As you probably know, Dalio’s firm Bridgewater Associates, was one of the few that did well during the last big market crash, in 2008-09. In 2008 he published a paper titled “How the Economic Machine Works: A Template for Understanding What is Happening Now” which looked at the potentials for selected economies by criteria he found important. Echoing the name of that paper, what happened next followed the script Dalio outlined very closely and many of Dalio’s clients actually profited from the decline, securing Bridgewater’s reputation was secured. In 2018 Bridgewater had $124.7 billion USD under management, down from earlier highs but still very respectable. And more than most of us throw around.
Fast-forward to the present, and the point of this article. On July 17th Dalio published a new paper titled “Paradigm Shifts” via LinkedIn. In this paper, he outlines what his research and experience have revealed about the “pivot points” in economies. He argues that understanding such times, and the factors that cause them, are critical because:
“Every major asset class had great and terrible decades, so much so that any investor who had most of their wealth concentrated in any one investment would have lost almost all of it at one time or another.”
Let that sink in for a minute. How many stories have you heard about someone who was hugely successful for a while, then suddenly lost it all? Might it be possible that Ray Dalio has uncovered the reasons why that happens? And wouldn’t it be useful to understand this, so you might recognize when such a time is approaching and at least protect your wealth?
Of course, any sane person would answer Yes to these questions. In fact, in the years your friendly Gold Enthusiast was training traders, even the successful ones admitted that at one point or another they couldn’t sleep due to anxieties of losing it all when the market turned against them. Dalio’s research may have revealed their anxieties were well-founded.
So for your weekend consideration, we highly recommend you read Dalio’s article, linked above the first time it was mentioned. In the article he offers (for free!) two more pieces he’s written; we’ll let you decide if you want to read those too. Part 2 of the article is titled The Coming Paradigm Shift which describes Dalio’s view of that, and the article ends with a small recommendation and a hint about an upcoming article that should be very interesting indeed.
We give Ray Dalio bonus points for this mention of a once-favorite trader saying: “he who lives by the crystal ball is destined to eat ground glass.”
The Gold Enthusiast
DISCLAIMER: No specific securities were mentioned in this article. The author is long the gold sector via small positions in NUGT, JNUG, a few junior miners, and covered calls on part of the NUGT position. He has no plans to trade the shares in the next 72 hours. Some of the options may be rolled forward and up in that timeframe if the current sag in the gold sector continues.
The SPDR Gold Shares (GLD) was trading at $133.94 per share on Friday morning, up $0.52 (+0.39%). Year-to-date, GLD has gained 8.32%, versus a 13.27% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of ETF Daily News.
About the Author: Mike Hammer
For 30-plus years, Mike Hammer has been an ardent follower, and often-times trader, of gold and silver. With his own money, he began trading in ‘86 and has seen the market at its highest highs and lowest lows, which includes the Black Monday Crash in ‘87, the Crash of ‘08, and the Flash Crash of 2010. Throughout all of this, he’s been on the great side of winning, and sometimes, the hard side of losing. For the past eight years, he’s mentored others about the fine art of trading stocks and ETFs at the Adam Mesh Trading Group.