The Big Cycle

Wealth and Power

Relative Standings

Rise and Decline

Changing Orders

The Future of Energy

New York and Dallas

“…what I learned is whatever successes I had in life had to do more with how I dealt with what I didn’t know than what I know…

“…the reason I did that book is because there are things that are happening now that never happened in our lifetime before, and I want to be like a doctor who knows many cases of those, but I have to go back and see them in history in order to gain that perspective.

“…There are only a limited number of personality types going down a limited number of paths, which lead them to encounter a limited number of situations to produce a limited number of stories that repeat over time.”

“…So, the question is really the adaptability. Man has a great adaptability, but he — but by neglecting it, then there are consequences… but how far it goes will be a test of man’s ability to adapt to it.”

- Ray Dalio, in an interview with Barry Ritholtz

One mark of true brilliance is the ability to make complex ideas seem simple. I think this is why so many of us fondly remember our early schoolteachers. They helped our young minds learn things (long division, for example) which at the time were new and often either exciting (to some of us) or tiresome or even frightening to some. We admire our teachers because they succeeded.

Ray Dalio’s book on the Changing World Order won’t teach you long division, but you’ll learn a lot. His understanding of great global cycles is systematic, based on hard data applied to real-world events—as you would expect from a successful trader. You don’t beat the markets by imagining things. You look at reality and figure out what it means.

As I noted last week, Ray’s book is a very deep dive. I can only give you a brief summary that still misses some important points. Today I’ll try to explain his “Big Cycle” concept and how he discerned it by looking at history. Next week, we’ll cover what it tells us about the near future.

(Note: At the end of this letter, I will give you a link to a webinar I am doing next week.)