Ray Dalio and His Principles For This New World Order
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Easy, forget he is a, was you to lose you to very dust. IT doesn't exist. It's never ended. IT is no matters not on the elemental chart.

Run in for our lives. We could go run and hide. We could have stuck at home listening to those voices in our dome.

But it's true. We chose our do. We're in amazing.

We've tt a get through, got to get that help when we can. We're going to do something for you, man. Let's do something for you.

man. Helen, Sally and Angusta. We're going to do something for you. man. Jump began of the jet into a jam when the tree stores instead gone up.

And to the right to look inside beyon black and White to get Frankland with for in the night, pay attention to those market flashes, crack the code with dots and dashes, build a portfolio for all seasons. You'll never know when you will find the reasons things are always what they seem. Don't fall for the fakes or silly means, develop its principles for success rate dios, back on the investigative a. They express.

Welcome back and welcome aboard. And this train is being held momentarily due to congestion and confusion up ahead. Apologies for the above stop, especially after the S.

M. P. I found closed over six thousand for the first time. Just this past monday is high close ever for all u score keepers out there.

But some harder than expected inflation data and a reckoning about all that spending heading our way blew a cool november breeze. Across the capital markets. The yield on the tenor U.

S. Treasury states stuck about four one four percent, and the major U. S. Equity index cave to that is premium closing lower for the third week in the past four. And all those rate cuts without will come in our way.

The chairman says we might need to take several seats and considering additional adjustments to the target range for the federal funds. rape. We will carefully assess incoming data involving outlook in the baLance of risks.

The economy is not sending any signals that we need to be in a hurry to lower rates. The fed will meet again on interest strates december seventeen th and eighteenth, the last meeting of the year and the last fed meeting before the next administration takes over on january twenty. According to the handy C M E fed watch tool, the odds of a quarter point cut at that meeting slip to sixty percent on friday, down from seventy two percent earlier in the week.

Even with last week sell off, the S M P five hundred is still one and a half percent higher than it's closing level on election day, and more than twenty five percent of the stocks on the new or socks exchange and the nazarite reached fifty two week high in the past two weeks. That's the highest level of positive breath and participation in three years. Last week sell off may just brought stocks and sectors back in line with where they were on november fifth.

Mega cap tech stocks as a group fell two and a quarter percent last week. Ami conductor stocks fell four percent. The man gives seven fell one and a half percent in the rustle two thousand supersensitive interstates fell four and three quarters percent, the neck overall down two point percent in the dow industrials.

Not all industrials fell two point three percent last week. All those losses pretty much wiping out the gains post election, and that needs a straight to our big three for the week. Number one, despite last week cell off, the overall narrow across global capital markets is starting to settle in. And that narrative is U. S. exceptionalism.

Not to get all jingo this close to thanksgiving, but we can't ignore the scores on the doors. The U. S.

Dollar index is up over four percent since election day, and that has put the real effective exchange rate for the U. S. Dollar against other currencies at a fifty five year high.

No wonder they don't want us tourists in spain anymore. U. S. Stocks against the rest of the world are at a seventy five year high since election day. The msci E A, F, E, that stands for europe, australia and the forest is down eight percent. India, which is one of the best performing equity markets this year, is down ten percent.

If you think any of this is going to change tune, just remember that the new administration doesn't take off us for another two months, and the republican party will control both the White house and congress, which brings us to, number two, who exactly is going to be in control and what exactly does control mean? Given president electron's cabinet picks and appointments to date, it's hard not to wonder at what's behind some of this Price movement. Trump appointed line mask in the vrom swami, at one time presidential candidate himself, to run the soon to be created department of government efficiency.

Please wake me up when this Terry gilian movie is over. But we between the lines first, or focus on the D O, G, E, just like that was coin. One of view on most favorite crypto chew toys.

And it's up one hundred and thirty percent since election day. Not a store value, not based on software that might be useful in a more efficient world. Just a joke of a coin that is on its way to the moon, maybe in a space especially at some point.

