market folly

Bridgewater Associates founder Ray Dalio appeared on CNBC today from the World Economic Forum in Davos to give his thoughts on the economy and markets.  Here's some of the highlights and videos.

- Said the markets are in a 'Goldilocks' period after a beautiful deleveraging as everything is 'pretty good' with a big jolt of stimulation coming from tax laws.  He says we're at the 'later part of the cycle' and there's a lot of cash on the sidelines (banks, corporations, etc).  "We're going to be inundated with cash." 

-  Thinks it might eventually lead to a market blow-off.  Thinks markets will continue to melt up: "If you're holding cash, you're going to feel pretty stupid."  Says last part of the cycle could perhaps last a year.

- Focused on interest rate policy as even a little change there can lead to a bear market.  Dalio says you can't have a significant rise in interest rates without knocking over asset prices. It seems he's saying anything above 4% could potentially get dicey.  Says there's much more interest rate sensitivity than before.

- Also notes that the various bonuses companies are paying out from the tax cuts won't move the needle much on the wealth gap as the middle class has been most impacted by soft income growth.  He's not worried about an immediate downturn, but if there's a good chance there's a downturn in 2-3 years, he's worried about how the difference between rich and poor will affect things.

- On bitcoin, he doesn't know how to value it but thinks it's been a bubble.  Thinks the blockchain technology is useful but doesn't have any other comment.


Embedded below are the videos of Ray Dalio's interview on CNBC:



And if you haven't already, be sure to check out Dalio's new book, Principles.