"La QUESTIONE non è SE INVESTIRE o NO, ma QUANTO INVESTIRCI" le PAROLE di RAY DALIO!

Summary

The video discusses investment strategies in China despite market challenges and government interventions. It highlights Ray Dalio's continued investment in China, emphasizing learning from both rising and falling markets. The script also covers the latest US Gross Domestic Product data, the S&P 500's Price-to-Earnings ratio, and Warren Buffett's market valuation indicator. Additionally, it touches on the Eurozone's manufacturing PMI, indicating a continued decline in manufacturing activity.

Takeaways

• 📉 Ray Dalio, founder of Bridgewater, remains optimistic about investing in China despite market downturns and contrasting opinions from peers.
• 🌏 The Asian dragon market is experiencing unprecedented lows due to government interventions and a slowdown in growth, with foreign investments in China dropping significantly.
• 💹 The World Bank and the International Monetary Fund predict a further slowdown in China's growth in 2024, mainly due to reduced foreign investor confidence, high debt levels, and a struggling real estate sector.
• 📉 Foreign investments in China have seen a decline of 60% in just over 5 years, reflecting the ongoing challenges in the financial markets, with a loss of over 50% in total market capitalization in the last 3 years.
• 🤔 Dalio believes that China's problems are closely tied to the management of the country's economy and politics, and he sees signs that Beijing might soon start quantitative easing and a gradual restructuring of debt.
• 🌐 The conflict between China and the US is identified as one of the biggest challenges that China will face in the coming years, alongside wealth disparity and climate change.
• 📈 Despite geopolitical risks, Dalio argues that these challenges do not outweigh the reasons to invest in China, and he questions the amount to invest rather than whether to invest at all.
• 💭 The market sentiment towards Chinese companies is still cautious, with investors not yet ready to buy into them despite historical low valuations.
• 📊 The US Q1 GDP data beat expectations at +3.4%, but the markets did not respond positively, possibly due to the data release occurring while markets were closed.
• 📉 The Price-Earnings ratio and the Cyclically Adjusted Price-Earnings ratio (CAPE) are highlighted as important indicators to consider, with the latter taking into account a 10-year average of earnings to account for economic cycles.
• 🔄 The Buffett Indicator, which compares the total market capitalization to the GDP, suggests that while the US market may be overvalued, China's market is undervalued, although many unlisted companies in China skew this data.

Q & A

What is Ray Dalio's stance on investing in China despite the market challenges?

Ray Dalio, owner of one of the world's largest investment funds, Bridgewater, defends his decision to continue investing in China. He believes that investing in China has been successful across different market conditions and has allowed him to learn to invest in both rising and falling markets.

What challenges does China face according to Ray Dalio?

Dalio identifies wealth disparity, climate change, and the trade conflict with the United States as the biggest challenges China will face in the coming years.

How has China's economic growth been estimated for 2024 by the World Bank and the International Monetary Fund?

The World Bank and the International Monetary Fund estimate a slowdown in China's growth in 2024, mainly due to reduced confidence from foreign investors, high levels of debt, and significant difficulties in the real estate sector.

What impact has the Evergrande collapse had on China's economy?

The collapse of Evergrande has exacerbated China's economic struggles, with the country grappling with reduced foreign investments, which fell by 88% last year, and a financial market that has continued to suffer.

How has the US' Gross Domestic Product (GDP) data impacted the markets?

The US GDP data, which beat analysts' expectations at a +3.4% growth, did not lead to particularly positive market reactions, possibly because the information was released when the markets were closed.

What is the current Price-to-Earnings (P/E) ratio for the S&P 500?

The current Price-to-Earnings ratio for the S&P 500 is around 28.4, which is not a low value but is significantly lower than the peaks reached in 2009.

How does the Cyclically Adjusted Price-to-Earnings (CAPE) ratio work and what is its current value?

The Cyclically Adjusted Price-to-Earnings (CAPE) ratio is an extension of the traditional price-to-earnings ratio that takes into account a 10-year period to adjust for economic cycles. Currently, the CAPE value is at 35, which is considered controlled.

What does Warren Buffett's market valuation indicator suggest about the US and Chinese markets?

Warren Buffett's market valuation indicator, which compares the total market capitalization to the country's GDP, suggests that the US market is near 200%, indicating a possible overvaluation, while China's market is close to 30%, which might indicate undervaluation considering the number of unlisted companies.

How has the manufacturing PMI for the Eurozone fared in recent months?

The Eurozone's manufacturing PMI has seen a more significant contraction in March, falling to 46.1 from 46.5 in February. This is the 21st consecutive month where the activity is below the 50-point threshold, indicating a general contraction in the European manufacturing production system.

What are the implications of the Eurozone's manufacturing PMI being below 50 for an extended period?

An extended period of the manufacturing PMI being below 50 indicates a persistent contraction in the manufacturing sector, which is not a positive sign for the Eurozone's economic health.

How does the perception of risk by investors affect the investment decisions in China and the US?

Investors' perception of risk influences their willingness to invest in markets like China and the US. Despite the valuations being at historical lows, investors seem not ready to invest in Chinese companies due to the high perceived risk. On the other hand, the US market, despite a high valuation, is not necessarily in a bubble but may indicate strong growth potential due to the large number of listed companies.