Ray Dalio: Current bubble ‘halfway’ to 2000 and 1929
Bridgewater Associates founder Ray Dalio joins 'Influencers with Andy Serwer' to discuss the volatility on Wall Street and surge in U.S. equities.
Video Transcript
ANDY SERWER: the one hand, you're seeing this rotation in equities from growth stocks to cyclicals-- number one, is that going to continue? And then number two, the 10-year is up, what, 100 basis points this year. Is that going to continue?
RAY DALIO: Well, what's happened is that a lot of, like these cycles go, a lot of new ideas, new technologies, new things come along, and they make fabulous revolutions. And they grow things. And that's great. But there's a tendency of investors to extrapolate the past and not pay too much attention to price.
And when that happens, you start to emerge as somewhat of a bubble. By our measures, the bubble is not what it was in 2000 and not what it was in 1929, but it's kind of like halfway there if I look at the types of qualities. And so what that means from a value point of view if you're calculating, you know, what can I realistically expect-- its expected returns shrink relative to the others.
However, kind of the meat and potatoes type of companies didn't benefit as much from those. And they're fairly stable and so on. And so that's why you're starting to see that kind of rotation. Now, that can change. It can come and go in these phases-- like when people get stimulus checks, and then, you know, they might be hot on the exciting things and they run up again and so on. But that's going on. And of course, there's Bitcoin and other things that are going on.
However, the big thing is plenty of liquidity and ridiculously low interest rates. Now, you ask about the 1.6%-- I think we have been in a 40-year bull market in bonds. So now you look at that 1.6%-- that's a negative-1% about real. So you're guaranteed. And you ask yourself if you're going to hold a bond, any investment-- the only purpose of an investment is so you can sell it to buy something you want.
And so when you look at, what is the length of time it's going to take me to get my money back? If I give an investment nowadays, in the United States, I'm going to have to wait about 50 years to get back the buying power to start, and then I'll start earning money.
