tv Studio 1.0 Bloomberg October 17, 2015 9:30am-10:01am EDT
>> and the lesser ability of central banks to eight monetary policy. now, we raise rates have ammunition. it sounds like you disagree. it is a restrictive policy. i do not care if they raise 25 basis points. i do not see the reason for it. 2007, i was watching this incredible bubble, nasa bubble and financed on a lot of debt and the obvious bubble. the fed paid attention to the gdp gap. they missed a bubble. we have a situation in which we are in the mid part of the cycle. trying to identify where inflation is. they are worried about -- we had a lot of liquidity. there are little glimmers here and there. a something. basically, i think they're worried too much about the
short-term debt cycle and not enough about the long-term that cycle. -- debt cycle. that -- look at the world. we are in a world economy. tell me the countries outside. >> a primetime bloomberg surveillance special on radio and television worldwide. with ray a new york dalia of bridgewater. i want to talk about you and bridgewater. you have been around for a while. you have suggested to people that we are starting to step back and a lot of people are saying this man with his ability should stay in the game. what are your plans? >> it has been 40 years. >> i am trying to be nice. >> i'm talking about stepping back in management not investments. i am an addict.
i started at 12 and cannot stop. i love the game. some confusion about what stepping back is. i will always be playing the game. >> do have a session that succession plan at bridgewater? who has worked with me for 27 years. he is 505i think. think.nsen -- he is 55 i greg jensen just turned 40 and has worked with me. i have a lot of people who have been there a long time. we are used to doing it. >> allen of ford tom: everybody runs a company differently. everybody has a style.
when you have a meeting at bridgewater the incredibly trained individuals choose to hire, how do you inject ability? ray:ve you inject humility ? ? unusualhave a very culture. so everyoneything can listen to everything. it is a. -- an ideal of meritocracy. there.t people come there is no traditional hierarchy. you can ask any questions. that keeps you on your toes.
you stand up in front and you have everybody shoot at you and you have the stress test and that is the best way to test your thinking. that is fantastic. there is meaningful work and meaningful relationships. ♪ tom: are you having a greater debate at bridgewater about china? ray: you have two problems in china.
the numbers into the template. mike: that is an interesting situation. ray: what is your question? mike: how did you miss it with the template? ray: by the way, we miss things. terms -- what happened was when they went to the bubble bursting in stock, he went from -- you have two problems in .hina, you have a debt problem you have to restructure. that is a manageable problem because it's in their local currency, and by the way, the -- they aregotten very intelligent, prudent people, so restructuring your
debts in your local currency is a manageable exercise. have done it three times. we have defaulted in 1971. we at the latin american debt crisis. we have the snl prices and the rpc. that is a manageable process. is a have tosue restructure what they are building money on. a newave to rebuild economy to replace the old economy. that is a challenge. that is like a heart transplant, it is a serious process. like most transplants, you'll get through it if you have good surgery. they had a bubble. they went from an equity market, which is normal. in the early emerging stages of many economies where you get the speculator in, get leverage on margin, then you have the
bubble. they have the bubble. that bubble was a negative at the same time. you went from a full market -- a ull market. you have a negative force coming in at the same time. in those three negative forces. if you look at them, look at the economies with a narrow set of circumstances. what are economies that have to restructure their debt, what is it like? it is a negative. what comes next? we know certain things comes next. when we had was that bubble burst, we shifted from one kind of set of two minus'ses and a plus. we exaggerate over the short term. we look at everything up close, and so we look at china, -- i think china is going to be just
fine. just to be clear. it is going to be weaker. growth is going to be twice the size of our normal growth. come backe how you and you have beautiful store charts of depreciation. i promised you i would ask you quotes, but at the end of the day, if the sioux solution-- is the going to be depreciation? facing aou are domestic contraction and you have a choice, do you want to depreciate your currency -- because everyone judges their network based on a local currency.
what happens -- that is the lesson i learned in 1971, i was working on the floor of the new york stock exchange. nixon, sunday night, announces that he is doubling of the gold standard. we don't have money, i am walking on the floor of the new york stock exchange, and i haveed that every time you stimulus and causes things to go up. when you have zero interest rates, what are you going to do? that an economic model, central banks around the world secular stagnation. you're optimistic about china. for investors out there, -- ray: i want to clarify. -- secularnk stick stagnation, i'm sorry, i
shouldn't have interrupted your question. returns inkind of the next 10 years can investors expect question mark i am not talking about your particular funds. is it going to be different? ray: yes. you are going to have returns that average somewhere in the vicinity of 3% or 4%. this is a major pension fund problem. way assets work, when there is quantitative easing, purchases, and prices go up, that is just producing a present value of fact. it is like a bond. up, -- bond price goes many say, i'm sorry, i'm not seeing it clearly. if you invest in a 10 year bond and it is two and a quarter percent, you are going to get to and a quarter percent.
the reality is, you collect the at at, sell it, and invest lower interest rate, the lower interest rate means that you are going to get the two and a quarter percent. when you look at the whole structure of asset prices from cash to the two and a quarter percent in the tenure bond, and carry it all the way through, that is permeating all asset classes. that is permeating venture capital, private equity, real estate, all asset classes are going to have a very low return. that means you need a whole lot more money in order to immunize something. $100,000 ayou had year expenditure. how much money would you have to have to immunize $100,000 expenditures? -- we know,tuation it is certain, we are going to have very low returns. ray: i just had to give a signal
to the camera. one minute or one more hour with you. [laughter] we went with one more minute. you are with hbs. what you say to a 26-year-old smart kid at hbs to say going to finance, how do you sell them on that? ray: it's easy. when you can go long or short, anything in the world, or everything in the world, that means you don't have any cycles, that means you get to think about the whole world. no excuses. if you go into any other business, you are going to have a cycle. there is went to be a tech cycle -- if you take financial engineering, every investment into, -- ing