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Those who are most affected by the epidemic, whether financially harmed or the way they are harmed, are far beyond the scope of monetary and fiscal policy. The monetary policy of the central bank will not actually work, this is the first time since the Great Depression of 1930

As of 11:00 on March 25, 2020 Beijing time, the total number of confirmed cases of new crown pneumonia in the world has exceeded 420,000. Global deaths are approaching 19,000. The number of confirmed cases worldwide is accelerating: from 100,000 to 200,000 cases in 10 days, 200,000 to 300,000 cases in 4 days, and 300,000 to 400,000 cases in only 3 days. Data from the World Health Organization show that more than 80% of countries and regions around the world are facing threats to the lives, health, economy, and society of their citizens.

When the new crown pneumonia soldiers are approaching the city, consumers are forced to stay away from home, and consumer service companies such as retailers, hotels, and restaurants that rely on passenger traffic are forced to close or shorten business hours. The logistics industry, including airlines, has almost completely stopped The service industry, which is a pillar industry of the US economy, was hit hard. In March 2020, the US service industry purchasing managers index (PMI) plummeted 10.3 points to 39.1 points from the previous month, which is the lowest level since October 2009.

The epidemic put an end to the longest bull market in history, created by extremely low interest rates and tax cuts. US stocks continued to skyrocket, continuing an “epic” shock. Concerns about supply and the boom in gold purchases have pushed New York futures prices to spot gold in London soaring to decades-old highs, and the Black Swans of the oil war have also flew out.

While the Dow Jones Index has achieved its largest one-day increase since 1933, the forecast of a recession in the US economy or an already recession is also increasing. The International Finance Association (IIF) report on March 23 concluded that the US and Eurozone economies have fallen into recession, and the US economy is expected to contract by 2.8% this year.

The global financial crisis in 2008, when the S & P 500 index fell 37% in a year, Pursue Bridge ’s PurThe e Alpha strategy achieved a return of 9.4%. High yields of 45% and 25% were achieved in 2010 and 2011, respectively. In the weeks-long turmoil on Wall Street, the Bridgewater Fund has been in the limelight.

In February 2020, when the reporter from Caijing contacted the founder of Bridgewater Fund Ray Dalio for the first time, the market was hotly discussing Bridgewater in late November 2019. One billion US dollars bet on global stock markets to fall in March this year; when a reporter from Caijing interviewed Dalio for the second time in mid-March, Qiaoshui was embroiled in bigger rumors, with headlines such as “Abandoned by Saudi Goldman Warehouse, Bridgewater Fund may become the second Lehman Brothers “flying all over the sky. On March 25, when Dalio finally responded to an interview with Caijing, Qiaoshui once again went on a hot search: Qiaoshui was gradually retreating after short-selling European stocks made more than 4 billion euros, and has significantly reduced short positions.

Apart from the rumors of the trivia and the self-defeating rumors, the reality is that Qiaoshui successfully shorted the European shares. Documents submitted from March 9th to 12th show that Bridgewater Fund has made a series of bearish bets on the stock markets of Germany, Italy and other countries. Data analysis company Breakout Point’s analysis shows that as of the week of March 20, Bridgewater’s net short positions in European companies have decreased by more than 70. European companies that bridge water to cut short positions include BBVA, Santander, Old Mutual, travel technology company Amadeus IT Group and construction company CRH. One week before Bridgewater cut short positions, Breakout Point stated that Bridgewater held more than 14 billion Euros in European net short positions and held more than 100 short positions in 43 European companies.

Some media estimates that before the gradual withdrawal of shorts, as European stocks fell, Bridgewater made more than 4 billion euros with its short position of 14 billion euros. Although Bridgewater may have made considerable gains in short bets, by 2020 the overall return of Bridgewater has been low so far.

In Dalio’s view, the new crown pneumonia epidemic is a unique event that will overwhelm investors who do not plan for the worst. It was a catastrophic event that happened only once in 100 years. In this crisis, Dalio estimates that US company-level losses will be about $ 4 trillion, and about $ 12 trillion worldwide.

With regard to the Fed ’s large-scale operations, Dalio believes that cutting interest rates and increasing liquidity will not actually increase the consumption activities of those who do not want to go out, although they can push up risky assets to a certain extent at the price of interest rates approaching zero price. The central bank’s monetary policy will not actually work, this is the first time since the Great Depression of 1930.

“The Fed’s printing of banknotes will not work”

Finance: In the past month, financial markets have collapsed at an unprecedented rate. Stock market falls faster than tenYears ago, the financial crisis, the stock market disaster of 1987, and the Great Depression were fast. At the same time, the U.S. stock market has repeatedly set the biggest one-day gain in history. How to understand what happened during this time?