Those coin market cap is now more than sixty billion dollars, real dollars. That's more than three hundred and thirty one companies in the S M. P.

Five hundred coin base. The online crp o broker is up forty four percent since november 4。 The coin is up twenty seven percent, topping ninety thousand dollars for the first time.

On the back of the present, alex promises to make the U. S. The crypto capital of the world and never, ever sell.

tesla. Shares erupt twenty four percent that's efficient. And since trump said he would nominate Robert f.

Cannel, a former presidential candidate and well known anti vector, to run the department of health and human services, shares of maDonna are down twenty one percent, shares of Fisher have fAllen seven percent, and he lightly stock is down more than ten percent. Stay healthy, my friends. Which leads us to number three.

How are you feeling? Well, we just wrapped up our by monthly sentiment survey of our readers, the smart st. Most educated investors on the planet.

And we need to call in pete Mitchell A K A. AmErica for this one. Well, not exactly. But you really didn't close your eyes when we kissed your lips to the other day.

Sixty nine percent of you say you are cautiously optimistic or that seems high, but it's down nine percent in september. Thirty nine percent say there's somewhat worried. That's up eight percent in the september, and only five percent of respondents say they are extremely optimistic.

Sixty four person of you are making no changes to your portfolios and twenty one percent are making risky investments. Fifty five percent who you believe the market is overvalue, that's the highest level in twelve months. All time high will do that to you.

Terf s and U. S. China relations are now your top concerns. Those are new and that's the election talking to you. Sixty five percent say higher terms will negatively impact your returns on the other hand, sixty nine percent say lower corporate tax rates and more individual income tax breaks, both of which have ve been promised by the incoming administration, will positive ly impact your returns.

Sixty seven percent expect returns of five percent more over the next six months, and the next six months are usually the strongest part of the year for the U. S. Stock market.

Yet only forty one percent expect returns of five percent are more annually over the next ten years. enthusiasm. Hr, where are we putting our money to work? Or two and nine percent in etf. And that spend the case over the past few months, twenty six percent are buying individual stocks, twenty one percent there are sticking within dex finds, and sixteen percent are buying government bonds, while thirteen percent are still buying certificates deposit. What would you do with an extra ten grand if you had IT?

Twenty one percent say they buy more etf, eighteen percent say stocks, sixteen percent say index fn, twenty percent so they will pay down some dead in eight percent say it'll try to get that higher savings account before those rates go lower, but seven percent now say they will buy cypher currency. At the first time, crypto currency has ever cracked the top five in this category, and it's happening even as most of us think cypher is in a bubble. Fifty eight percent think A I stocks are in a bubble.

Yet in videos, your top pic for the stocks that will deliver the best returns over the next decade, percent say crypto is overvalued. What we think and what we do sometimes travel down different tracks. Let's get set up for the week ahead.

And in video, I will take the spotlight again as IT reports its fiscal third quarter results on wednesday. A CEO Johnson one continues to say that demand for chips to power the A. I.

Revolution is insatiable. That could be the cat is the entire market needs to get back into gear is the biggest company in the rolling market capitalization, and IT throws its weight around, especially during earning season. We'll also get a Better look at the health of the U.

S. Consumer when walmart and target report results this week, retail sales pop point three percent last week, even as we were complaining and voting about inflation. But we want to know more about what we were buying last quarter and how confident these megory tailors are about our spending this quarter. The bigger shopping days of the year are coming our way, and the stakes are pretty high. The economic calender is fairly like this week, but we will get updates on the housing market along with initial jobless claims, flash purchasing manager index readings are manufacturing and the service sector.

In the pantheon of the world's greatest investors and financial minds, you'll find radios picture hanging high in the rafters. The founder and former chief investment officer for bridge water association, one of the most successful hedge funds of all time, literally wrote the playbook for how to invest in, generate alpha across asset classes and global economies.

