Oh what do these guys know? Two of the all-time most successful hedge fund operators, Ray Dalio and Stan Druckenmiller, and one of the all-time most successful bond fund managers, Bill Gross, have this to say about debt:
“It’s the end of the supercycle. It’s the end of the great debt cycle.” -Ray Dalio
“Corporate debt was $3.5 trillion– in 2007, arguably a period and– many would describe as bubbly. It’s 7 trillion now. So it’s gone from 3.5 trillion to 7 trillion. As you know, most of that mix has been in more highly leveraged stuff, Covenant-Lite loans– high yield, that’s where the majority of the rise has been. And if you look at corporations have been using it for, it’s all financial engineering.” -Stan Druckenmiller
“In the past 20 to 30 years, credit has grown to such an extreme globally that debt levels and the ability to service that debt are at risk, relative to the private investment world. Why doesn’t the debt supercycle keep expanding? Because there are limits.” -Bill Gross
“The process of lowering interest rates causing higher levels of debt, debt service and spending, I think is coming to an end.” – Ray Dalio
“The implications are much lower growth, less inflation, lower interest rates, and less profit growth.” -Bill Gross
“We brought consumption forward and issued one giant credit card for the past 30 years. Now the bill is coming due. Investors need to get used to low returns, and low growth, inflation, and interest rates for a long time.” -Bill Gross
“Central banks have largely lost their power to ease… We now have a situation in which we have largely no spreads and so as a result the transmission mechanism of monetary policy will be less effective. This is a big thing… So I worry on the downside ’cause the downside will come.” -Ray Dalio
All quotes are from “Scary Words From Dalio, Druckenmiller & Gross,” davidstockmanscontracorner.com.
