5 MINUTES AGO! Ray Dalio Shared A Terrifying Message...
Summary
TLDRThe speaker candidly discusses the inevitability of economic hardships, drawing parallels to historical patterns like the Great Depression. They emphasize the importance of understanding economic cycles and mechanisms to navigate them effectively. The advice includes stress-testing personal finances, securing savings, and being informed about historical economic responses. The speaker also touches on the significance of education, the potential for political instability during economic downturns, and strategies for personal and portfolio resilience, such as diversification and considering assets like gold as a hedge against inflation.
Takeaways
- 🌪️ The speaker emphasizes the inevitability of economic hardship, suggesting that individuals and companies should prepare for a 'brutal' reality where many will face job losses and financial struggles.
- 📈 Historical patterns of economic cycles are highlighted, with the speaker noting that understanding these patterns is crucial for navigating future economic downturns.
- 💸 The role of central banks in economic crises is discussed, particularly their actions during times of zero interest rates, such as printing money and buying financial assets to stimulate the economy.
- 🏦 The speaker explains the mechanics of government and central bank interactions, detailing how governments issue bonds and central banks purchase them to inject liquidity into the economy.
- 💼 For individuals, the importance of managing personal finances wisely is stressed, including having a plan for worst-case scenarios and understanding one's income, expenses, and savings.
- 🌍 The speaker discusses the potential for increased political conflict and the rise of strong leaders during times of economic turmoil, drawing parallels to historical events like the rise of Hitler and the lead-up to World War II.
- 🏛️ The value of education is underscored, with the speaker advocating for a well-rounded education that includes not just facts but also civic responsibility and social skills.
- 🧘 The benefits of meditation and maintaining a clear mind are mentioned as tools for making better decisions, especially in times of stress and uncertainty.
- 📊 The speaker outlines five major factors affecting the world: debt and monetary creation, internal conflict, the rise of new world powers, natural disasters, and human adaptability and innovation.
- 💼 Investment strategies for the current economic climate are suggested, including diversification, focusing on assets that can hedge against inflation, and being cautious of political and social conflicts that could impact financial markets.
Q & A
What is the hard truth about economic downturns as mentioned in the transcript?
-The hard truth is that during economic downturns, companies will go under, people will lose their jobs, and some will struggle to find their next meal. It's a level of brutality that most have not experienced, and it's a recurring pattern throughout history.
What happened in 1932 and 2008 in response to hitting zero interest rates?
-In both 1932 and 2008, when interest rates hit zero, central banks started printing money and buying financial assets, specifically government bonds, to stimulate the economy.
Why do central banks buy government bonds?
-Central banks buy government bonds to inject liquidity into the economy. When someone buys a government bond, they are essentially lending money to the government, which promises to pay back with interest. The central bank's purchase of these bonds is a way to increase the money supply and stimulate economic activity.
How does the speaker suggest individuals prepare for economic downturns?
-The speaker suggests individuals should look at their income, expenses, and savings, and perform a stress test to ensure they can sustain a certain lifestyle even if their income falls or disappears. They should also consider getting unemployment insurance or other safety nets.
What historical example is given to illustrate how to manage a crisis effectively?
-The example given is Franklin D. Roosevelt's response to the Great Depression. He took measures to keep the economic situation orderly and reorganized the system to work better, addressing the wealth gap and implementing changes that could help the country recover.
What is the importance of education according to the speaker?
-Education is considered the most important thing. It provides individuals with the necessary knowledge and skills to be good citizens and to operate effectively in jobs. The speaker emphasizes the need for education that goes beyond basic literacy and numeracy to include behavior and civility.
What does the speaker suggest for people to do during times of crisis based on historical perspective?
-The speaker suggests that people should have a plan for worst-case scenarios, understand how to deal with problems, and find their path. They also mention the importance of meditation for reducing stress and making smarter decisions.
What are the three big things happening in the speaker's lifetime that didn't happen before?
