False sense of financial security?

[gcgang]

RAY DALIO: There is a 'big squeeze' coming
http://finance.yahoo.com/news/ray-dalio-there-is-a-big-squeeze-coming-202511228.html

I find Dalio, founder of $160b Bridgewater Associates, very interesting.

"For now, any sense of financial security among individuals can be characterized as a false sense of security."

The 50-75 year long debt cycle is at its end. As baby boomers retire, and start drawing benefits, current low returns won't be enough to satisfy the promises.

Rarely do investors see a market so clearly overvalued as the bond market now.

Holding non-financial assets like gold could become more attractive than holding long duration fiat currency flows with negative yields.

 

[REWahoo]

Should we add Ray to the list?

http://www.early-retirement.org/for...its-vs-the-s-and-p-500-2010-2016-a-83005.html

 

[Whisper66]

Good article. Thanks for posting.

No.....doesn't appear to be "gloom and doom" to me. (Always interests me that anytime we see opinions of folks that suggest the market isn't all rosy, the old "gloom and doom" comments come out.) This article provides a nice summary of measures that the Chairman and CIO of Bridgewater feels are pertinent to the health of the market. One can agree or disagree that they are important but they appear well thought out and simply show concerns that are getting fairly widespread about the current high value of the market, low interest rates, high debt levels and low levels of economic growth. Nothing really new but well presented. As an investor, this type of data is what's pushed me to be a bit more conservative than I was in prior years. Not as conservative as most retirees on this board (based on past discussions on Asset Allocation) but a shift in my thinking.

 

[CaliKid]

Probably about a 50% chance each "expert" will turn out right.

 

[travelover]

People that can predict the future don't need to work at any job, save for making a few astute calls occasionally.

 

[Sunset]

Nothing new said by him.
Then the next article under it by him says the Fed should not raise rates.

I see it as:
Yes, the Fed is in a pickle (and so is the world) as low rates have made interest investments lousy, ballooned up the stock market to overpriced, and any attempt to raise the rates could kill the weak economy plunging us into a recession or worse, without the ability to stimulate by lowering rates (unless you consider negative rates of a few percentage a good idea).

 

[REWahoo]

Good article. Thanks for posting.

No.....doesn't appear to be "gloom and doom" to me. (Always interests me that anytime we see opinions of folks that suggest the market isn't all rosy, the old "gloom and doom" comments come out.)

Did we read the same article?

It’s an all-around gloomy situation that could force policymakers into desperate positions before the whole thing ends in tears.

 

[GrayHare]

There's always a game of musical chairs going on somewhere in finances. This go 'round it happens to be in bonds. Eventually the music will stop, but no one knows when.

 

[Whisper66]

Did we read the same article?

Probably not. The sentence you quote appears to from the Juilia La Roche article where she summarizes Dalio's speech. La Roche provides a link to the source information (his speech). I read and commented on the source document since it was available. Sorry, should have mentioned that in my post I guess.

In the La Roche article, she does a good job of putting Dalio's comments within quotes. The specific sentence you quote is not contained within quotes so appears to be a comment from the author (La Roche) that she uses as a lead-in to the next paragraph. In other words, she is putting her interpretation on what she provides in the surrounding information. Nothing wrong with that but I think she overstates the original speakers tone as shown below.

The quoted sentence is not contained in the actual speech. Nor is there any other mention of "gloom", "doom", or "tears". His tone is reflected in the following quote from the speech (emphasis is mine):

"Unlike in 2007 when this template signaled that we were in a bubble and a debt crisis lay ahead, I don’t see such an abrupt crisis in the immediate future because a) most economies are near the mid-points of the short-term debt cycles and their growth rates are neither dangerously rapid nor dangerously slow – i.e. the cyclical influences are close to being in equilibrium – and b) debt growth rates in the developed countries have been roughly in line with income growth rates with debts largely in the hands of central bankers who can roll them forward.
However, when we do our projections we see an intensifying financing squeeze emerging from a combination of slow income growth, low investment returns and an acceleration in liabilities coming due both because of the relatively high levels of debt and because of large pension and health care liabilities. The pension and health care liabilities that are coming due are much larger than the debt liabilities in most countries because of demographics – i.e., due to the baby-boom generation moving from working and paying taxes to getting their retirement and health care benefits. "

 

[Montecfo]

I am not a gloom and doom type. But I do wonder if the low rate environment we are in will not just continue for another decade or more, consistent with the longterm trend.

If so, then higher yielding investments make a lot of sense here, which is the opposite of what most are saying.

It would have significant implications for the FIRE crowd.

 

[dallas27]

I have it on good authority that this time is different. And if it's not, next time will be.


Sent from my iPhone using Early Retirement Forum

 

[retiredtuna1]

The Washington Post ran an article recently about a researcher linking low economic growth to changing demographics: https://www.washingtonpost.com/news...imple-explanation-for-americas-economic-mess/
This is not necessarily a new idea, but it is one that is often ignored or given insufficient attention.
Are you all familiar with the 'lamentations' of the prophet Jeremiah (from which we get the term 'jeremiad'?) I feel like that sometimes because I do see gloom & doom on the horizon. Federal, state, and municipal debt levels, personal debt, unfunded liabilities for social security & medicare, an aging population, underfunded pensions, and the relatively low level of savings for retirement by Mr. or Ms. Average Person are not pointing us towards a rosy future. Throw in some infrastructure issues and dysfunctional govts (again, at the 3 levels) and I can begin to sound like a dismal person. And, don't get me started on the issue of individual moral character. So, even with early retirement (a luxury afforded / earned by only a few), I think it is better to keep up at least some part-time work or a home business 'cuz you don't know what is going to happen tomorrow at the macro-level.

 

[Whisper66]

......I feel like that sometimes because I do see gloom & doom on the horizon. Federal, state, and municipal debt levels, personal debt, unfunded liabilities for social security & medicare, an aging population, underfunded pensions, and the relatively low.....I think it is better to keep up at least some part-time work or a home business 'cuz you don't know what is going to happen tomorrow at the macro-level.

The nature of the markets is that they will go up and down, but in general will trend upward. Recognizing that drops may be coming is not necessarily "gloom and doom" unless you feel the market is truly going into a funk for a longer term or take a drop that is really enormous verses typical. If that's your feeling, it would be good idea to stay out of the market.

The timing of market dips is highly unpredictable but generally reverse within a reasonable time. So many of us just hedge against the downside in various ways. Some ensure they have continuing income in retirement...that's a great idea if you are happy continuing to work (or manage rental properties for example). Offers a lot of flexibility. Others choose a conservative asset allocation to help dampen the downturns. Still others just ensure they have enough cash / fixed assets to avoid having to sell during a downturn.

Bottom line is you just need find something that makes you comfortable in your situation.

 

[Totoro]

Holding non-financial assets like gold could become more attractive than holding long duration fiat currency flows with negative yields.

Well, that's got little to do with non-financial assets, and everything with said long duration fiat currency flows with negative yields.

Almost by definition, negative yielding bonds will have negative nominal returns. Add in 2% inflation, and you'll have -2% and less real returns.

Low bar to clear for any other asset class ..

 

[Mdlerth]

I have it on good authority that this time is different. And if it's not, next time will be.

+1

My favorite aspect of this forum is the humor.

Not that there isn't also plenty of actual advice as well, not to mention perspective, encouragement, data, etc.

But mostly I like the humor.