After four decades of delivering market beating returns, ray took that playbook and turned IT into a new york times is best selling series of books, including principles, life and work, principles for dealing with the changing world order and principles for navigating big deck crisis. He turned that into a terrific educational video series and now an online course for financial professionals and family officers in partnership with a wealth management institute of singapore, a markets master, a historian, a philosopher of phantoms pst and an educator. When ray talks, we listen, and we are deleted to welcome RAID alio back aboard the express.

So good here again. So great to be here again.

Thanks for being here. We love IT. How rain. We've gone through a lot of the last few weeks. A lot of things are sorting to Crystallize a little bit. But how is the election and the result change your thinking, if at all, from an investors perspective that you make any decisions going into this or they have to make any decisions coming out of IT now that we know what we know?

Yeah so you have to understand my perspective. So lay the ground work and then to the specifics at change over the last few weeks. Uh, first of all, through my life, whenever I was surprised, I realized and off then IT was because of the things never happened in my lifetime, but happened many times in history.

So I think we're in that kind of an environment to changing world order. The changes, we have to understand the changes. So for that reason, I studied these changes going back for a long time.

There are five major forces of the first is the debt money market economy force. Credit produces buying power. That buying power makes things go up.

But IT also produces debt. And there's a cycle, and we experience our cycles. That's number one.

Number two is the internal political and social order, the left, the right, capitalism, socialism and so on. And that was where the election is. We're going to turn to that in the second.

Number three is the great world order, the change in the world order. We had a system coming out in one thousand and forty five in which the united states was the dominant power, the dollars, the dominant currency. They create a set of rules.

How is the system going to work? The united nations, the I M F, the world trade organization, that's all changing important ways. That has a big effect.

The great power's conflict. What's going on with china, russia hit has a bearing on everything that we're doing. Number four is, through a history, acts of nature, drought, floods and pandemics have killed more people than wars and topped more orders.

So they cannot be ignored. And I don't think at this time can be ignored because of the fact that there's global warming. There's other things going on.

And number five is technology, man's inventiveness of new technologies that makes productivity rise over a period of time, and there's nothing that's going to be more important than these new technologies. So we're going through a period of those five factors and then creating almost a timetable. And the world, I think, is going to be very different in the next three to five years as a result of those.

They're interrelated. So you can talk about one without understanding that into relationship to me. So now we go back to the election OK.

The real question on that election, going into that election, is, would we have domestic quality? How would that take place if you had IT let's A A close election, particularly a close loss by Donald trumping? Then there was a question, would you have an orderly transition of power? Okay, risky situation.

We have crossed that. We are best that. So we now have a particular, we have a Mandate.

okay? The president has a Mandate, the senate, the house and now the spring court and so on. So there's something new going on.

What is that new thing? Look like two things. Domestically, its reform.

I'll talk about that in the second internationally is preparing for the war or the possibility of war with china, most importantly, and with other countries. okay. Now let's go into that for a second.

Okay, that reformation, that reformation is it's a reformation of government and it's a reformation of the whole economy. Donald trump in the administration is going to be like a corporate office. It's a capitalist reformation.

And IT has some of those fundamental values that's going down to the nitty gritty. Okay, what does that mean for technology like we're going to have for twenty percent of our key chips have gotta be produced in the united states by twenty thirty. Okay, in order to do that, how do you do that?

That's connected to an energy plan that's connected. okay. So there are a number of initiatives here. There's an immigration, there's terf s there's you know many things that are initiative as the department .

of governmental efficiency. Is sun out of nowhere? To your point of this? Is gonna come much like a CoOperation. See what that ends, right?

I go through all the particulars because i'll just ramble to look. But instead, I want to say, okay, that there is that taking place and then there will be things that are not taking place. And now you're seeing the prioritization of these things, which are the ones that are gonna be. And what are those people particularly like gonna like who get into that? And if you look at the type of people that are being there, these people are tough, committed to the mission, you know um yal .

is the word you hear a lot well, loyal and also .

they're tough. Like if you're making choices of this thing or that, there's no substance, ty about that. So things like deregulation in the changes, that's what's gona happen domestically and then internationally, self sufficiency and a confrontation.

