Ray Dalio, CEO and Founder of Bridgewater Associates, largest hedge fund in the world, recently published an article on LinkedIn entitled "Paradigm Shifts". In that articles, he mentions that it is time to buy gold $GOLD . Ray Dalio has always been saying that you need to have gold in your portfolio and in recent years, he has been warning investors about an coming debt crisis. He even wrote a book, Principles For Navigating BIG DEBT CRISES, on the subject. The book is available for free on his Principles Website. The LinkedIn article is actually a small summary of what's in the book. It is very technical and I suggest that you read it.
According to Ray Dalio, we are in a similar situation as in the 1930s. In 1929, there was a the great depression, Central Banks became very powerful(remember the Glass-Steagall Act?), income inequality was rising, populism was rising and the market crashed again in 1937. In 2008, there was the Great Recession, Central Banks became very powerful(remember Dodd-Frank Act?), income inequality along with populism are on the rise. These are not coincidences according to Ray Dalio. He studied 500 years of economic history and found the it repeats itself. The solution to protect oneself against this crisis? GOLD
Gold in itself doesn't have any intrinsic value. The same thing can be said about the US Dollar $USDOLLAR or any other currency or cryptocurrencies such as Bitcoin $BTC . But what makes gold so special is that it has been a store of value for millennia, longer than any other asset. And whenever there has been a crisis, gold prices would always rise. However, gold is not a value producing asset. Gold doesn't produce more gold. If you invest in bonds, you are paid an interest. If you invest in stocks, the company will grow and you are also paid dividends.
Should we invest in gold? Ray Dalio is right. Things have been too good for too long. Interest rates are low, the stock market $SPX500 is at all time high, bond yields are low(in some countries, such as Germany, they even have negative bond yields), unemployment is low, inflation is low. Central Banks are creating too much money through Quantitative Easing and they are keeping interest rates low. The reason they are doing that is because they are scared of another crisis. President Trump is pressuring the FED to keep interest rates low so that the stock market continues to rise. That's not a good thing. The stock market grows because businesses are growing naturally, not because they are artificially being doped to grow. It is not something good for the economy in the long-term. If the market has to crash, let is crash.
For the defensive investor, investing in gold seems to be a good idea but for the entrepreneurial investor, it is better to invest in gold miners. Let's say gold prices double next year because of a crisis, you can only make 100% profits but if you invest in a company mining gold, you can make much more than that. Of course, this is not for the defensive investor. You need to do a lot of research to find the right companies. I am not able to tell you today, which companies are the best because I'm still doing my research. It is the same thing about the Permian Basin. I wanted to invest in oil $OIL and gas $NATGAS companies with operations in the Permian Basin and I spend two months researching companies before investing in Parsley Energy $PE and Concho Resources $CXO . How can you do this research? Look at the companies in the Gold Miners ETF GDX $GDX .
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