Interviewer: David Tepper had texted into the show on Friday and suggested right now you have to be in the market, full-on. So the question is whether everybody jumps on the train. Everybody gets in full-on, and then the problem arises. When do you jump off the train?
Dalio: The question is, what do you jump into when you jump off the train? The issue is you can’t jump into cash. Cash is trash! Ok. Cash is… that they’re going to print money. What do you do, you get out? Cash is not going to be good!
Interviewer: So what do you do?
Dalio: What you have to do is. You have to have a well diversified portfolio. First of all, you have to be global and you have to have balance. And I think you have to have a certain amount of gold in your portfolio, or you have to have something that’s ‘hard’.
There are three monetary systems that happen. The first is in the old days it had intrinsic value. You’d carry around gold coins. Then we came up with the idea of banks, or even central banks. What they do is they create certificates, we call notes, that are claims on those banks. We print many more certificates than there is money in the bank. That’s a link system. We broke that in 1971.
Then you have a fiat monetary system, which means you can print whatever amount of money you want. That’s what governments do. We’re in that part of the cycle. Bigger picture. When you think about things. The depreciation of the exchange rate and the printing of money I think over the next few years is going to be the biggest thing.
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