So you're going to see fighters in that mission. Some things are gonna on the side. We don't have to get talk about those. But anyway, that's what the picture looks like.

right? Talk last, when you came out with the with the principles for dealing with the changing role order, this pretty much, that book prety much predicted the moment were in right now, even though we didn't get through those results that time. They are here today.

that we have that world order today.

IT is right here today. So I was going to ask you about your cycle principles.

What cycle are we? Are you pretty much well described IT? But how seriously, both as A A functioning member of society, but also as somebody who who puts money to work, do you take some of the campaign pledges? Do you take some of the policy promises? When IT comes to terror, when IT comes to taxes, when IT comes to deregulation, when IT comes to government spending on things like deportation and defense.

I take those very serious. Ly, I think that that's right. And and internationally, we have to recognize what that picture looks like to i'm just touch a nap on touching on the domestic.

Yes, I believe that this is this plan has been well in the works for quite a time. I think that they're going to be able to hit the ground running. And so we're going to see those changes.

We're going to have now a time where aspirations and that inspiration is going to hit the realities. Okay, you might have to change laws. You know what it's like to change laws.

You can do everything. So we're gone to see the prioritization of that. But there's gonna need. You have to pay attention to the first hundred days and then you must have these things accomplish in the first two years.

So there's a priority question in terms of like how good are they and actually pulling these things off. But those directions are real internationally. It's changed everything, okay because we've come from a world.

In nineteen forty five, the new world daughter, the world ended in terms of that. And we have a system, multilateral organizations at all this. Now we have we don't have that system.

We have a an american first system, and you have a china first system and so on. So there are no rules of the gate and and that is a power thing. So we're now going it's tougher to have allies.

You gonna deals, but you're not gonna allies. And so different part of the world, we're paying attention now a lot to the united states. Of course, the united states is important and we're americans in here. But if you're really want to understand the world, you have to understand how it's changing a broader sense.

What does that mean in india? What is the A, C on countries going to be like? What is the middle east like? The gulf countries and so on? That world is changing in a way that we shouldn't so singular look at through an american lands.

Everything is connected as we know. You do such a good job of pointing that out across all of your work, but we are also in this period of what feels like deglobalization, right? We used to kind of work together a little bit supply change. We have been pulling apart, getting more regional, getting tougher and at a time where tensions are rising pretty much everywhere you look.

Yeah so what the way i'd actually find that is geopolitically year in one of three categories. You're on the american ali side. You're on the chinese and other side or your neutral, you don't want to get involved geopolitically.

So we're gonna, for example, two totally different technology systems that are going to develop an american version, a chinese version. And so what? okay.

But in terms of globalization, i'm finding out like we're more globalized than an almost standing everybody's to get the same group of people doing deals, okay? They come from all different countries. Never before in my life was IT like this so you can find um saudis and indonesians and singapore poias and everybody.

They're all in the same group. There's a group and they're all doing deals. And before I used to be much more, you know okay, here's americans and you wouldn't have sauces or you wouldn't have doing the same kind of deals.

They could be venture deals, they could be private equity deals. So this globalization of the economic part of IT in terms of doing deals is very globalized beyond standing of people. The um is more globalized.

The education of a lot of people is more globalized. So both forces are at work, right? Yes.

people say, were getting more deglobalization. As you say, money talks when IT comes to deal make. And I just came from a gathering, have a bunch of global investors, big pension on funds, big sovereign funds, everybodys, looking to put money to work, but they are also looking to shore up their own interest because they can predict the future either. They just know it's going to get a .

lot more complicated and. They never been together the way they were right when you went to that meeting. Yeah and you're look at who's around now.

It's like they never work together like this and they can speak the same language, you know in terms of investing or anything. Now they all speak the same language. They're all looking at the same deals. They're all saying, can we work together or you can .