-The three big things are: 1) The amount of debt creation and monetization and its impact on the system, 2) The level of internal political, social, and economic conflict, and 3) The rise of a great power (China) challenging the existing world order.
How does the speaker view the role of cash and bonds in the current economic environment?
-The speaker views cash as 'trash' and believes that bonds and debt are not going to be good investments. They suggest positioning oneself for inflation and avoiding or properly positioning in financial assets.
What advice does the speaker give regarding portfolio diversification?
-The speaker advises investors to look at a four-quadrant box representing rising and falling inflation and real growth relative to discounted values. They suggest reducing risk and raising returns by having more in the upper right quadrant (rising inflation) and diversifying investments to include inflation hedge assets.
Outlines
🌪️ Economic Realities and Historical Patterns
The speaker begins by emphasizing the harsh truth that no external force will save individuals or companies from the inevitable economic downturns. Drawing from historical precedents, they explain that economic cycles are characterized by periods of boom and bust, often triggered by excessive debt. The speaker highlights the 1930s and the 2008 financial crisis as examples where central banks responded to zero interest rates by printing money and purchasing financial assets. They stress the importance of understanding these cycles not just as historical events but as mechanistic processes that can be managed with knowledge. The speaker also touches on the role of central banks in stimulating the economy and the limitations they face when interest rates hit zero.
💼 Personal Finance Strategies in Times of Crisis
In this paragraph, the speaker shifts focus to personal finance, advising individuals to assess their income, expenses, and savings, and to conduct stress tests to ensure financial security during potential income loss. They discuss the importance of having a plan, such as obtaining unemployment insurance, and the significance of education in preparing for and navigating economic downturns. The speaker also reflects on historical examples of how different countries managed crises, citing the political changes that occurred in the 1930s, including the rise of Hitler and the lead-up to World War II. They emphasize the value of education, not just in terms of basic skills but also in fostering good citizenship and the ability to contribute to society.
🌟 Adapting to Unprecedented Times
The speaker discusses the unique challenges of the current era, noting that several significant events are occurring that have no direct precedents in their lifetime. They mention the decreation and monetization of money, internal conflicts, and the rise of China as a global power. These factors, along with natural disasters and pandemics, have contributed to a complex global situation. The speaker also reflects on their own learnings from history, such as the 1971 Nixon shock and its parallels to the 1933 banking crisis. They emphasize the importance of understanding these historical events to navigate the present and prepare for the future.
📉 Navigating Financial Markets and Political Shifts
This paragraph delves into the financial market dynamics and the impact of political ideologies on the economy. The speaker anticipates a period of stagflation, where the balance between debt and credit becomes challenging. They discuss the end of a long bull market and the shock to investors, leading to a shift in financial strategies. The speaker also expresses concern over the potential for increased political extremism and the risk to the system when ideologies take precedence over the stability of democratic processes. They advise investors to diversify their portfolios and to be prepared for a period of economic and political turbulence.
🌐 Global Currency Dynamics and Investment Strategies
The speaker addresses the role of currency in a global context, noting the challenges faced by fiat currencies and the importance of considering currency as both a medium of exchange and a store of wealth. They discuss the implications of financial claims outpacing real assets and the need for investors to position their portfolios to protect against inflation and other economic shifts. The speaker also touches on the potential for increased government controls on capital markets and foreign exchange, advising investors to be aware of these risks. They advocate for a balanced portfolio that includes hedges against inflation and for considering non-traditional assets like gold as a form of insurance against economic instability.
💎 The Role of Gold in Portfolio Diversification
In the final paragraph, the speaker focuses on gold as a key component of portfolio diversification. They highlight gold's role as a store of wealth and its historical importance during times of crisis. The speaker compares gold to an insurance policy, providing stability when other assets may decline in value. They discuss the benefits of including gold as an overlay in a portfolio, suggesting it should constitute about 15% of the portfolio without displacing other assets. The speaker concludes by reiterating the importance of a well-balanced portfolio that can adapt to changing economic conditions.
