Ray Dalio, Chairman and CIO of Bridgewater Associates has released a new memo this morning where he notes that risks are rising and prudent investors should be preparing wisely. The key points of the memo are:
- Recent low volatility is unlikely to persist. “As a rule, periods of lower risk/volatility tend to lead to periods of greater risk/volatility.”
- Most investors don’t get this. “Most people are inclined to assume that the circumstances they have recently encountered will persist. (During) low-volatility periods in which credit is readily available… people to assume that it’s safe to borrow more, which leads them to lever up their positions, which contributes to greater volatility and hurts them when things change.”
- Risks are now rising, especially around the situation in North Korea – which is hard to price. “We are seeing two confrontational, nationalistic, and militaristic leaders playing chicken with each other, while the world is watching to see which one will be caught bluffing, or if there will be a hellacious war.”
What should we do?
- “Stay liquid”
- “Stay diversified”
- “Don’t be overly exposed to any particular economic outcomes”
- Hedge your bets and buy Gold. “If the above things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen, and treasuries) would benefit, so if you don’t have 5-10% of your assets in gold as a hedge, we’d suggest that you relook at this.”
Overall his message is: don’t assume the near future will look like the recent past... and be prepared. (VIEW LINK)
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Always hard to buy gold because it produces no income! Do you suggest any fund?
John with the usual caveats about past performance this may be of interest: http://www.totuscapital.com.au/wp-content/uploads/2017/07/Totus-Alpha-Fund-June-2017-Performance-Summary.pdf
Ray, I agree. It does seem a lot of risk is being ignored. Ben, unfortunately a $250,000 minimum investment puts the Totus fund out of the reach of most here. By the way, I seem to recall that you are associated with Totus. If so, perhaps a declaration of interest would have been appropriate?
Hi Graham , thanks for your comment - with due respect there is a meaningful portion of the Livewire audience that are looking for these types of solutions. Ben is listed as a contributor on Livewire along with his position as a PM at Totus, I believe his disclaimer was intended as a declaration of interest but worth pointing out. Do you have soem alternative suggestions to add, I think it's a topic investors are interested in at the moment. James
Several ASX listed ETFs including GOLD and GDX both provide liquid access to the gold price. Alternatively direct investments in quality domestic gold miners are a higher risk but higher reward way to gain exposure to a rising gold price.
John - In addition to Daniel's comments, how about gold nuggets from the Perth Mint ?
We did actually have Jordan Eliseo write an article specifically addressing the best way to invest in gold. Copy and paste this link: https://www.livewiremarkets.com/wires/what-is-the-best-way-to-invest-in-physical-gold
Hi James. I don't have any miracle solutions. As far as alternatives go, I can only put forward what I do. Figure how much income my spouse and I need. Subtract her part SSS pension and invest sufficient in term deposits with second line banks and credit unions to make up the difference. Reasons: 1. If the system really falls apart I want the income government guaranteed. 2. It also means we never have to sell and can ride out your more common once a decade crash. This in turn means we can then invest the rest for the long term, be it in or outside super, in fairly aggressive growth assets. Nothing fancy, but it suits us and it’s worked.