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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: LTK007 who wrote (101025)	2/7/2009 6:18:39 PM
From: Chispas	1 Recommendation Respond to of 110194

Applause to Ray Dalio for the Barron's interview - .......................................................................................................................................................... How the U.S. economy is like GM Posted Feb 7th 2009 12:40PM by Tom Taulli General Motors Corp.'s (NYSE: GM) problems are well known: declining growth, huge debts, and enormous contingent liabilities (such as for retirement and health care benefits). Yes, it also sounds like the U.S. economy, huh? Well, this is the gloomy assessment from Ray Dalio, who is the chief investment officer of Bridgewater Associates. A few years ago, he warned about the overleveraged economy. More importantly, he positioned his portfolio for the New Reality. In fact, in 2008 the Bridgewater Pure Alpha 1 fund was up 8.7% and the #2 vintage increased 9.4%. So, what's is his thinking now? Unfortunately, it's fairly gloomy (this is according to a great interview in this week's Barron's, which is a paid publication). Now, Dalio is not saying the U.S. is plunging into a depression (keep in mind that the D-word has some terrible connotations). However, he believes that we are not prepared for the wrenching problems ahead of us. After all, the U.S. government is preparing a massive stimulus package; the Fed is cranking up its balance sheet; most investments have plunged; and short-term interest rates are basically zero. If you look at the depressions of Japan (in the '90s) or Latin America (in the '80s), you'd see the same thing. Essentially, Dalio believes that the debt structure in the U.S. needs to be restructured. This means taking large write-downs, which would certainly be scary. But, in a sense, it will reset the system. However, what's likely to happen is that there will be much more intrusiveness from the federal government, which could create bureaucratic slog. We may also see restrictions on global trade, as well. OK, how can an investor deal with this grim picture? Dalio likes gold right now and he is also buying government bonds. He even thinks there are opportunities in Japan. And, interesting enough, he thinks there could be a huge opportunity for equities in late 2009. Tom Taulli is the author of various books, including The Complete M&A Handbook and The Streetsmart Guide to Short Selling: Techniques the Pros Use to Profit in Any Market. He is also the founder of BizEquity, a free online business valuation tool for small businesses. ................................................................................................................................................ bloggingstocks.com