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in the pantheon of the world's greatest investors and financial Minds you'll find Ray Doo's picture hanging high in the rafters the founder and former Chief investment officer for Bridgewater Associates one of the most successful hedge funds of all time literally wrote The Playbook for how to invest and 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 best-selling series of books including principles life work principles for dealing with the changing World Order and principles for navigating big debt crisis he turned that into a terrific educational video series and now an online course for financial professionals and family offices in partnership with the Wealth Management Institute of Singapore a markets Master a historian a philosopher a philanthropist and an educator when Ray talks we listen and we are delighted to welcome Ray doio back aboard the express so good to see you again so great to be here again thanks for being here we love it how Ray and we've got gone through a lot over the last few weeks a lot of things are starting to crystallize a little bit but how has the election and the results change your thinking if at all from an Investor's perspective did you make any decisions going into this or did you make any decisions coming out of it now that we know what we know yeah so you have to understand my perspective so I'm going to lay the groundwork and then get to the specifics that's changed over the last few weeks uh first of all I through my life whenever I was surprised I realized in off then it was because of the things never happen in my lifetime but happened many times in history so I think we're in that kind of an environment the changing world order the change the changes we have to understand the changes so for that reason I studied these changes going back for a long time uh there are five major forces 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 those Cycles that's number one number two is the internal uh political and social order the left the right capitalism socialism and so on and that was where the election is and we're going to turn to that in a second number three is the great world order the change in the world order we had a system coming out of 1945 in which the United States was the dominant power the dollar is the dominant currency they create a set of rules how's the system going to work the United Nations the IMF the World Trade Organization that's all changing in important ways that has a big effect the great Powers conflict what's going on with China Russia it has a bearing on everything that we're doing number four is through history acts of nature droughts floods and pandemics have killed more people than Wars and toppled 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 I think creating almost a Time Warp and the world I think is going to be very different uh in the next 3 to 5 years as a result of those they're interrelated so you can't talk about one without understanding that inter relationship to me so now we go back to the election okay the real question on that election going into that election is would we have domestic order how would that take place if you had let's say a close election particularly a close loss by Donald Trump then uh there was a question would you have an orderly transition of power okay risky situation we have crossed that we are past that we have a mandate okay they the president has a mandate the um Senate the um house um and U now the Supreme Court and so on so there's something new going on what is that new what does that new thing look like um two things um if I was to take it domestically it's reform I'll talk about that in a second internationally it's 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 um well it's a Reformation of government and it's a Reformation of the whole economy it's going to be like um 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 uh 20% of our uh key chips have got to be produced in the United States by 2030 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 um an immigration there's tariffs there's you know many things that are initiative as the department of governmental efficiency all of a sudden out of nowhere to your point that this is going to become much more like a corporation we'll see what that ends up being right so we I won't go through all the particulars because I'll just ramble too long but instead I want to say okay that there's 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 going to be and what are those people particularly going to be like who get into that and if you look at the the type of people that are being there these people are tough committed to the mission and they're hard asses I mean they're you know um I think loyal is the word you hear a lot too well loyal and also they're tough like if you're making choices of this thing or that there's no subtlety about that so things like deregulation and the changes that's what's going to happen domestically and then internationally self-sufficiency and a confrontation so you're going to see Fighters in that mission some things are going to go on the side we don't have to get talk about those but anyway that's what the picture looks like right we talked last when you came out with the with the principles for dealing with the changing world order this pretty much that book pretty much predicted the moment we're in right now even though we didn't get those results that time they're here today we have that world order today it is right here today so I was going to ask you about your Cycles principles what cycle are we in now 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 tariffs 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 seriously I think that that's right and then internationally we have to recognize what that picture looks like too I'm want to just touch on that but on touching on the domestic yes I believe that this is this plan has been well in the works that this for for quite a time and 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't do everything so we're going to see the prioritization of that but there's going