I oppose you? That's what it's like I have to do is look, respond. And that might never have happened five, ten years ago, but the world works today. Money is global, and people are still wanting to put that money to work, even though geopolitical tensions probably have never been except in more time as high as they are right now.

That's right. So it's it's cool and it's risky.

right? So let's talk about what this means for investors, especially individual retail investors, the folks that listen to inducive dia, the folks that read principles, the folks that have been following you for years. And coming to our website, we've heard this from a bunch of different bank golden tax and others about this expectation for curbing our enthusiasm for equity returns going out for the next decade.

So we've just come through pretty much twenty years of, except the last couple years, really low interest rates, really easy money. A government that had a was not allowing any moral uh, hazard to happen because they would step in no matter what, right? And this productive companies being able to generate master profits to the point rate.

When we have several companies worth over three trillion dollars being a trillion dollar, no big deal anymore. When you will start now we can even imagine at ten billion dollar company. So what is this? How do you evaluate that? That call for more muted returns for the equity market, U. S.

Equities in particular. Well, my montreal of investing is fifteen good uncorrelated return streams, risk baLanced. okay.

So I want to start there, right, okay? Because I know that if I can pick good investments and they're uncorrelated investment, I won't lower my return because i'll get the average of those returns, but I will lower my risk by up to eighty percent. So my montreal is what I don't know what the risks are always out there. So that when you first asked me a question, I think in that way you have have and risk baLance them. It's not necessary dollar .

Better and it's not just this is this combination is basic, the all weather pfoa o that you are are well known for.

So now if I step back from that and I think about, okay, the world now, so that's almost like seven and eight percent and things that are uncorrelated, there are some general themes. Okay, my general theme would be, first of all, that we have a debt issue. And when I take that dead issue, most fundamental to award markets and the underpinning of every market is the treasury market.

IT affects everything. So and answer your question, you have to start with the treasury market. And there's a supply demand issue there in terms of this.

And i've seen this before, one man's death or another man's assets. When we talk about currency as a storehouse, ld of wealth are really talking, is debt a stop hold of wealth? So when I look at that issue, I think we have a big issue that there is a big risk.

So as as as I start to make tactical deviations from, well, let's say what is a totally rpp baLanced summing, I don't know exactly what's going to happen. My biggest, most important deviation is I don't want to hold much dead as an asset. And I think the japanese example is such a good example.

IT steals money quietly. And the way IT does that is people make the mistake of paying too much attention to their nominal returns rather than their real returns. How inflation in what its way at that.

So I when I look at japan, what they did on average over the last fifteen years or so, they have a three percent lower interest rate than we had in the united states. And they appreciated the currency by about four percent a year. So you lose in seven percent a year in the value it's appreciated holders of those bonds because of the monetization and all of that.

I think that there is a significant risk that, that will happen to us. So when I think about that, I think, okay. Now I don't want to concentrate anyone bet on anything.

But as i'm thinking about the bet, my biggest bet, my biggest concern is that concern. Then when I get to individual socks or anything, what are the risk premiums? What should I pay to be out of dead?

I M, that's right.

So I think that there is a risk there. If if you had Normal times and you say, well, what is the inflation rate and then give me what the bond rate would be, I would sort of say inflation currently is in the two and a half, three percent facilities, you should have a two percent real rate. So you come out in the five fish percinet without the supply demand consideration for those reasons.

I'm concerned about rates, and I think people also pay a lot of attention to is the first thing. And they think our rates go down because of that. I've watched them go in two different directions for good reasons. okay. So well, that look at the treasury market OK back .

to that real quick is that if you watching treasury al drives because you think this that deficit situation is becoming way too big of a problem. And if any of these policies go through that, the trump administration promising we're talking about several more trillion .

dollars of that is, yes, you have to sell IT.

right?

Someone gotto want IT, okay? The traditional buyers have been burnt in IT and owe too much. In other words, about one third of all the dead as zone by foreigner.

