Ray Dalio is the founder Bridgewater Associates, the largest hedge fund in the world with $160 … [+]
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Topline: Ray Dalio believes we are hitting a depression similar to that of the 1930s, which will take years of financial and economic reconfiguration and human ingenuity to recover from, as he discussed in a Wednesday Ted Connects talk.
- “We’re not going to go back the way it was,” said Bridgewater Associates founder Ray Dalio in the virtual TED talk. “We’re going to restructure our economy and restructure our financial system” over the next couple of years in order to recover.
- Ray Dalio’s Bridgewater Associates has $160 billion in assets under management, making Dalio the 46th richest person in the world with an $18 billion net worth.
- Dalio’s biggest worry is that restructuring will not be done in a civil bipartisan way to “both increase the size of the pie and divide it well,” warning of partisan politics preventing effective solutions, “damaging”—rather than repairing—the economy.
- The key to success as an individual investor is to “know how to diversify well and in a balanced way,” he said. “The greatest mistake of all investors is to think that what has done well lately is a better investment; cash is almost always the worst investment.”
- He also thanked the Chinese for their work on coronavirus, noting that doing so was political: “The Chinese, in many ways, are helping with things that are needed to manage this crisis.”
- Dalio flagged the opportunity for entrepreneurship as the catalyst for recovery: “The greatest force through time is human inventiveness. The greatest force of that is reinventiveness.”
Crucial quote: “This is not a recession; this is a breakdown. You’re seeing the same thing that happened in the 1930s.”
Key Background: The coronavirus has hit the economy with catastrophic results: with 10 million Americans filing for unemployment in the last two weeks of March alone, incredible volatility in the stock market, and all businesses deemed non-essential shuttered with 97% of Americans under stay-at-home orders. The difference between the coronavirus crisis and other economic crises is that this one is caused by a public health emergency, making it an economic and societal problem without a history-tried solution.
“This is a huge, unprecedented, devastating hit,” said Federal Reserve Chair Janet Yellen to CNBC, expecting GDP to decrease 30% in the second quarter.
Ray Dalio has given $10 million to China to fight the coronavirus in February, and $4 million to aid his home state of Connecticut in the crisis.