American - Businessman | August 8, 1949 -
He who lives by the crystal ball will eat shattered glass.
Ray Dalio
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It all comes down to interest rates. As an investor, all you're doing is putting up a lump-sump payment for a future cash flow.
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Over the long run, the price of gold approximates the total amount of money in circulation divided by the size of the gold stock. If the market price of gold moves a long way from this level, it may indicate a buying or selling opportunity.
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There are two main drivers of asset class returns - inflation and growth.
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I believe that the biggest problem that humanity faces is an ego sensitivity to finding out whether one is right or wrong and identifying what one's strengths and weaknesses are.
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Pull in your belt, spend less, and reduce debt.
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I think that the first thing is you should have a strategic asset allocation mix that assumes that you don't know what the future is going to hold.
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In return, society rewards those who give it what it wants. That is why how much money people have earned is a rough measure of how much they gave society what it wanted.
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When growth is slower-than-expected, stocks go down. When inflation is higher-than-expected, bonds go down. When inflation is lower-than-expected, bonds go up.
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Imagine if you had baseball cards that showed all the performance stats for your people: batting averages, home runs, errors, ERAs, win/loss records. You could see what they did well and poorly and call on the right people to play the right positions in a very transparent way.
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I'm just saying that if you understand how the economic machine works, it just works like a machine. There are cause-effect relationships.
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What I'm trying to say is that for the average investor, what I would encourage them to do is to understand that there's inflation and growth. It can go higher and lower and to have four different portfolios essentially that make up your entire portfolio that gets you balanced.
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