Managing Money in a Zero Interest Rate Environment
Usually I am a Ray Dalio fan,  but I felt this video was not worth the time.<p>From a marketing point of view it reiterates the obvious point that a financial plan built around cash,  stocks,  and bonds in 2020 that assumes positive returns isn&#x27;t a plan.<p>I love Ray&#x27;s articles that describe how &quot;All Weather&quot; works,  how you can put together multiple beta sources with some leverage and derivatives and get &quot;better&quot; results.  (e.g. qualified &quot;better&quot; because you have to decide if you&#x27;d rather eat returns or eat Sharpe ratio or give up because the Sharpe ratio has nothing quantitative to say about the black swan that&#x27;s coming)<p>What he doesn&#x27;t do is even suggest that sources of beta exist that aren&#x27;t impacted by the ZIRP catastrophe,  or even that there is something much more sinister about it:<p>So far as we know,  there is no end to the ZIR environment.  What would happen if interest rates go up?  Overleveraged consumers have their $500 mortgage payment become an $800 mortgage payment.  Countries that were spending $10 billion a year on interest payments are not spending $100 billion a year of interest payments.<p>If interest rates go up,  everybody will default.<p>You could color it morally in different ways,  but factually,  participants in our economic system have been making unrealistic promises to each other for years.  ZIRP has let us deny that truth,  but someday it won&#x27;t be possible to deny.