to be the need you have to pay attention to the first 100 days and then you must have these things accomplished in the first two years so there's a priority question in terms of like how good are they in actually pulling these things off but those directions are real internationally it's changed everything okay because we've come from a world in 1945 the New World Order the world ended in terms of that and we had a system multilateral organizations that this now we have a um we don't have that system we have a uh an America First system and you have a China first system and so on so there are no rules of the game that is a power thing so we're now going it's tougher to have allies you're going to have deals but you're not going to have 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 in a broader sense what does it mean in India what is what is the ason 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 singularly look at through an American lens sure everything is connected as we know you do such a good job of pointing that out across all of your work but we're also in this period of what feels like de globalization right we used to kind of work together a little bit Supply chains we've been pulling apart getting more Regional getting tougher and at a time where tensions are rising pretty much everywhere you look the way I uh actually find it is geopolitically you're in one of three categories you're on the American Allies side you're on the Chinese and other side or you're neutral you don't want to get involved geopolitically so we're going to have for example two totally different technology systems that are going to develop an American version a Chinese version and so on but in terms of globalization I'm finding out like we're more globalized than in almost anything like everybody's together 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 singaporeans and everybody they're all in the same group there's a group and they're all doing deals and and before it used to be much more you know okay here's Americans and you wouldn't have Saudis 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 the understanding of people the uh is more globalized the education of a lot of people is more globalized so both forces are at work right yeah people say we're getting more de globalized but as you say money talks when it comes to deal making I just came from a gathering of a bunch of Global Investors big Pension funds big Sovereign weal funds everybody's looking to put money to work but they're also looking to shore up their own interest because they can't 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 when you went to that meeting yeah and you're looking who's around what it's like wow they never were together like this and they they didn't 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 can I outbid you that's what it's like sure all you have to do is look at the floor of Madison Square Garden and you see it's sponsored by Abu Dhabi and that might never have happened 5 10 years ago but this is the way 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 Wartime as high as they are right now right that's right so it's it's cool and it's risky right so let's talk about um what this means for investors especially individual retail investors the folks that listen to Investopedia 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 Sachs and others about this expectation for curbing our enthusiasm for Equity returns going out for the next decade or so we've just come through pretty much 20 years of except for the last couple years really low interest rates really easy money a government that had uh was not allowing any moral hazard to happen because they would step in no matter what right and this productivity of companies being able to generate massive profits to the point Ray where we have several companies worth over3 trillion do being a trillion dollar company is no big deal anymore when you were starting out we couldn't even imagine a 10 billion dollar company so what is this how do you evaluate that that call for more muted returns for the equity Market us equities in particular you know my Mantra of investing is 15 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 um and they're uncorrelated investment I won't lower my return because I'll have the average of those returns but I will lower my Risk by up to 80% so my Mantra is you know uh what I don't know what the risks are always out there so that's when I when you first ask me a question I think in that way you have to have to uh and risk balance them it's not necessarily dollar balance sure and it's not just these it's this combination this basket the all weather portfolio that you have 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 7 half perc in things that are uncorrelated there are some general themes okay my general theme would be first of all um that we have a debt issue okay and when I take that debt issue most fundamental to of all markets and the underpinning of every Market is the treasury market it affects everything so in 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 debts are another man's assets when we talk about currency as a storeold of wealth we're really talking is debt a storeold of wealth so when I look at that issue I think we have a big issue that's there it's a big risk so if as I as I start to make tactical deviations from well let's say what is a totally rat balanced assuming I don't know uh exactly what's going to happen my biggest most important DV ation is I don't want to hold much debt 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 eats away at that so and when I look at Japan what they did on average over the last 15 years or so is they have a 3% lower interest rate than we had in the United States and they depreciated the currency by about 4% a year so you're losing 7% a year in the value it's depreciated holders of those bonds because of the monetization and all of that I think that there's a significant risk that that will happen to us so when I think about that balance I think okay uh now I don't want to concentrate any one 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 