Mindmap
Keywords
💡Zero Interest Rates
💡Quantitative Easing
💡Debt Crisis
💡Stagflation
💡Wealth Gap
💡Central Bank
💡Government Bonds
💡Inflation
💡Populism
💡Financial Assets
💡Portfolio Diversification
Highlights
No one is coming to save anybody; individuals must take responsibility for their own financial security.
Historical patterns of economic cycles repeat, with companies going under and people losing jobs during downturns.
Understanding the mechanistic causes of economic events is crucial for dealing with them effectively.
Debt crises, like those in 1929-1932 and 2008, are caused by excessive debt accumulation during boom years.
When interest rates hit zero, central banks print money and buy financial assets to stimulate the economy.
Governments issue bonds to raise money for projects, and central banks buy these bonds to inject liquidity into the economy.
Central banks have the unique ability to create money and credit, unlike governments, companies, or individuals.
The average person should stress-test their financial plan to ensure they can weather economic downturns.
Education is fundamental for individuals to succeed and is more important than ever in times of crisis.
Historical examples, like Roosevelt's response to the 1930s crisis, show how to manage economic downturns effectively.
Internal conflict and the rise of extremist leaders can accompany economic crises, as seen before World War II.
Meditation can help individuals make better decisions and reduce stress during challenging times.
Surprises in financial markets can often be understood by studying historical precedents.
The rise of China and other global powers is challenging the existing world order, affecting economic and political landscapes.
Natural disasters and pandemics can have a more significant impact on the economy than human actions.
Adapting to stagflation and the supply-demand balance for debt and credit is crucial for investors.
The ideological allocation of resources is becoming more prevalent, potentially leading to economic inefficiencies.
Investors should diversify their portfolios to protect against inflation and the devaluation of financial assets.
The role of currency as a store of wealth and medium of exchange is shifting in a world of fiat currencies.
Gold can serve as an effective hedge against inflation and economic uncertainty.
Transcripts
I'm going to be super blunt to anybody
watching right now and Ry if you think
that I'm wrong I trust that you will
jump in no one is coming to save anybody
and that's the hard truth and if I look
at history and even if I listen which I
have listened to literally every word
said on the subject publicly anyway that
this is just going to suck like there is
going to be a level of brutality that
most of us have not experienced in our
lives companies are going to go under
people are going to lose their jobs
there are going to be people that are
going to struggle to find their next
meal this same things happen over and
over again through time for basically
the same reasons a lot of these things
happen once in a lifetime you know and
if you don't go back and see how they
worked over time then you're in trouble
so there's a pattern I could describe
the pattern that there's a pattern that
happens over and over again and we're in
a particular spot in the pattern and
then to understand it not just because
it happened before but to understand
mechanistically how it happens and then
one has a sense of how to deal with it
just like in
1929 to
1932 there was a debt crisis that came
as a result of an excessive amount of
debt in the boom years and then when you
have that in 1932 we hit zero interest
rates and when they hit zero interest
rates in 32 like in
2008 Central Bank Prince money and buys
Financial assets what happens in these
Cycles is that normally uh central banks
can stimulate the economy by lowering
interest rates but when you hit zero
interest rates that doesn't work so the
last time it hit zero interest rates was
1932 and what they did in 1932 was the
same thing they did in 2008 and that is
that the central banks Prince a lot of
money and buys government bonds and so
we're doing that now and just to be
clear the reason that they're doing that
is so somebody has bought a Government
Bond the government is basically saying
hey you dear person lend me the money
I'm going to build something roads
whatever but I'm going to pay you back
in a year two years 10 years whatever
plus interest I would assume that makes
it worthwhile and the reason that the
government is going in and buying those
is to get back liquidity to the people
that have loaned them that money yes
because think of it this way the s Cal
government and also companies and
individuals don't have the capacity to
create money so the central government
has the right to determine they can tax
people they can get money from people
and they can spend money on whatever
they want to spend money on but they
don't have the right to print money and
create money in credit like the Central
Bank does central bank is the Federal
Reserve similarly the federal res
Reserve does not have the right to spend
money and determine how it's spent
