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The king of hedge funds, Ray Dalio, sees the need to find gold as central banks become more aggressive with policies that devalue currencies and are about to bring about a "paradigm shift" in d & # 39; investment.
Dalio, founder of the world's largest hedge fund, wrote in a LinkedIn article that investors have been pushed to equities and other badets generating returns similar to equities. As a result, too many people hold these types of securities and may face diminishing returns.
"I think these are probably not good real return investments and those who will do best will be the ones who do well when the value of money is depreciated and national and international conflicts are important, such as gold, "said Bridgewater. The manager of the badociates said.
"In addition, for reasons that I will explain in the near future, most investors are underweight in these badets, which means that they simply wanted to have a better balanced portfolio in order to to reduce risk, they would have more of this type of badet, so I think it would be both riskier and more cost-effective to consider adding gold to its portfolio. I'll explain why I think gold is a portfolio diversification tool. "
The price of gold has skyrocketed following the publication of the note by Dalio, most recently up 0.7%, around $ 1,421 an ounce.
Dalio's appeal comes two weeks before the Federal Reserve will reduce its benchmark interest rate by at least a quarter point. This decision comes after a three-year cycle of rate increases from historically easy, almost zero, levels applied during the financial crisis.
The new trends are part of what he called a new "paradigm shift" that comes after the last during the crisis. Investors, said Dalio, will have to change their minds about what will work after the longest bull market in Wall Street history.
"In paradigm shifts, most people are surprised to be doing something that is too popular and really hurt," he wrote. "On the other hand, if you are smart enough to understand these changes, you can manage them well or at least protect yourself from them."
Since the crisis, the Fed and many of its global counterparts have maintained low interest rates and resorted to such measures as quantitative easing or buying bonds and other financial badets to strengthen the take of risk, which has helped the holders of financial badets.
Meanwhile, the amount of corporate and government debt has risen, putting central banks in the position of keeping interest rates low. The Fed embarked on a program in which it tried to normalize its policy, but is now expected to return to easing by lowering rates and stopping the reduction in bond holdings on its balance sheet. .
"For me, it seems obvious that [central banks] must badist debtors in relation to creditors. At the same time, it seems to me that the easing forces behind this paradigm (ie interest rate declines and quantitative easing) will have diminishing effects, "wrote Dalio.
"For these reasons, I believe that debt monetizations and currency depreciations will eventually accelerate, which will reduce the value of money and real returns for creditors and will put them on the map." The margin left by the creditors to the banks to generate negative real returns the badets. "
This is a story in development. Come back for updates.
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