Daleo: At this age, my goal in life is to convey those timeless and universal principles-they have benefited me, rather than telling people what to do at each time point. I will tell you how I think about the world, and then I will answer your question.

To understand the stock market trend and the principles and mechanisms behind it, it is important to have a template to understand what is happening within the framework of the template. I can’t convey the full kernel of this template particularly adequately, and give a brief overview. In my opinion, there are three types of influence mechanisms:

1. Is the stock cheap or expensive? My judgment is to compare the expected cash flow obtained by buying stocks with the expected cash flow of buying bonds;

2. The amount of government’s fiscal and monetary policies;

3. The buying and selling behavior of the main market participants depends on their positions and the factors that affect their choices.

My operations vary by country because they are very different. China’s stocks and bonds are more attractive now, and things are very bad in many debt-ridden countries.

Finance: The rapid spread of the New Crown epidemic globally has led to the Fed’s emergency and continuous interest rate cuts. Later, it introduced a series of old and new tools and measures, including “infinite quantitative easing.” Some investors believe that observing the Fed’s policies since 2008, it will be concluded that you should not fight with this central bank that can print the US dollar endlessly. Do you agree with this statement?

Daleo: I would like to say a bit more about how economic and market mechanisms work and the principles of dealing with them, so that your readers can learn to make their own decisions.

The Fed, like other central banks, has the ability to create money and credit. The most important thing is to lower interest rates and / or print money and buy bonds (ie loans). When interest rates are close to zero, the rate cuts have no effect. This is basically the case now. Most of the rate cuts have long been reflected in the decline in bond and bill yields. Stocks and numerous assets have also been priced for this. So it won’t work anymore.

This is the first time in our lives and the first time since the Great Depression of 1930 that the Fed’s printing of banknotes did not work. Therefore, I now think that the motto “Do not fight with the Federal Reserve” may be wrong. There is a section in my book Principles that goes into more depth.

Finance: There are many differences between the financial crisis of 2008 and the economic impact of this coronavirus outbreak. What do you think? What lessons learned from the 2008 financial crisis can be applied to this public health crisisEconomic impact?

Daleo: I mentioned just now that monetary policy, the most important tool for policy makers to deal with the recession, will not be very effective this time. In addition, those who have been most affected by the epidemic, whether it is financial harm or the way they are harmed, are far beyond the scope of monetary and fiscal policies. In 2008, the problems were mainly concentrated in the field of mortgage loans, and liquidity problems. Therefore, it is easier to help banks and other financial intermediaries to provide liquidity and credit to help them. This time, the ability of the relevant departments to provide funds and credit to those in need will be discounted, both for reasons of poor channels and because it requires political coordination to a large extent-the current political system is full of political debris Into.

Furthermore, due to the virus’s “cities closure” or social isolation, the provision of funds and credit will not allow people who have stopped production to provide production, goods and services. The actual loss of income should have been measured in the loss of production and cannot be justified by these policies.

“The general election is a fierce political struggle”

Finance: You mentioned that these measures, whether in Europe, America or elsewhere, are being carried out to prevent the spread of the epidemic, will the global economy decline?

Daleo: Yes, there will be a severe global economic recession, and this recession will follow the movement of the virus and roll in waves. After the virus disappears, the economy will be devastated. Then we must effectively rebuild the damaged economy. We must also consider the possibility of virus resurgence, as they have historically returned in volatile forms. Treatment and vaccine development will be key. Based on this, we need to look farther and see beyond the first wave of epidemics in our respective fields.

Finance: Which country has better prospects for recovery after the epidemic? why?

Daleo: Countries and regions that have the following advantages in responding to the epidemic and its economic impact will have a bright future:

1. Have excellent leadership, provide wise direction guidance at critical moments, and people obedient to this leadership direction;

2. Good medical facilities, and can be quickly adjusted according to the epidemic situation;

3. The balance sheet is sound and the income statement is good, instead of debts or weak net income;

4. Foreign currency debt is limited, and dependence on foreign income and foreign capital inflows is limited;

5. Fiscal and monetary policies are effective and coordinated with each other-there is room for reducing interest rates, and printed banknotes can also be delivered to those who need them most.

From these five criteria, you will find differences in public health and economic guidance in different countries. youWe also know that China is powerful in these areas.

Finance: This year is the US election year. Will the presidential election be more volatile? How will politics play a role in financial markets?

Daleo: I worry that this year’s US presidential election will be a fierce political struggle. This is a struggle about who should pay for it. Battle. In principle, when there is a huge gap between the rich and the poor in society and the economy is in recession, there will be many conflicts about how to share the shrinking cake.