And they're owning IT and its big parts of their portfolio. They've lost money in IT. And besides losing money in IT, there's political issues, issues like sanctions. Okay, think about the chinese. Chinese.

what about biban? If not.

the japanese have had this problem and solved the portfolio is bigger. And then we've got not only the supply that is coming a supply demand. So do they want to increase their market chair? I don't think so in terms of the share of their portfolio.

And then you put on that. Um that's just the new supply demand. The real issue even beyond that new supply in the band is if people think that that's not a good investment, you will get selling of existing that.

And if you sell existing that and all of that debt, you can have a real disaster in the treasury market. And so that would force the central bank in. What does the central bank do? They buy the debt, they print the money and so on.

And so that scenario exists as a realistic worry. So when I look at the markets, I say fifteen good on correlated, but what would I want have a tactical deviation from? I'm not really excited about the debt.

okay. Then when I look at equities, I think I have to look at the specific equities. The idea of talking about equity markets as a whole is an absolute idea. We're now in an error of disruption. So what disruption means is bad for one, good for another.

And so one and how that's gonna, of course, the hyper scales and so done well, I believe that really is the most greatest advantages are going to be on those who use IT well. And we're not paying enough attention to that. We're thinking, okay, did they make the chips? Did they make that? okay. But the users, because they are in a war that's going to be a very expensive war. It's a war that so important to them that there's not a question of whether return on investment, you have to win, you have to win or or give or give that.

And you see the vacation in the in the chip socks that are doing well in the ones that right.

And you are seeing that also, which is interesting, is that a national survival quest. So what that means is it's more important than profits, is more important than money. Okay, which country? The country that has the best technology? No, I will will have the best economics, but they gona have the best military the most.

So these things are, uh, a war where profits can be a secondary consideration. But those that are benefiting from the technology and making transformations like I think in investing, like i'm super excited because all of the times that I my investing was, I would always write down my principles, my decision rules, convert them into algorithms. And I used expert systems to be able to build systems that would make decisions, computerized systems.

I believe in that. Now i'm very excited about what A I does in b will will do that. So I think that that's just only one area, but IT exists in healthy care, exists so many different areas.

So finding those that are the beneficiary aries versus those that are the uh detractors, the ones who are losing but also are getting away from really the super scales and focusing on that I think is important. I think location is very important. Other words, when I mean location, three basic things, when I look at, I look countries, I look at company in the same way.

Do you earn more than you spend? Do you have a good baLanced? You have have more assets in your liabilities. So are you financially good as a country? Good income said a good baLance sheet because you're going to need that internal order.

Is there a internal order that lends its of the productivity and so on, rather than fighting, including rich, poor, fighting this capitalism exist in this environment ment, or is not going to be threatened. A number three is, are you in risk of an international war? You is so much Better to be not in the war than to be in the war.

Because history has shown there's the the work. They are the winners. They are losers and their neutral countries.

The winners lose. They get deeper into dead, and they have their losses. The losers are devastated, the neutral countries of the one who are the real winners. So if you can have those financial so that you have that, if you can have property rights protections and working well together and you don't have that international or so, when i'm looking around the world for my fifteen on good, on correlated, a return streams, these are the things that I think about.

right? Does cypher have a place in any of those today?

yes. Well, crypto, I have a small percentage of my portfolio in crypto, uh, because what we're really do thinking about is we have to think about what is the alternative of money because a money, a currency, is a medium of exchange. There will always be a medium strange, but it's a storehouse ld of wealth.

And so when you're talking about the bonds, the debt, okay, we have to think about an alternative money. And when when we look at the united states and we look at other countries currencies, they're all having problems. okay? The same problems that we're talking about, the united states of the same types of problems, europe as same types of issues that china has a mind gona own their debt safely and so on, and the same props, a problem japan has.

So you tend to see them go up and down together. So you have to think about money. Money is can I move IT around? It's not like real estate that's not down and nail down.

And then you also have a to taxes. So uh, you're dealing with gold and then you're dealing with the new version, which is crypto. Okay, so you have to think about that.