that's for congress every individual
every company and every government has a
certain amount of money that comes in in
the form of income a certain amount of
expenses and then a certain amount of
savings so you do individually and it
works the same way for everyone so that
if their income Falls to be less than
their expenditures they're in trouble
unless they have a good savings and then
they go to the savings so all around the
world there are lots of entities that
are in trouble in that way so the
government the two parts of the
government the US government they have
to give money and so they print money we
call it print there's not even paper
much it's digitally create money and
then that comes in the form of loans
okay so basically they're digitally
creating money which they're allocating
to the government and then the
government is deciding how to disperse
those funds yeah the Federal Reserve
will buy government bonds so it's a
transaction of buying it and they will
also buy private bonds they might pick a
company many companies and they'll say I
will buy your bonds which is the
equivalent I will lend to you that's
happened through history so what we're
going through is the same process as
happened in the 1930 to 1945 period what
can the average person take away from
that they don't have bonds they they
don't think like that they may not even
understand what their 401K is or they
may not even have a 401k so how do they
navigate this is it just head down do
your best to weather the storm or is
there actually something that they can
learn from the historical perspective
and move on now to make this easier for
them yeah it's the same for every
individual same for every company if you
understand this then you understand well
there are three things the first is look
at your income your expenses and your
savings and then do a stress test so
that you get yourself secure if you were
to lose your income or if the income
were to fall Beyond a certain level and
you play that out maybe that's means you
go get unemployment insurance or
whatever how long can you live in in an
acceptable lifestyle and do you have a
savings that is adequate for that okay
so what you do is you calculate if I
lived in a simpler lifestyle and I had
this amount of earnings how many months
how many months or years Could I Live
acceptably what countries or what
periods of time has going through this
kind of Crisis been managed well so that
we come out the other side of the as
little sort of pain and suffering as
possible well an example would be the
differences in the way Roosevelt did it
so again 1929 to 32 interest rates hit
zero they print money we had a large
wealth Gap and then they sat down and
they figured out how do we keep it
orderly and how do we change the
circumstances whether it's taxes or how
do you reorganize it so that the system
works well there is a risk also at the
same time because the world is going
through that there's a risk of conflict
so in Germany Hitler came in power in
1933 and he came in power in 1933
because there was a lot of internal
fighting as to try to bring produce
order because everybody the left and the
right you know the Communists and the
fascists and they're all fighting about
wealth cuz everybody's fighting about
wealth when you have a downturn and then
they were democracies four democracies
existed then that chose not to be
democracies because they became so
disorderly that they wanted some strong
leader to take charge and run the
country and then of course we had a
bunch of those types of leaders and then
they had a war that's how World War II
happened so when you look at that that's
kind of the political landscape but back
to the average man in terms of his
finances I would say the important thing
is those three elements to have a plan
and maybe to have a plan with uh both
your family what's the importance of
Education in you know when we start
thinking about protecting um successive
Generations how much of that comes down
to education education is the most
important thing um I was raised with a
very modest economic background my dad
was a jazz musician my mom was a
stay-at-home mom but I was lucky to have
parents who cared for me and I went to a
public school I got a good education and
I came out to a world of equal
opportunity and I believe that those are
fundamental Necessities that you have to
know how to have an education of facts
like you have to know how to read write
and arithmetic but you also have to know
how to behave well with others to be a
good citizen operate in a civil way to
be able then to go into jobs and that
that education can be anything that
works I think the big thing is you know
three big things on what I think work
should be make your work and your
passion the same thing and make it
economic if it works that you love your
work you'll probably be better at your
work so you want those things and then
there's the economics of it so it could
be anything from learning trades
whatever it may be education certainly
does not have to be College college is
overemphasized so as this next 3 to 5
year part of the cycle hits us what is
one thing that people can do that you
