 Good day, fellow investors. Ray Dalio recently gave an interview with CNBC at the Greenwich Economic Forum and in 17 minutes he said it all. He gave a description of the economic and market environment we live in, the outlook, what has to be done and what we can expect. He reiterated this with his LinkedIn article titled, the world has gone mad and capitalism is broken. However, he said it all by just using a few words here and there as the article and interview are just a summary of his ideas. I wish to add value to you building on Dalio's words and explain his message. This should give you a good perspective on how you stand, where we are now and whether you are prepared for this environment that is coming. As the world has gone mad and the system is broken, Ray Dalio expects a paradigm shift and we have to see whether we as individuals, investors, portfolios are prepared for what is going to come in the economy, in the markets and in general. The topics are separated on the economy, on the market, so we are going to discuss what are the main issues in the economy, in the markets and then what can be done to solve that in general and also from an investing perspective. So let's start immediately with the economy to quote Ray, the world has gone mad and capitalism is broken. Monetary policy is not working anymore because there is absolutely no benefit coming from lower interest rates and more money printing. And what are central banks doing? They are printing more and more money and lowering interest rates. Just over this quarter there will be 23 global interest rate cuts that will supply even more money, make money more available. Just for those that are credit worthy, the majority of the population doesn't get access to this more money, thus the system is broken because it helps only the rich getting richer and not everybody. And that's one point that Ray Dalio makes very, very well. The Fed has tried to increase interest rates lately but has immediately reversed its policy and it has tried to lower its balance sheet if you look at the red line here. But also the policy has been quickly reversed after just two years of unwinding and that is the Fed and that's just the Fed. We have the ECB continuing with stimulating the economy on a monetary perspective. Bank of Japan, China, everybody is doing it and the party seems just to continue. The thing is that all the developed country have seen sluggish economic growth and they are trying to print economic growth. They are trying to financially engineer economic growth but it's not about financial engineering. They can postpone issues but they have to really solve issues if they want to improve things and the issue is always the same. You can push things up by using that but sooner or later those things come back to you and chase you and decrease your growth in relation to your growth in productivity. Growth in productivity can be achieved through education improvements which is not the focus. The easiest thing you can do is print money and that's why they are just printing printing and printing. Demographics don't help. There is no demographic growth especially in Europe and the United States are even the best among developed countries on that paying field. So slow demographics, a lot of money, high debt levels are not painting a good picture for the future. If we go to Albert Einstein, insanity is doing the same thing over and over again and expecting different results. The Fed, ECB, Bank of Japan are doing the same thing over and over again. The same things that they have been doing for the last 45 years by constantly lowering interest rates and they expect different results which is the clear definition of insanity. So Ray Dalio says it all. The system is broken. It is not effective. The federal rate cuts are not helping now in a late part of the economic cycle. With the economy still doing good they cannot increase interest rates so the effect of those cuts and the effect of money printing will again not be seen in the economy. It will be only seen in financial assets because there is where the benefits stop and we have seen real estate prices exploding over the last decade. This is the Netherlands and just compare lower interest rates, what they have done to nominal home prices and compare it to netto wages. So the red line are house prices, the wages are the wages, the black line. So it's crazy the difference what's going on, how people are priced out of the market and only the rich that have access to very low, very cheap money, low interest rates, only they benefit. If we look at real hourly earnings for production and non-supervisory employees in the United States adjusted for inflation the level in March 2019 has been the same compared to February 1973. So the American worker doesn't see any benefits of what's going on and the wage is not growing, which is increasing the gap among the population, which is something Ray Dalio is really focusing on because historically we have seen that those gaps ebb and flow and when it starts to change, when the current focused on creating wealth, make the richer, richer changes, when the current changes then it will be issues for portfolios for everything. So the bottom 90% of the population in the United States held about 33% of the wealth 30 years ago. Now it's less than 25% while the top 1% held 30% and now it's almost to 40%. So the rich are getting richer, those that have access to capital. The wealth gap will change the