Ray Dalio, Warren Buffett, two of the most famous and two of the most successful investors in the world. What do they have in common? Or actually more importantly, what are they exactly at odds against and who’s more successful? So in this video, I’m going to break down a core concept between the two that one is completely offsides on and is losing billions, tens of billions of dollars while the other one is having success with it. And more importantly, I want to break this down so you can understand it. You can apply it to your own portfolio.

It’s a massive misconception that you’ve been fed to you by Wall Street, so you depend on them. But of course, you don’t need them. You can do this on your own as long as you understand this one concept. I’m going to break down and if you use it, maybe one day you can be at the likes of Warren Buffett and Ray Dalio. Maybe. Let’s go. All right, welcome to the channel. If you’re new, my name is Mark Moss. And I make these videos because I got caught offsides in 2008 after building multiple businesses, multiple business exits, a Fortune 500 exit, developing tens of millions of dollars in real estate.

I wasn’t paying attention to the financial system. I got caught offsides and I’ve been studying the markets in depth ever since. About five years ago, I started making education to help people avoid the same mistakes that I have. I’ve been writing a financial newsletter for over seven years now and I have an investment fund and I’m taking all the lessons that I’ve learned through all those years of teaching and in my own fund and bringing them to you right now. And I want to talk about this concept that is a big misconception.

And when I didn’t understand this pre-2008, it cost me a lot of money, but I’m going to teach it to you right now and hopefully you won’t be losing money on this. So what’s the big misconception that I’m talking about? Well, the big misconception that Wall Street feeds you, your financial advisor feeds you, is that you need to be diversified. Diversification, they tell you, is the key to success, right? You need to have different assets. You need to buy all these different things, 5, 10, 15 different positions, different assets. You have to have stocks and you have to have bonds and you need to hold all these different things and they need to all be in different sectors, right? Everything, all these different things across all the different asset class, across all these different categories and across all these different sectors, as spread out as you possibly can.

That way, if one goes bad, the other ones don’t, right? That’s what they tell you. You need to have all these different eggs, split it all up. But the problem is that diversification can actually be diversification, can actually make it worse for you. Why is that? Well, there’s lots of reasons for that. But before we get to that reason and what the better way is, let me just break down how this is playing out in real time and we’re going to use Ray Dalio for this example. So Ray Dalio is very famous.

He does great work. I’ve read a couple of his books. I love them. He created one of the largest hedge funds in the world, Bridgewater Capital, super successful. He really came under the scene when Tony Robbins talked about him in his book, Money Master the Game. And he talked about Ray Dalio’s, what’s called an all-weather portfolio. All right. And like I said, Bridgewater Capital became one of the largest hedge funds in the world based off this all-weather portfolio. Basically, the way the all-weather portfolio works is that you play the field. If you were going to go to Vegas, for example, and you wanted to play roulette, instead of betting on red or black or on, you know, whatever, number 16, you would just play everything.

Well, you’re going to lose a lot, but you’re guaranteed to win on one of them. And so some of the losses offset some of the wins. That’s basically the strategy. The problem is that it doesn’t always work. Specifically, when a lot of the assets you’re buying aren’t doing really good. Let’s take a look at this specifically. So inside Ray Dalio’s fund, Bridgewater Capital, he used something called a risk parity trade. So you’re trying to pair the risk. Now, first of all, let me just say categorically, the idea is not so bad.

And all hedge funds actually do some of this, which is the name hedge. They’re hedging their bets, right? A hedge fund. And I think about this a little bit. I do it a little bit differently. We’ll come to that. Okay. So basically his all-weather portfolio, it performs well across different economic conditions. So basically what it’s saying is no matter what’s happening, it works well, because even when we’re losing, we’re making money. If you bet on red and black at the same time, you’re going to lose on one and win on the other.

How far are you getting ahead? Okay. The goal of the all-weather portfolio is to generate consistent returns while minimizing risk, which sounds great. Consistent returns and I don’t minimize risk. I love that, right? We’ll get to the performance in a second. Now, in this, you have basically about 30% in stocks and Ray Dalio likes to invest in the S&P 500. Now I’ve shown you many times, if you watch my videos regularly, that the S&P 500 is basically a perfect proxy for inflation. Now, not CPI, but the rate of debasement, the rate of monetary expansion, right? So the money supply is expanding since 2019 till now at about 10% a year.

So you don’t need to beat the three, four, 5% inflation the government tells you, the number you need to beat in your investments is 10%. So he’s invested in the S&P 500, but the S&P 500 is averaging about seven or eight percent. So S&P 500 is not averaging enough to beat the inflation rate, the real true inflation rate. He invested to 40% of long-term bonds and 15% into intermediate short-term bonds. But of course, the bond market has completely imploded. The last couple years has been the worst trade to be in. And I don’t understand how anybody would want to buy bonds when the government is literally printing money at the fastest rate in history.

The US government about a hundred, I’m sorry, about a trillion dollars every hundred days. Why would you want to hold debt? Yes, they’re holding about 7.5% in commodities. So how’s that working out for a good old Ray and Bridgewater capital? Well, we can see in the last 30 years, so I’m not cherry picking data here. In the last 30 years, the Ray Dalio all-weather portfolio obtained a 7.6% compounded. So it’s making it on top of what it’s already making a 7.6% compounded and it will return with a 7.43 standard deviation. But it’s supposed to minimize risk and provide consistent returns.