know from the historical perspective
will most insulate them from the
probably emotional and maybe Financial
damage whatever you think is more
important well the things that I thought
about some of the things I mentioned
earlier the plan for uh the worst case
scenario and make it terrific is one of
the things the understanding how to
triangulate well to deal with whatever
problems that you're going to face and
how to work that through to find the
PATH and find your nature but also uh
one thing that's helped me a lot is
meditation it's healthy CU it reduces
stress and it also makes you smarter to
make the decisions well because if you
have the
equinity that centeredness that com
centeredness and you have your plan and
you triangulate well with others so that
you can get all the best advice and
don't have to approach it in your own
head you know you're a long way there
one of the things I learned really 1971
and then repeatedly is that surprises
that happened in my lifetime happened to
me many cases were for things that
didn't happen in my lifetime but
happened in Prior lifetimes such as in
1971 I was clerking on the floor of the
New York Stock Exchange August 15th
Nixon sever the relationship between
gold and the dollar so essentially
defaulting and I walked on this Stock
Exchange I said financial crisis and I
would expect it to be down a lot it was
up a lot I studied history and found
that the exact same thing happened in
March 5th 1933 with Roosevelt doing the
same thing basically on the radio and
then I understood things better so what
happened for me over the last number of
years is there are three big things that
are happening in my lifetime that didn't
happen and I actually found with three
research five so the first is the amount
of decreation and
monetization of that and how it's
carrying through the system the second
is the amount of internal political
social economic conflict that is now
going on the third is uh the rising of a
great power to challenge the existing
World Order and the existing world power
of China and the geopolitical in which
you know when I was born 1949
four years after the New World War to
began in 45 and the United States of
course was a much more dominant country
then had 80% of the world's gold 50% of
the world's economy the Monopoly on
military power because of nuclear and
all of that and it's declined on a
relative basis and that led me to do
research which I needed to do the last
500 years of research to follow I wanted
to study the rise and decline of
currencies Reserve currencies and their
empire irus and I went back and in doing
that I also discovered that their acts
of nature actually had bigger effects
than the first three of those even with
the wars because of droughts floods and
um pandemics and then number five was
the greatest of course is man's capacity
to adapt and invent because in one way
or another if you look at that per
capita income Rises living standards
rise over periods of time but these big
cycles and these big events are dominant
so those are I think almost everything
can fall into those five categories you
know so that's how I look at it I think
that um we're in a period in which
there's a supply and demand for debt and
credit because one man's debts are
another man's assets and um that is
making us move into a stagflation kind
of environment in other words the
tradeoffs between the two will become
more difficult but I think that number
two influence the political is the most
important I think we have been used to
being in an environment in which
economics ruled you know you'd have a
global economy and um those who could
produce items more efficiently or
cheaper would get the business and they
would raise their living standards and
other places you know it was a global
competition largely run by economic
considerations and resources would shift
that way I think we're now in that
doesn't exist as much that way and
there's been a transition to an
ideological allocation of resources and
so on such as you know the um
acquisition by Elon Musk of Twitter it's
not a financial transaction as much as
it is for the purpose it'll have
controls and when we have the conflict
such as with Disney and D santis in
Florida and those political ideologies
it's the belief that um economics has
got to fall within that agenda that'll
have very big implications I think and
then of course this external looking at
it Year bye this is the third year of
the expansion with a very aggressive
monetary policy so we're in the part of
the typical expansion where there's a
lot of inflation pressures because it
happened in a giant big way and
everybody's long the world it's the end
of a paradig time because everybody
believes that they want everything to go
up and of course that creates a dynamic
where policy is long everything goes up
and of course that happens by creating
money and credit and which creates debt
and that dynamic means that you must
have a decline in real wealth measured
by that because that's the financial
wealth has become enormous relative to
the real wealth everybody who's holding
bonds or assets particularly the debt
assets believes or financial Assets in
