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Notes to myself, possibly of interest to others.
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Sunday, June 6, 2010

Dalio: Like Rosenberg -- Gold, Treasuries, Asian Currencies

The risk ... is that public sentiment has turned more negative about perceived bailouts. There is a lot of criticism about saving financial institutions and running a big budget deficit, but if the government didn't do those things we would be in a terrible situation. It will be impossible to stimulate that way in the future because politically it is untenable. That's a risk because, between now and 2012, the economy will probably go down again
...there is another recession out there. It will probably come sooner than most recessions do. Usually, there is about five years between recessions, but for various reasons related to the size of the debt, the next recession is going to come sooner. We are in the equivalent now of a quantitative easing-induced cyclical recovery. But it is a fragile recovery,... Corporate balance sheets are much, much better [now, than a year ago] because they extended the maturities of their debt and slashed expenditures by laying off workers. I would be shocked if we saw new [absolute]  lows in the economy, but you can't go to new highs anytime soon, either.... The average American's net worth is less, and incomes are less and so the amounts they can leverage will be less
...Europeans are faced with the same three choices we were facing in dealing with debt -- print money, redistribute money, or restructure...It's a very frightening situation because there is a risk here that the Europeans will not move decisively or quickly enough. ...
Our portfolio is mostly skewed to Treasury bonds, gold and emerging-market currencies, especially Asian currencies. We also hold commodity assets that are limited in supply and that high-growth emerging countries need. I want to minimize my exposure to the major developed countries' currencies ...in developed countries there is too much of most things at the moment, and that's creating a deflationary environment. There is too much manufacturing capacity. There is too much labor. There is too much housing stock. ...the printing of money does not mean that it will produce an accelerating inflation because simultaneously there is also less being purchased, and the surpluses are already causing deflationary pressures. That is why, contrary to almost everybody's belief, I believe the bonds in countries that can print money will be good investments.
---Ray Dalio in Barrons, 5/28

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