stocks or anything what are the risk premiums what should I pay to be out of that which is why debt and the treasury yields are important that's where you're basing that that's right and then what is so I think that there's 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 should be I would sort of say inflation currently is in the 2 and a half 3% vicinity you should have a 2% real rate so so you come out in the fiveish vicinity 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 Fed easing and they think ah rates will go down because of that I've watched them go in two different directions for good reasons okay so that's a look at the treasury market okay well back to that real quick is that are you're watching treasury yields rise because you think this debt deficit situation is becoming way too big of a problem and if any of these policies go through that the Trump Administration is promising we're talking about several more trillion dollars of debt is that yes you have to sell it right someone's got to want it okay the traditional buyers have been burnt in it and own too much in other words be about onethird of all the debt is owned by foreigners and they're owning it and it's big parts of their portfolio they've lost money in it and besides losing money in IT issues like sanctions okay think about the Chinese did Chinese want the bonds yeah why would they buy our bonds if we're not buying our chips Japanese have had this problem and so 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 share 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 and demand is if people think that that's not a good investment you will sell you will get selling of existing debt and if you sell existing debt 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 I say 15 good uncorrelated but what would I want to 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 uh the idea of talking about Equity markets as a whole is an obsolete idea because they're so different and you know we're now in an era of disruption so what disruption means is bad for one good for another and so on and how that's going to change um of course the you know the hyperscalers and so on done well I believe that really it's the most ADV greatest advantages are going to be on those who use it well right and 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're in a war that's going to be a very expensive War it's a war that's so important to them that they don't there's not a question of whether there's a return on investment right they you have to win you have to win market share making or give or give that up and you see the bifurcation in in the chip stocks that are doing well and the ones that are not doing well right and you're seeing that also which is interesting is it's a national survival question so uh what what it means is it's more important than profits it's more important than money okay which will which country the country that has the best technology not only will have the best economics but they're going to have the best military the most so these things are a 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 AI does and being able to do that so I think that and that's just only one area but it exists in healthcare exists in so many different areas so finding those that are the beneficiaries versus those that are the uh detractors the ones who are losing but also uh getting away from really the super scalers and focusing on that I think is important I think location is very important when I mean location three basic things when I look at I look countries I look at companies the same way do you earn more than you spend do you have a good balance cheap you have have more assets than your liabilities so are you financially good as a country good income saving good balance sheet because you're going to need that internal order is there a internal order that lends itself to productivity and so on rather than fighting including Rich poor fighting does capitalism exist in this environment or is it going to be threatened and number three is are you in risk of an inter National War it's so much better to be not in the war than to be in the war cuz history has shown you know there there's the uh the war there are the winners there are losers and they are neutral countries the winners lose they get deeper into dead and they have their losses the losers are devastated the neutral countries are the ones who are the real winners so if you can have those financials so that you have that if you can have property rights protections and working well together and you don't have that International War so when I'm looking around the world for my 15 good uncorrelated return streams these are the things that I think about right uh does crypto have a place in any of those today yes well 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 money because a money a currency is a medium of exchange they will always be a medium exchange but it's a stor hold of wealth and so when you're talking about the bonds the debt okay we have to think about an alternative money and when we look at the United States and we look at other Count's currencies they're all having problems okay so the same problems we're talking about in the United States are the same types of problems Europe has same types of issues that China has am I going to own their debt safely and so on and the same types of 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 knocked down and you know nailed down and then you also have it 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'm I'm into diversification and so um uh the reason I pref prefer well the reason I'm concerned about U crypto is first of all privacy the government knows exactly what you got where it is and it's also an effective way of taxing it because I was with Central Bankers when interest rates hit zero and a bunch of central bankers and we're U figuring out uh how negative can you make interest rates the thing that limited the negative amount of interest rates was the paper and and so the question was the answer to the question was we can for a very short period of time have netive -400 basis