I prefer gold, okay, but that doesn't mean I am into diversification. And so the reason i'm concerned about a crypt u is, first of all, privacy. The government knows exactly what you ve got where IT is. And it's also an effective way of taxing IT because I was with central bankers when interest strates zero and a bunch of central bankers and we're figuring out how negative can you make interest rates. And the the thing that limited the negative amount of interest rates was the paper. The answering to the question was we can, for a very short period of time, have negative four hundred basis points because of the fact that there's not enough storage space for all the paper, but they'll build storage space for the paper .

that that sound sort nineteen hundred.

But okay, now if you don't have the paper and you have a digitally, you can have a negative you it's just the same as taxes. So when i'm looking at that, I think, okay, that is not exempt from crypto. okay? That's and then the reliability of crypto in terms of, let's say, saying does IT corporate with inflation, does a corporate with those things? No, IT doesn't really not well, it's still largely a speculative vehicle.

And number four is also it's not likely to be a reserve for a currency. okay. Won't work whether now as countries need thing, what is the reserve gold is still is the third largest reserve currency, the U.

S. Dollar, the euro, gold and then japanese. So I prefer goal. But anyway, I hope whatever what vehicle we're talking about, I think i'm saying you have to think about that is being maybe you don't want one man sets or another man essence. You you may not want the bonds.

You do have to think of an alternative currency that's going to also allow your buying power. And a currency is something that can go from one country to another. It's you know and so there are up many sounds.

sounds a bit going me. We talked about earlier about principles, the best sellin books series, the tremendous video series. Now you're taking IT to the classroom and you have partner with the wealth management institute of singapore to do this. What's beyond move of bring IT into an online learning platform? I've taken the class I barely passed because IT takes a lot to get through IT, but it's excEllent proto to that partnership.

I met a stage in my life where my goal is to pass along whatever I have. That's a value to some extent, money filled throws ally, to some extent, knowledge that i've done. And so IT was great to be able to partner with them and create this course.

IT receives very, very high rating. People are learning IT. That's transformative. So yeah, that's that's a great satisfaction.

And you're teaching people not just the principles for our investing but also for family offices. Your own family office has been in singapore for over thirty years or so. What is IT about singapore and why you trying .

to extend this to the family? I, what is IT about singapore and what is IT about all good places? Okay, it's basics.

Raise your children well. Vast majority of the population IT can be well educated, not only in terms of skills, but also in civility. And if you come out an environment that they can be productive, simple as no natural resources.

And so what and ball, they have a human capital and that how they deal with each other, you create a capital market, you create rule of law. They have people productive and then they get the finances right. We're talking about about do you spend more than you learn and how you do that.

Those are the fundamentals. okay. So that's what it's a very civil and and it's also a very exciting place because it's a window on that whole region and that's a hot, interesting transforming region.

Switching back again for new investors, people that are just coming into the marketer, this is their first sort of experience with a new election shakeup and a new shifting of powers around washington. Plus it's a new day and we have climate is yet another thing we have to factor into the way we think. How would you advise new investors were approaching the market? Is IT? Is IT not enough to just be an index investor anymore?

And just ride the wave, I think you have to approach IT as like a video game, like a life game in which you are. You approach, though, with great humility. Okay, so you say, i'm gonna go into the adventure, Young investor.

I'm gonna into this adventure and i'm gona learn through experiences, and then i'm going to ask questions to invest the pedia. When I did that, I started at twelve. I catched my, did catching, took my money fifty dollars.

Then I would put IT in the market. I didn't know what I was doing. And my version of this invest pedia is that when fortune came out with the fortune five hundred, they listed the fortune five hundred.

You could get the annual reports. I checked them all. I got all five hundred of them, because I and I would have my library, and i'd asked the questions, and then I had my experiences.

