In this video we try sum up Ray Dalio’s views on the changing world order. Dalio has a long form article written on his LinkedIn about this topic (which is a great read), so we thought it was important to make it into a short video so more people can see it!
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“I believe that the times ahead will be radically different from the times we have experienced so far in our lifetimes. A direct quote from Ray Dalio.
I believe this because about 18 months ago I undertook a study of the rises and declines of empires and their markets, prompted by me seeing a number of unusual developments that hadn’t happened before in my lifetime but that I knew had occurred numerous times in history”.
This is how Ray Dalio’s start off his study on the changing world order. Based on where we are in terms of the cycle and where we are going… Now what I want to do in this video is try to sum up what Ray Dalio is saying in a concise short video, but if you want the full version in writing please go to Dalio’s website principles.com. This website explains everything in full concise, well articulated terms, I got to say it was one interesting read for me personally.
So let’s first give you a picture for where we are now in terms of the empire and the market. Currently we are in a very unique period in terms of the cycle, where 3 key ingredients are taking place. First is high levels of debt and low interest rates. Second is large wealth gaps and political division.
And 3rd is a rising world power which is China. This period that we are in we have seen it numerous times throughout history. 1930-1945 was a very similar situation to the one we are currently in now. It’s what Dalio calls a transition phase. A 10 to 20 year change between economic and political cycles.
Now before we begin as investors, you might rightfully ask why do we need to go so deep into history and study these long-term cycles, when we want to make money over shorter periods of time? Maybe over 3,5-10 years. But the deeper you understand the long-term cycles the better you’ll comprehend what is going on over the short-term. And thus you’ll be able to read the patterns and hopefully make higher returns… That’s why it’s so important the cycles of the economy and dominant countries.
You see the thing you need to know about empires, aka the major powers of the world, is that throughout history, they change between nation. If you go far back in the day China was the major force, who then started to decline in the 1600’s and they lost their title to the Netherlands. A country that was small but still became the dominant power. Then in the 1800’s we all know the UK was the major force that took over the world. Following them, the dominant power of over the past 150 years has been the United States.
But before even the 1500’s, we saw the exact same pattern, where power switched between the Middle Eastern countries, the French, the Mongols, the Spanish, etc.Essentially what we’re trying to say is that empires inevitably rise and fall.
So let’s talk a bit about the ascent phase of an empire and even more importantly the descent phase…
So when an empire is ascending aka like how the U.S. was back in the 50’s we generally see a couple of things… Strong and capable leadership accompanied with strong education and ability to teach.
A strong work ethic taught in the family and in schools.
Low corruption, people working well together united by trying to improve and grow. When you have all of these things that align this generally results in…
Strong income growth, higher productivity, a good system for allocating resources, strong equity, currency and credit markets.
In the 1900’s we really saw the U.S. building and growing on all of these things in a tremendous way. But eventually things get overdone, and the seeds of decline start to creep in…
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DISCLAIMER: It’s important to note that I am not a financial adviser and you should do your own research when picking stocks to invest in. These are just some of my viewpoints, by no means would I recommend watching one YouTube video and then immediately buying that stock. This video was made for educational and entertainment purposes only. Consult your financial adviser.
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