points because of the fact that there's not enough uh storage space for all the paper but they'll build storage space for the paper and so that that sounds so 19th century but but okay now if you don't have the paper and you have it digitally you can have as negative it's just the same as taxes right 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 correlate with inflation does it correlate with those things no it doesn't really not well it's still largely a speculative vehicle so for those and and number four is also it's not likely to be a reserve for a currency okay it won't work whereas now as countries need things what is the reserve gold is still uh it's the third largest reserve currency the US dollar the Euro gold and then Japanese Yen so I prefer gold but anyway whatever vehicle we're talking about I think we're saying uh I'm saying you have to think about debt as being maybe you don't want one man's debts or another man's assets you don't 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 aren't many sounds sounds like Bitcoin to me um and is the fact that it's become such a bigger asset in terms of the amount of assets under management the amount of money that's into it and it's been around now for over 10 years that it maybe the Pres the the the thinking about it not being a store of wealth has changed a little bit yeah but I I would say uh it's still has to prove itself so so when you say it's big um you know it's a fraction of Microsoft One stock right okay okay it gets a lot of attention I think there's Merit to it but you heard what I said in terms of the association what about the dollar uh what do you think the direction will be for the dollar over the next four years and then how does that play into the asset correlation that you're trying to build successfully because we know what high tariffs means usually for doll for the dollar what do you think I think that um a lot has a lot is going to have to do with capital flows and the tightness of money and whether um the Federal Reserve uh when the time comes is going to be uh shifted more to control which it certainly will be under uh the under Trump and the administration which would favor a much easier monetary policy yeah so there's certain things that are going on which are uh while there's there's the tariffs there's also the attraction for foreign foreigners to come in um in terms of uh building businesses and there's going a lot of be building business building and in some cases um we don't have the national champions uh even though there's a desire for the national national champions there um the the idea will be if they produce it here that we that they are going to be welcome so you might see more Capital flow in it's a tougher question in terms of monetary policy um and so also it goes down uh what is it that's going to go up uh so when we look at the Euro when we look at the Yen okay they're real issues like the Yen you know we're really dealing with a 300 basis points difference and in both real rates and nominal rates in terms of that tax that you have to have to pay in terms of the interest rate difference so for those reasons I don't think it's the even the big question I don't think it's the most important question I think it's that all money will be all money will be at risk what is your feeling about the FED being under more of the executive Branch's control more input As president-elect Trump would like to have in terms of interest rates is that safing to you do you believe that the FED should maintain its independence or do you feel like it's never really been that independent what no I I I I feel that it uh definitely should remain its independence if I'm holding a bond and I want to know that uh it is certainly in the government's interest all the time to borrow and spend particularly under your term and then you let somebody else deal with the mess you created and the ne when they come to power okay so that's always the case so it undermines the storeold of wealth I think the the FED should Target a real bond yield of 2% by and large okay 2% is not too high real and it's not too low and they should Target that kind of a real bond yield which you can see by the way in the inflation index bonds uh pricing so um I I think that the cycles that we're going on from one extreme to another are very disruptive but I think it's going to become a lot more political particularly if there are problems because the problems are going to be based on the fed and so it becomes political and um yeah so I worry about that yeah we this should be a new chapter in history if that actually comes to pass let's switch gears a little bit here we talked about earlier about principles the best-selling book series a tremendous video series now you're taking it to the classroom and you've partnered with the Wealth Management Institute of Singapore to do this what's beyond the move of bringing 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 what what brought you to that partnership I'm at a stage in my life where my goal is to pass along whatever I have that's a value to some extent money filled anthropically to some extent knowledge that I've done and so it was great to be able to partner with them you know and and create this course which is it it receives you know very very high ratings people are learning it it's transformative so yeah that's that's a great satisfaction and you're teaching people not just the principles for investing but also for family offices your own family office has been in Singapore for over 30 years or so what is it about Singapore and why are you trying to extend this to the family office well I would I would say what is it about Singapore and what is it about all good places okay it's Basics Raise Your Children Well the vast majority of the population can be well educated not only in terms of skills but also in Civility and that you come out in an environment that they can be productive Singapore has no natural resources and so on and all they have is human capital and that how they deal with each other you create a capital Market you create rule of law you have people productive and then they get the