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Dalio's Frightening Words On The Stock Markets Future

Dalio came out with a very interesting letter to clients which discusses a potential lost decade ahead in the stock market. Let's talk about this...

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Ray Dalio, he’s the billionaire hedge fund manager at Bridgewater who’s made over $58.5 billion dollars for his clients. Now when you’ve got such wealthy clients you have to send them updates every now and again. And Bloomberg has managed to get insight into a recent update that Dalio sent to his clients. And what can I say about this insight it was a very gloomy prediction on what stocks would do over the next 10 years. Dalio warned of a possible “lost decade” for the stock market going ahead. Let me explain…

If you look throughout history there’s been a number of these times where the stock market, has seen negative returns for 10 years or longer. So if you put your money in the stock market during those times, you could have waited 10 years and still seen a loss.
For example the year 2000. Right before the dotcom crash. If you invested then you could have waited over 12 years until 2012 and still lost money.

Probably the best example that we could give was back in 1929. If you invested then, you would have had to wait over 30 years before you made any profit on your investment. Imagine investing and having to wait that long. Crazy…

And Dalio thinks that we might be in one of those periods. Today! Where if you invested now, it might be a decade and you still could lose money! But let’s delve into why!...

The first thing that Bridgewater mentioned as causability for the lost decade ahead, was lowering profit margins. So that’s a decrease in what profit margins once were.
They said, “The margins, which have provided a big chunk of the excess return of equities over cash, could face a shift that would go beyond the current cyclical downturn in earnings”.

And one of the reasons why they see the lowering of profit margins is because of the decline in globalization.

They said “Globalization, perhaps the largest driver of developed world profitability over the past few decades, has already peaked,”. “Now the U.S.-China conflict and global pandemic are further accelerating moves by multinationals to reshore and duplicate supply chains, with a focus on reliability as opposed to just cost optimization.”. End quote.

So I want to explain this, because it’s very important to understand what these analysts are saying…
So what they’re saying is in 2019 and the years before this, there was this big drive towards globalization. This just means businesses operating in different countries and sourcing things from other countries as well. Why did they do this. Because it’s so much cheaper and so much more profitable. So profit margins became really high.

But the analysts at Bridgewater, what they’re seeing is a decline in globalization. Since this crisis. This decline is happening because countries are looking to rely more on themselves and produce their own goods.

But what this does to a lot of companies profit margins is it decreases them. Because more expensive to produce them yourself instead of outsourcing them. This is one of the key reasons behind the lost decade argument. The decrease in globalization…

The analysts at Bridgewater say “Even if overall profits recover, some companies will die or their shares will devalue along the way. Left with lower levels of profits and cash shortfalls, companies are likely to come out on the other side of the illness more indebted,” the analysts warned.
This is the 2nd reason behind the lost decade argument for stocks and that is higher levels of corporate debt!

You see this lockdown that we’ve seen, it hasn’t helped companies balance sheets. If you’ve got a business and your not able to operate it for a couple of months, well you’ve still got expenses to pay. And because you’re not generating any income for these expenses, you do the only thing that you can do. And that is borrow money. And this is what Bridgewater analysts are talking about, the rise in corporate debt. Which never helps long-term with equity markets…
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DISCLAIMER: It's important to note that I am not a financial adviser and you should do your own research when picking stocks to invest in. These are just some of my viewpoints, by no means would I recommend watching one YouTube video and then immediately buying that stock. This video was made for educational and entertainment purposes only. Consult your financial adviser.

Видео Dalio's Frightening Words On The Stock Markets Future канала Cooper Academy
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4 июля 2020 г. 16:48:57
00:10:38
Яндекс.Метрика