Page 93 - Ray Dalio - Principles

scary to all of us because of what it might mean to those who
weren’t protected.

As in 1982, when conditions deteriorated and
circumstances increasingly transpired as we’d predicted,

policymakers began to pay more attention to us. Betfarhad had
me come to the White House to meet with him. Tim Geithner,
president of the New York Fed, asked to see me as well. I
brought Bob, Greg, and a young analyst named Bob Elliott to
a lunch meeting with Geithner. We walked him through the
numbers and he literally turned white. When he asked me

where we’d gotten them from, I told him they were publicly
available. We’d just put them together and looked at them in a
different way.

Two days after our meeting with Geithner, Bear Stearns
collapsed. That didn’t trigger much worry for most people or
for the markets, though it was a sign of what was to come. It
wasn’t until six months later in September, when Lehman

Brothers collapsed, that everyone else connected the dots. At
that point the dominoes fell fast, and though they couldn’t
contain all the damage, policymakers, most importantly Fed
chairman Ben Bernanke, reacted brilliantly to create “a
beautiful deleveraging” (i.e., a way of lowering debt burdens
while keeping economic growth positive and inflation low). 8

To make this long story short, we navigated this period well
for our clients, anticipating market moves and avoiding losses.
Our flagship fund made over 14 percent in 2008, a year when
many other investors recorded losses of more than 30 percent.
We would have done even better had we not feared being
wrong, which led us to balance our bets instead of arrogantly
and foolishly putting more chips at stake. But I had no regrets
because I had learned that it wasn’t smart to bet that way.

While in this case we would have made more money if we
were less balanced, we certainly wouldn’t have survived and
succeeded long enough to be in such a position if we’d
approached our investments in that way.

The 2008 debt crisis was another one of those like the one
in 1982, which were both like many more before them and

many more that will come. I enjoyed reflecting back on my