finances right we were talking before about do you spend more than you earn 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 as I said I've taken the course it's difficult but if you paid attention to principles the books and the video series and then all the lesson building in there you will learn a ton from it so I did as well all right switching back again for new investors people that are just coming into the market or this is their first sort of experience with a new uh election shakeup and a new shifting of powers around Washington plus it's a new day and we have climate as yet another thing we have to factor into the way we think how would you advise new investors who are 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 um a game uh like a video game like a life game you approach it though with great humility okay so you say I'm going to go into the adventure and I'm going to learn through experiences and then I'm going to ask questions to Investopedia um when I did it I started at 12 I caded my did caddying took my money $50 then I would put it in the market I didn't know what I was doing I and my version of this of of Investopedia is that when um Fortune came out with the Fortune 500 they listed The Fortune 500 you could get the annual reports I checked them all I got all 500 of them because they and I would have my library and I'd ask the questions and then I had my experiences loss is a great teacher you know have a principle pain plus reflection equals progress the learning comes from the pain and how you would change things I I I it was my greatest learning my greatest loss was my greatest learning right people who know and 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 hedge fund uh uh investors in history there was a lot of deep loss that's right and when I had that that created the learning that's how I learned um humility how I want the smartest brains to challenge me and so on to have triangulation and it's learned and I learned my Mantra my mant is 15 good uncorrelated return streams I learned that I could maintain the same return um as any one of those investors with 80% reduction in Risk I wouldn't have learned that if I continued if I went through that that was what created the bottom and then from then on it was pretty much straight up plus you document everything though you wrote everything down you created a process because you weren't just throwing darts you were studying your returns you were studying the performance of things until you created system that you could then actually you were early to AI before we were even talking about AI you turned this all into an algorithm that captured your thinking and your recording right AI has been a um in existence since 1956 and it has different versions uh um what they mean is uh can it make a decision computers can make a decision and what I learned at an early age I'm in the markets um that I should write down my criteria for decisionmaking these are my principles for life for everything else okay not don't just make a decision write down your criteria and then when you have your criteria I could test my criteria through time and I could make Timeless and Universal criteria so I know how they would behave and I could put them into a portfolio that would allow me to understand what my game plan is and with the computer being able to process a lot more information and and complexity like if I take positions I want to know their correlations and all that can't do that in my mind and also do it less emotionally because when you're sitting there with a trade that goes against you whatever the day of operating where oh I'm the smart guy and I'm doing it in your head is over it's obsolete so you have to move on to this okay and that's that's been my way of doing it so yes that's my way of way of doing it also ways to teach other people to do it you've you've educated thousands of investors who have gone on to very successful careers as well so let's talk about our what Investopedia was born with our our financial dictionary our terms you know that we are a site built on that I know you have so many in your mind and over your career that you've developed but do you have a favorite investing term right now Ray diversify I think you told me that two years ago and four years ago and you know what that is exactly because it's the magic yep 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 the the world is filled with surprises so there's no doubt that you need to do that well portfolio construction is more important even than the picking of the best thing you like right but this is educated diversification versus just I'm just going to buy a bunch of things right to your point they have to have either a no correlation so they don't hurt each other or give you an unrecoverable loss yes but there are two ways to look at that there's Alpha and there's beta okay beta means like if I didn't know anything what should I do you still should properly diversify your risks in a way that uh allows that and that that's that's important you you also should diversify your Alphas in terms of what your bets are so diversification applies um you know in either way the first find your betas is not that big you know you it's not a big deal I mean it's not as complicated as producing Alpha because Alpha is a 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 in the Olympics you'd say well how many people can the markets it's even more so because there's so many people doing it and and putting you know I don't know how much but it's is it a billion dollars a year that we put 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 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 educate you've educated so so many investors and people throughout your career and through principles the book series and now the class with the Wealth Management Institute and you've been such a good friend to Investopedia Ray Doo it's always a pleasure to have you here and on the express thanks so much and you've been such a good friend to me thank you thank you we're on the same Mission thank you thank you n
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