Another Ray Dalio Gem
Ray Dalio recently published another gem: A Template for Understanding Bid Debt Crises. He generously makes this huge work available for free. Since I've recommended it to a number of people, it only makes sense to post some comments. The purpose of such would be to encourage you to get a copy and read it.
Caveat: When I say "read it," I don't necessarily mean to slavishly pour through every one of the 471 pages (of the pdf available on the internet) word for word. You could do that, of course, but you'd better be one of those speed readers who actually absorbs what they're reading. Alternately, if you're a slow reader like me who needs to take some time with serious material in order to gain some understanding, you could follow Dalio's own recommendation: Start with Part 1. Beginning with the first section: "The Archetypal Big Debt Cycle," you'll basically get the fundamentals of Dalio's way of understanding debt cycles.
Here's why you should bother:
Ray Dalio founded Bridgewater Associates. It's the world's biggest hedge fund (I think) and has been for a number of years (how many I don't know). Since hedge funds charge a lot, and Dalio's the big cheese at his firm, he's grown very rich. He grew rich because his massive hedge fund has produced results for his large institutional clientele. He's produced those results through various market cycles with an admirable degree of consistency. So he's not some slick, quick, in and out flash in the pan who hit it big with one lucky idea. (Several well-known hedge fund "geniuses" come to mind here.)
In other words, he's successful because he's good at what he does. And among the things he does well is to understand market cycles, the most important of which are debt cycles.
If you're not familiar with Dalio's thinking here, there's a video "How the Economy Works" on You Tube. It's 30 minutes long and worth your time. If you've studied the discipline of Economics you may or may not agree with everything he says. But his understanding has clearly allowed him to make money in a very competitive area of investing that relies on understanding the "big picture" of the economy and financial markets.
So do download A Template for Understanding Bid Debt Crises and do read Part 1 - 60+ pages. And don't race through it. Take your time with those 60+ pages and you'll likely find it worth your time. It's certainly worth spending time here than on the vast majority of written and video material out there on the economy and financial markets.
Besides, if we're heading into a credit crisis at some point - a distinct possibility - this reading could prove most helpful. Besides Part 1, Dalio present a section that analyzes three iconic debt crises, using his template: The US 2007-2001; US 1928-1937; Germany 1918-1924 (the German great hyperinflation that arguably helped paved the way for Hitler and the Nazi's eventual rise to power). Dalio attempts to take us through these crisis in rather minute detail day by day. You can more or less experience what happened as it happened.
Regarding the US 2007-2011, most folks have totally forgotten (less than 10 years later) how dicey things were then. Hardly anyone really understands the causes of the crisis and how it unfolded. We were all going about our the business of our day-to-day lives as the world's financial markets crept to and almost fell into the abyss. Spending some time grasping what and how this happened may make you better prepared for the next crisis when it arrives.
Dalio's published other works. I've read some and both enjoyed them and gained something of worth for my time. So thanks to Mr. Dalio for making this available for free!
We may have more to say about this rather impressive work in the future.
P.S. - If you're a bit put off by the sheer quantity of information Dalio has assembled, he's put up some ausio and video pieces you can access for free first. But get the book after that and at least read the first 60 pages. And, again, the book in pdf form is free as well.
Caveat: When I say "read it," I don't necessarily mean to slavishly pour through every one of the 471 pages (of the pdf available on the internet) word for word. You could do that, of course, but you'd better be one of those speed readers who actually absorbs what they're reading. Alternately, if you're a slow reader like me who needs to take some time with serious material in order to gain some understanding, you could follow Dalio's own recommendation: Start with Part 1. Beginning with the first section: "The Archetypal Big Debt Cycle," you'll basically get the fundamentals of Dalio's way of understanding debt cycles.
Here's why you should bother:
Ray Dalio founded Bridgewater Associates. It's the world's biggest hedge fund (I think) and has been for a number of years (how many I don't know). Since hedge funds charge a lot, and Dalio's the big cheese at his firm, he's grown very rich. He grew rich because his massive hedge fund has produced results for his large institutional clientele. He's produced those results through various market cycles with an admirable degree of consistency. So he's not some slick, quick, in and out flash in the pan who hit it big with one lucky idea. (Several well-known hedge fund "geniuses" come to mind here.)
In other words, he's successful because he's good at what he does. And among the things he does well is to understand market cycles, the most important of which are debt cycles.
If you're not familiar with Dalio's thinking here, there's a video "How the Economy Works" on You Tube. It's 30 minutes long and worth your time. If you've studied the discipline of Economics you may or may not agree with everything he says. But his understanding has clearly allowed him to make money in a very competitive area of investing that relies on understanding the "big picture" of the economy and financial markets.
So do download A Template for Understanding Bid Debt Crises and do read Part 1 - 60+ pages. And don't race through it. Take your time with those 60+ pages and you'll likely find it worth your time. It's certainly worth spending time here than on the vast majority of written and video material out there on the economy and financial markets.
Besides, if we're heading into a credit crisis at some point - a distinct possibility - this reading could prove most helpful. Besides Part 1, Dalio present a section that analyzes three iconic debt crises, using his template: The US 2007-2001; US 1928-1937; Germany 1918-1924 (the German great hyperinflation that arguably helped paved the way for Hitler and the Nazi's eventual rise to power). Dalio attempts to take us through these crisis in rather minute detail day by day. You can more or less experience what happened as it happened.
Regarding the US 2007-2011, most folks have totally forgotten (less than 10 years later) how dicey things were then. Hardly anyone really understands the causes of the crisis and how it unfolded. We were all going about our the business of our day-to-day lives as the world's financial markets crept to and almost fell into the abyss. Spending some time grasping what and how this happened may make you better prepared for the next crisis when it arrives.
Dalio's published other works. I've read some and both enjoyed them and gained something of worth for my time. So thanks to Mr. Dalio for making this available for free!
We may have more to say about this rather impressive work in the future.
P.S. - If you're a bit put off by the sheer quantity of information Dalio has assembled, he's put up some ausio and video pieces you can access for free first. But get the book after that and at least read the first 60 pages. And, again, the book in pdf form is free as well.
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