Finding Agreement with Ray Dalio’s Paradigm Shift

The billionaire hedge fund manager Ray Dalio has been speaking out on the current state of economic affairs. His recent article Paradigm Shift argues that markets are poised to change, big time. I guess we are in good company, because I just wrote something similar regarding markets being out of whack. The point of Ray’s article is that a paradigm shift is coming, and as an investor you have to be cognizant or you will be in trouble.

Ray has a strong track record identifying paradigm shifts. His thoughts on the current environment have weight. He feels we are close to the end of the current paradigm. What was popular the last ten years/in the current paradigm, will be the opposite in the next one.

Ray references what I did in my article Take Advantage When Markets Are Out of Whack: that markets and the economy, and commensurately the wealth disparity is real. The wealth disparity can be proven out by current numbers. The best example is that labor’s share of national income has dropped from a historic norm of 65% to 56%. That is A LOT.

Take a Social View, Not a Political View, with Your Investments

He references the current battle between a socialist approach and capitalist approach. It is real. This is not a political statement from me. I try to be apolitical. What I am stating is reality. I am not aligning myself with whatever Ray’s political views are, I don’t know what they are and frankly it doesn’t matter. I am a life-long independent and (not a surprise based on my profession), fiscally conservative, e.g. I don’t believe in the absurdity of Modern Money Theory (MMT), the government can’t print money forever. (Note: it is unfortunate that I even have to state/address this, but in today’s toxic political world that we have allowed politicians to suck us into, everything is put under a political lens.) As an investor you must be attuned to what is going on in the world. This social shift is not going to end. It (and other things) will have ramifications for profit margins. These things ALWAYS revert to the mean.

Gold Might Be One of the Preferred Investments in the New Paradigm

Ray notes that future returns will be lower, because we have borrowed future returns into the present. He notes that the next paradigm will be especially difficult for those holding debt (bonds, etc.), suggesting that bonds are not a safe investment as the economy reflates due to the excesses of the past.

The only safe place that Ray sees is gold. I agree with Ray that gold is a safe haven. History proves that out. I assume that Ray is starting to position himself for the new paradigm and owns some gold. Full disclosure, we recently purchased some gold.

Gold has been rallying and has some strong momentum. Ray may not be alone in his thinking. Gold rallying may be evidence that investors believe that markets out of whack. Gold has had a way of churning up and down in recent years, but the recent rally has been strong. Markets falling out of whack and shifting to a new paradigm will create opportunities for the savvy investor. Keep your eyes open and you can be one!

We Can Help You Navigate Paradigm Shifts

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“If everyone is thinking alike, then no one is thinking.”

– Benjamin Franklin