general which are just journal entries
they're claims but they believe that
they can take that buying power and sell
it and buy goods and services and they
can't and by its necessity there must be
negative real returns negative returns
relative to buying power so if we take
it chronologically I think there's the
short-term cycle which is usually the
business cycle takes you know 7 years on
average and the give or take depending
on where you start the cycle give or
take a few years I think we're moving
along here quicker so we're now going to
be in a very tight environment and that
changes everything so when we look at
the returns of equities and we look at
the well-being of companies you see that
the cost of Interest relative to the
expected returns of equities creates a
squeeze on equities changes the
economics a lot of borrowing has been
done at much lower interest rates and so
on the return on equity for a company
versus the return uh the cost of debt is
changing and all of those are changing
and like all bubbles or Paradigm shifts
the
mentality that did exist we don't have
to worry about inflation cash is a safe
place and so on gets a shock there's a
punch in the face there's been a 40-year
bull mark market and there's a punch in
the face to the all investors and when
that happens things that were never
supposed to happen because everybody
believes in the tech companies which is
the same as the nifty50 or the do
companies they get hammered right 75%
decline in heywood's funds and so that
causes the adaptation so we're in the
beginning of that adaptation that is
most similar I think to the 1970s period
and um it becomes Financial so I think
as we come to elections and that'll have
economics and markets has a big impact I
think that you'll see greater political
extremism coming out of that moderates
are leaving and even those are running
are populists populists are people who
will fight to win and will not accept
losing and we fight for their
constituency so you'll see more populism
the left and more popularism the right I
look at
2024 and I'm worried about the neither
side accepting losing and I think that
there's a big risk that the system is in
Jeopardy because history has shown when
the causes that people are behind are
greater importance to them than the
system the system is in Jeopardy um
those types of things change the world
landscape I'm emphasizing the United
States and certainly Europe is in that
type of a position
so I think that when I look at it it'll
be very important to not only diversify
well but to be able to be long and short
different Assets in order to perform
well in that environment my main things
are First Cash is
trash and that there's in bonds and debt
it's not going to be good and the claims
of financial assets so either avoid
those or position position yourselves so
that when those things operate and
position yourself for inflation so there
are lots of Investments pertaining to
inflation and the big commodity Cycles
are reactive there's a giant just like
the 40-year bull market and bonds
Associates with a commodity cycle where
everybody adapts to that companies don't
hedge inventories are drawn down there's
less investment in those things when
that switches
switches to that kind of an environment
and the big overarching thing is that
the amount of Financial claims that
exist there's charts that I repeatedly
show when I deal with the changing World
Order what is the amount of Financial
claims assets relative to real assets
and you could see that through history
when those Financial claims it's like a
a bank has too many IUS on its real
money and that thing then you you always
get into these environments where it's
undesirable to own the debt and you have
negative real returns and so to position
one's portfolio in a tilt that way but
of course the way that we do it is to
separate Alpha and beta right so two
parts core cuz we're all talking
tactical how do you create a truly
well-balanced core portfolio and we know
that the typical well portfolio is not
well balanced with its greatest
vulnerability being in that upper right
quadrant in our box which is the
inflation box and we know that we're in
that environment so from a starting
point of view I would encourage all
investors to look at those four quadrant
box that box that we have Rising
inflation falling inflation Rising real
growth relative to discounted falling
real growth relative to discounted and
see what the biases are in those
portfolios I believe that now you can
simultaneously reduce risk and raise
returns reduce risk of that portfolio by
having more in that upper right quadrant
Rising inflation and you will reduce
your risk because if you look at your
portfolio typical investors's portfolio
that is the environment that is missing
so you start with that how do you get
more neutral how do you get better
balance and you cover yourself from that
exposure and then you make tactical
moves around it and the Tactical moves
again should not be in those debts it
should be very well Diversified I think
that the social and political conflicts
are going to be a big investment thing
coming forward and so that'll mean that
way I look at it is I want to look at
