portfolio, I have been growing our working capital base and credit lines.  We will have very little capex over the next 10 years and we could run fine with a very large vacancy or even rent cuts. I am an optimist, but I also like to be prepared. So, yes Ray is right on, you can't build your business on what would have worked the last 10...

Robert C. · Answer

@Marcus Auerbach, Funny, I was literally reading this exact thing when your post popped up. One line that stuck out to me - "The worst thing one can do, especially late in a paradigm, is to build one’s portfolio based on what would have worked well over the prior 10 years, yet that’s typical."

I guess that helps your thesis on real estate remaining strong through the next shift.

What Ray Dalio said this week about future US economy / ... REI

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