current system. I'll tell you in a second how it will change it, but there are other issues, not only money printing in the system, the other issues are unfunded liabilities that are going to weaken currencies, all the reserve currencies that we run to now are going to be wicked because of the following things. There are three components of unfunded liabilities, budget deficits, healthcare deficits, future healthcare liabilities, and social security liabilities, pension liabilities that are only partly covered. That's something insane and you'll see how insane it is now. The U.S. federal surplus of or deficits, better to say deficit is negative, has been negative for the past 45 years. So the United States, 40 years, the United States have been borrowing, have been spending more than what they make for 35 years and everybody is fine with that. But if you look at the federal debt, it has exploded over the last 45 years, especially over the last 20 years has quadrupled. If I would have a stock like this, I would be the happiest man in the world, doubled since 2009 and this is just not all of the debt that we have out there. You can't increase interest rates because this debt has to be funded so you have to print more money and it is simply not sustainable. And given the free money, negative interest rates, roll over to debt and you are never expected to pay this back. You are just selling dreams of everlasting supply of money and that it has no effect on whatever is going on. The financial crisis in 2009 was a liquidity crisis. It will not happen today because there is so much money. But what will happen is a big squeeze because more obligations come due, a lot coming at the US. The bottom 60% is not credit worthy, it's difficult to lend too. So they can't really get the money. They can't see the benefits of what's going on of all the money printing. The money doesn't go through to help the people and stays in the financial system. Everybody is doing the same if we look at global debts in US trillions as a percentage of GDP. 1997, 2007 and 2017, the chart is simply insane. Just look at government debts globally in 20 years. It went from 19 trillion to 63 trillion and from 58% of GDP to 87% of GDP. The financial sector also 53 to 80% and household debt went also from 15 trillion to 44 trillion but look at GDP growth from 42% and 59%. Corporations non-financial went from 64 to 92% which is something crazy. So more money is pushed into the financial system that goes nowhere which creates the financially engineered bubble. Actually when you have to borrow like the United States have to do in many other countries just to pay interest rates. That's called the Ponzi scheme. There is no other definition than a Ponzi scheme and you can see of the deficit of the United States deficits what is the primary deficit and what is going to just pay the net interest on the debt. If interest rates increase due to external forces the US will be in big big trouble. The outlook is actually terrible if we look at the congressional budget office not some mumbo jumbo from some researcher out there just from the projected deficits and federal debt held by the public over the coming years. The growth is staggering it's going to increase to 160% of GDP and then somebody will say okay Japan has 240% and everything is good. It's not good my friends it's not good in Japan. If you look at where the spending is going to go of course big growth in net interest spending, big growth in major healthcare programs and big growth in social security. So that deficit is going to have to be covered somewhere and the biggest way of covering is to print more money to cover for demographics for natural forces. Older people are going to be more and more older people social security healthcare programs and these are liabilities that are not on the balance sheet now but will be coming in the future and are certain. The thing is that weakening demographic trends the potential labor force adding to productivity is not there and there is the potential labor force productivity that depends on many things but we have seen over the last 10 years it has been much much lower than in the past plus something extremely important for investors if you have a pension fund don't expect it to deliver on its obligations. They expect to deliver 7% per year in return on your funds which is something impossible given the current economic environment and impossibility of raising interest rates. The latest investment return assumptions but by various American pension funds and global are ridiculous. The Alaska teacher pension funds expect to make 7.48% per year over the very long term the New York state and local police and fire 6.80% where are they going to find returns of 6.84% beats me so they say this will be your pension this will be our returns those returns will not be like that in the current environment where the 30 year bond gives 2-3% so it will be 2-3% pensions will be cut and there will be a lot of unrest when the Alaska teacher retires in 10-20 years hoping to get X and he'll get just half of X as a pension so the solution will be cutting benefits cutting pensions raising taxes and printing more money and that's something that will have a big impact on what's going on on what has been going on over the last 50 years and it's actually a paradigm shift that will have to happen to cover for those benefits to cover for those health care obligations and to cover for those unfunded