Loss is a great teacher, you know, have a principal. Pain plus reflection equals progress. The the learning comes from the pain. And how you would change things like that was my greatest learning. My greatest loss was my greatest learning.

right? People who know IT have read your work and your biography know that you went through some serious losses. You didn't just wind up one of the most successful investors in history. There is a lot of deep loss at right?

And when I had that, that created the learning. That's how I learned humility. I want the smartest brains to chAllenge me, and so want to have triangulation.

And it's learned and I learned my montre my mantra is fifteen good on correlated return streams. I learned that I could maintain the same return um as any one of those investors with eighty percent reduction in risk. I wouldn't to learn that if I continued if I went through that, that was what to created the bottom of them. From then on, I was pretty straight up.

Do you have a favorite investing term right now?

diverse? fine.

I think you told me that two years ago and four years ago, and you know .

what that is this because it's the magic that if you take equally good things that are not correlated, you improve the return to risk ratio, you reduce the risk, because I think everybody should know that the risk of being wrong is the problem, and then the world is filled with surprises. So there is no doubt that you need to do that well. Portfolio construction is more important even than the picking of the best thing you like.

great. But this is educated diversification versus just i'm just gonna buy a bunch of thing that to your point, they have to have either and no correlation, so they don't hurt each other. Give you an unrecoverable loss.

yes, but there are two ways to look at that. There's alpha as beta. okay? A beta means like if I didn't know anything, what should I do? You still should properly diversify your risks in a way that are allows that and that that's in that's important.

You also should diversify your office in terms of what your bets are. So diversification applies in either way and diverse. The first fine, your beta is not not a big deal. I mean, IT saw as complicated as producing alpha because alpha is zero sum game. And competing in the markets is more difficult than competing in the olympics because there's more money.

Like if I was to say you want to compete the olympics, you say, well, how many people can the markets is even more so because of so many people doing IT. And is that a billion dollars a year that we that I put we put into trying to get this right in terms of the computers and the brains and so on? Alpha is a difficult thing to produce.

So humility is a is a beneficial thing. So yeah, you don't have to have the alpha necessarily. You do have to have the portfolio .

construction, right? And the desire to learn and in your case, the desire to education, educated so many investors in people throughout your career and through principles. The bookstore are now be class with the wealth management institute. You been such a good friend to invest a pedia rate. Dio, it's always a pleasure to have you here and on the express.

thanks. So we've been such a good friend to me. Thank you. What are the same mission?

It's terminology time, time for us to smart up with the investing and finance term or indicator. We need to know this week and this week's indicator is earnings revision momentum. And if you're looking for a legitimate obstacle that could trip up the balls over the next twelve months, you found IT earnings revision momentum measures upward.

The downward changes to expected purchase earnings over the next five months for the S M P five hundred. And according to bloomberg intelligence, IT has slipped into the negative territory and it's kicking around its second worst readings over the past year. To be sure, the here and now for corporate profits looks pretty good.

The S M P five hundred is expected deposit its second best quarterly earnings outperformance in two thousand twenty two, with profits climbing eight hf percent from a year ago, doubling estimates. But it's the future that investors like us are betting on and the prospect of higher interest rates for longer, a slowdown in china's economy, the world's second biggest and a whole heap of uncertainty, the next administration's economic policies could throw the brakes on corporate profits over the next several years. Maybe that's why our outlook for equity returns over the next decade has become more commuted lately.

Or maybe we know in our heart hearts that profit growth, like we've seen over the past decade, just doesn't last forever, will be keeping a close eyes on earnings revision momentum as this earnings season winds down. Thanks for joining us. This week is always any super special.

Thanks to rate dal for climbing backup board the express. He's done more to educated investors like us than just about anyone around. And his principles are a terrific guide. We're learning about life and money.

Check out the principal courses online with the wealth management institute, singapore, which will link to in the show notes, along with all the other reports recited on this week show by those wherever you ripped the express and another shut out to public for partners with us on these episodes. We need you and all of us on this wall of financial and investing education. Mind the sudden starts and stops on the track. This week, we'll talk again a little further .

on down the line.