History of Deleveraging

[racemize]

Found this to be pretty informative:

 

http://www.bwater.com/Uploads/FileManager/research/deleveraging/an-in-depth-look-at-deleveragings--ray-dalio-bridgewater.pdf

 

curious as to the board's thoughts on it (e.g., any arguments against their reasoning/analysis).

[kiwing100]

 

FYI, he also put out a note on his opinion on how the economic machine works - a template for understanding - which was updated in March.  The link is below

 

 

http://www.bwater.com/Uploads/FileManager/research/how-the-economic-machine-works/a-template-for-understanding--ray-dalio-bridgewater.pdf

 

[rijk]

the article on deleveragings, although very informative, strikes me as a bit simplistic, can it really be this simple?

 

what dalio refers to as:

“THE most beautiful deleveraging yet seen”

is characterized by klarman as:

"What, then, are we to make of the nation's Central Banker, who stares at the national Bloomberg screen and marvels about the impact of his policies on stock prices--which have no appreciable impact on the unemployment rate or on economic growth?"

 

i am puzzled by the stark contrast between dalio and buffett on one side and klarman, watsa and rodriguez on the other side

 

regards

rijk

[link01]

according to this paul volker said of dalio & bridgewater "mind blowing":

 

<<The document begins: “The economy is like a machine.” This machine may look complex but is, he insists, relatively simple even if it is “not well understood”. Mr Dalio models the macroeconomy from the bottom up, by focusing on the individual transactions that are the machine’s moving parts. Conventional economics does not pay enough attention to the individual components of supply and, above all, demand, he says. To understand demand properly, you must know whether it is funded by the buyers’ own money or by credit from others.

 

Using these principles, Dalio was able to predict the Euro crisis. Bridgewater figured out how much debt would need to be refinanced and when, who would want it and who could buy it. Paul Volker has called Dalio's methods and calculations "mind blowing," and said “he has a bigger staff, and produces more relevant statistics and analyses, than the Federal Reserve

 

...This week's issue of The Economist has a wide ranging issue with Dalio, who calls America's recovery "the most beautiful deleveraging yet seen" (Europe's is "ugly").

 

And he's seen a lot of deleveraging, if only because part of the way Dalio constructs his investment ideas is by reading old newspapers from past periods of economic distress, like the Great Depression. Unlike Soros, Dalio isn't big on reading academics, his strategy comes from his experience after years of trading.>>

 

 

Read more: http://articles.businessinsider.com/2012-03-09/wall_street/31138606_1_economic-ideas-ray-dalio-investment-ideas#ixzz1op8HjeV2

 

jeff gundlach has also spoken admiringly of dalio & his research, tho he's never remotely intimated that he thinks America's recovery "the most beautiful deleveraging yet seen" that i'm aware of. pimco's gross & el-erian dont sound too starry-eyed about it either. Here's The Presentation Where Jeff Gundlach Dares To Compare The US To The Roman Empire

 

Read more: http://www.businessinsider.com/doubleline-jeff-gundlach-us-decline-fall-roman-empire-2012-2#-1#ixzz1opDTyt5O

 

 

 

 

 

[link01]

i am puzzled by the stark contrast between dalio and buffett on one side and klarman, watsa and rodriguez on the other side

 

i'm continually amazed at this as well. and yet the great ones succeed both because of & in spite of their macro opinions somehow

[ERICOPOLY]

On the topic, Citigroup's presentation has a comparison of total debts and their composition by sector.

 

page 8:

http://www.citigroup.com/citi/fin/data/p120307a.pdf?ieNocache=853

 

Shows that from 2000 to Q2 2011, total debt in Canada grew by 25% whereas it grew by 27% in the US.  Not a big difference.

 

resulting in total debt:

Canada  276% of GDP

US        279% of GDP