pension liabilities bad demographics that we are living it so Delio says it simply printing money is the easiest path because it's the most hidden way of creating a wealth transfer and it tends to make asset prices rise which is exactly what we have been seeing because there are no limitations made on the amount of money that can be printed or the value of that money this is the easiest path however the big risk of this path is that it threatens the viability of the three major world reserve currencies as viable store holds of wealth so three major currencies are threatened so keep in mind over the next years and then again you have those pension funds that have invested in bonds so currencies are threatened the value of those currencies will be debased to pay for all the shit that's going on and bye bye my little pension fund bye bye the system we are seeing as we are seeing now on the markets to quote Ray Delio they are buying dreams not earnings because investors have so much money to invest and because of past success stories of stocks of revolutionary technology companies doing so well more companies than at any time since the dot-com bubble don't have to make profits or even have clear paths to making profits to sell their stock because they can instead sell their dreams to those investors who are flush with money and borrowing power that is your pension fund and what does this mean simply look at uber stock key highlights growth they are growing 29 per cent per year wonderful then they push it on adjusted ebita 600 million everything is positive but when you look okay net loss attributable to uber technologies 1.2 billion over the quarter that even improved and then you look at okay it's money losing company how much cash do they have they have 12.7 billion in cash thanks to the latest ipo that's what Ray Delio says about selling dream and people that are flushed with money when you look at the normal financial statements you see that over the last nine months uber lost 7.6 billion dollars and that's the reality they are selling dreams and it's not just uber it's many other companies like tesla or we work we don't even have to mention it and that's a big big risk because where are the returns going to come from all these companies operate in highly highly competitive environments and there is so much money also for the competitors that it's very unlikely they will grow they will give positive returns to capital invested and those ipo investors are your pension funds so they are really really doing funny things asset prices continue to go up Ray Delio suggests there will be no crash because there is so much money in the system so there is no liquidity issues no crashes ahead but very very very low returns from all asset classes if we look at earnings over the last 10 years if you look at the bump received by increased taxes buybacks etc real earnings real corporate earnings didn't change much over the past 14 years SAP 500 earnings in 2006 were 103 points then we had the crisis and now those are given also the low much lower taxes those are not much really different and show growth of one two percent per year over the last decade that's what you have that's what people are investing in and this is mostly thanks to financial engineering not to any increases in product productivity or similar and the outlook is that taxes will be pushed higher and it will put pressure also on stocks for long-term investment returns those returns that really matter when it comes to retiring and when it comes to investing so on the outlook there is populism the wealth gap is increasing it will have a lot of pressure on tax policy benefits and there is no effective monetary policy out there fiscal and monetary monetary policy coordination will be necessary due to negative interest rates and that's very very dangerous because when you give a printing press to the politicians it can lead to Weimar Germany 1920s scenarios large budget deficits large debt pension liabilities healthcare liabilities there is going to be a lot of money printing so say bye bye to your currencies earnings will be driven down by taxes companies are selling dreams not earnings money printing a lot of it is the conclusion and the answer is a paradigm shift those things that supported the economy in the past low interest rates high debt money printing will be in geo party the system is stuck you can't raise rates everybody has debt the borrowing is stimulated it's competitive and when you have to reverse it it will put pressure on everything that's going on you can't reverse things anymore those are not benefiting the economy there are no trickling down to the majority of the population and it is time for a paradigm shift so to conclude the financial crisis was a liquidity crisis it's not going to happen today there is going to be a big squeeze by more obligations coming due especially in the u.s europe japan and that the financial help is not trickling down to other population you will see more populism more taxes and the rich people are going to go to the countries that have lower taxes and the outlook is a slow painful outlook for the very very long term from an investing perspective fortunately for us that look globally there are opportunities to protect our money from inflation have higher superior returns so please subscribe to this channel to get insights into into better investments that are going to do better no matter what the economic environment will be