places that have good income statements
and balance so I say places I mean
countries as well as individuals that
make up those countries the individual
people and the individual company
so do they have a good income statement
Financial stability do they have a good
balance sheet so that they can weather
those things and also it's a sign of
their productivity are they productive
and then number two are they civil with
each other I really do believe that
internal conflict and bad finances are
going to be defining characteristics of
where to invest or even where to be and
then if I carry that forward to the the
third am I going to have in risk of
being in a international War an
important International War because that
International war will raise lots of
threats so I want when I'm picking those
locations I want to be the inflation
headge assets well Diversified look to
parts of the world that are not as
plagued with this so emerging Asia is
very interesting India is interesting
look at neutral countries during that
period of time watch out for government
controls on Capital markets because
that's the logical Next Step history has
shown that watch out for foreign
exchange controls could be watch out for
those things so those are the themes
that I think are most important and will
be most important in investing there are
two purposes of a currency which is a
medium of Exchange in a storeold of
wealth and we're living in a world where
we have three major currencies are Fiat
currencies with the same kind of
problems so you can't look at one
currency in relationship to another I
think people make a lot of mistakes of
thinking you know it's an ugly contest
the questions that we're going to be in
is storeold of wealth okay what is your
stor hold of wealth and a money is a
stor hold of wealth that also is widely
accepted in other countries so that you
can move it around it's not just limited
to currencies don't think that Medium of
exchange is the only important thing so
think about the storeold wealth that's
when we deal with the quadron you know
the four pieces to try to find a
balanced stor holder wealth and then you
have to think can I move that and sell
that anywhere am I going to have the
free Capital markets to do that or are
they going to be a problem and I think
we are entering a period where all
currencies the traditional medium of
exchange type of currencies are going to
a lot of currencies will compete what
will be the medium in which I could take
something and go someplace else and cost
effectively convert that into buying
okay the medium of exchange I think
we're in a storeold of wealth issue in
other words focus in on that and then
okay your transaction cost of converting
that storeold of wealth a balanced
portfolio into buying power and then you
transact because even in the worst
inflation the worst environments the
currencies most of the time still could
be mediums of exchange even though
they're devalue so I encourage people to
think about bad Fiat currencies
generally and what the liquidity is and
think about even what capital Wars look
like gold as a overlay on a portfolio on
top of a portfolio works like an
insurance policy gold is a debt asset it
just sits there but it's always through
characteristics that are limited in supp
one of the most important things it's
the third highest Reserve currency held
by central banks and in periods of time
of war or such periods of time of
credibility it is the medium like they
say it's the only asset that you can
have that's not somebody else's
liability that means you have to be
dependent on them giving you it them
giving you money or they're giving you
something and it is international it can
be moved and it's TR to in that regard
but its behavior isn't very
environmentally specific so as a hedge
asset it's really like a great insurance
policy because when the other assets go
down and so something like that or the
equivalent plays a role in a portfolio
not as the core asset but as the effect
of diversification of asset and that's
if you do it as an overlay it's about
15% of the portfolio not taking away
asset asss from other parts of the
portfolio but I come back to my Basics
which is the four quadrants you know the
Timeless and Universal the one thing
that you could be sure of is that cash
will not be the best asset class and
when you diversify to portfolio so
you've got a well balanced portfolio of
other things it will outperform cash
because it's the nature of the system
people you know the Central Bank puts
money on deposit people with better
ideas come along take elements of risk
and it works it works better than the
traditional portfolio in the down moves
by a lot like when the market goes down
60% or so the worst cases are like 20%
maybe a little bit over than that and it
never stays there because central banks
can't let capitalism which is dependent
on those other assets performing a
higher return than cash can't let that
continue so they come in there and they
produce money in credit and it produces
the pop
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Basics of Investing
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