So is it so bad? Well, it suffered a maximum drawdown of 20% that required 30 months just to get back to even. Hopefully you weren’t retiring in those three years, you know, and your income plunged. So it doesn’t sound very consistent to me and it doesn’t sound very safe. And it’s certainly not keeping up with the rate of inflation. So that’s about how well this is working. Now, as I said, this is sort of a tale of two investors. Now, this is Ray Dalio’s fund. Now, how is that really working out for Ray Dalio? More importantly, Bridgewater capital.

He’s recently retired, so he’s not there anymore. But we can see that investors, this was, as of April of 2024, investors are losing faith in Ray Dalio’s risk strategy after a lackluster five year run. So this is not short term. I showed you the 30 year performance over the last five years. He’s had poor performance so bad. In fact, that people are pulling out their cash as fast they can. It’s been disappointing for a long time. This is not new. He didn’t just collapse because he’s investing in bonds and bonds collapse.

No, this has been happening for a long time. I believe somewhere over $70 billion has been withdrawn, not from people like you and I, not mom and pop retail. No, no, these are fun, smart people. They realize that this doesn’t work and they’re pulling their money out. Okay. Now a tale of two investors. The other side of that coin is good old. Well, Warren Buffett, I talked about him at the intro. Now, Warren Buffett has a concept called the deal box. I’ve talked about this before. I made a whole video talking about it.

We’ll link to that video in the show notes down below. But Warren Buffett says that we should invest into our circle of competence. We should have a box that our deals go in. And that’s the ones that we hit. Andrew Carnegie right here says the way to become rich, you want to become rich, way to become rich is to put all your eggs in one basket and then watch that basket. So instead of diversification, like Ray Dalio says, whose performance is underwhelming and is losing money right now, Andrew Carnegie says that we should put all our eggs into one basket, which is opposite than what you’ve been told.

But we should be watching that basket. But Mark, doesn’t that sound risky? Well, yes, it certainly does. But you got to watch the basket. Now going back to Warren Buffett, if you want to get rich, it takes concentration. Warren Buffett talks about like he uses a baseball analogy where you have like a batter’s box. And for example, I’m not a big baseball fan. But for example, one batter might be really good. If balls are right here, they get like a 400%. But if they hit balls here, they’re really bad at it, for example.

So you want to understand when deals come through your deal box, where your zone of genius is, where your circle of competence is. So the problem with Ray Dalio’s fund is that you’re so diversified, you don’t know what all that stuff is. You have no idea what that stuff is. And you have no way to watch the basket. You can’t watch that many things. Legendary investor Peter Lynch talks about and in one of his books, that the average ordinary investor can easily beat the market if because as they walk through downtown, they see stores or they see products or brands that they know, like and identify with.

And they can buy those and that will typically outperform the market. Why? Because intuitively, they go Oh, I don’t know. Aloe. My wife loves that. Like aloe workout where like that’s a big brand. It’s overtaking Lulu limit. I should buy some of that. So like I know that it’s in my circle of competence. It’s things that I pay attention to. Now, you might ask yourself, well, I don’t know what my circle of competence is. Well, then if you don’t know what your edge is, you probably don’t have one. But the good news is, is that you can build that circle of competence, you can build that.

Now back to Warren Buffett, why am I talking about him? He says that everybody’s got a different circle of competence. So some people know different things. Obviously, people have different circle of confidence. The important thing is that is not how big the circle is. The important thing is staying inside the circle. So you might have a very small circle, I might have a very big one, or vice versa, it doesn’t really matter. The key is, is to only stay within that circle. So for example, if I know that my my batting performance goes up with balls there, then I’m just gonna wait, I’m gonna let balls go by until one comes through there, and then I’m gonna swing.

Now obviously, in baseball, you get what three strikes and you’re out. But in business, or in the world of investing, like look, we’re not on a timetable, we’re not on a rush, like I got the rest of my life here. Right? So like, I’m just gonna let deals go by. There’s billions of places you can stick your money. Why wouldn’t I wait until I see the ones that come into my core circle of competence? Now again, if you’re a circle, if you don’t have one, or it’s very small, don’t worry, you can build that you can expand on that circle of competence.

Okay, now that’s happened. Where should I be focused? Like if you’re trying to build it or learn it or grow it, where should I? Well, there is an asset black hole that’s going on, that’s sucking in the money from everywhere. And I’m going to show you this is where you should be focusing your money. This is where your your core circle of competence should be if you have interest in it. Now, if you want to know the exact individual assets that I’m buying and selling inside this black hole, it’s more than I can cover in this short video.

However, next week, I’m going to be doing a live presentation, I got like 20 or 30 charts will break all this down the black hole, what assets we’re buying, how we’re allocating towards that. And it’s gonna be done all live, you can hang out with me and I’ll answer all your questions live, so you’ll know exactly how to interpret it and apply all this information. And it’s fun, we get to hang out. So it’s free, there’s a link down below, come hang out with me to qr code on the screen costs nothing, and we have a good time hanging out.

Hopefully you’ll make it. But this black hole, the circle of competence is being framed up by this, you probably see me choose this chart many times before. This is a phenomenon, a k wave, a conjoint wave, I call them a technological revolution wave, they happen about every 50 years. And about every 50 years, there’s a new technological revolution, not just a new technology, like an iPhone, a revolution, a cluster of technologies, that one changes the course humanity, but more importantly, it drives financial markets. So this is where our circle of competence should be in each cycle.

Now, right now, we are starting a brand new what I’m calling the six, six, the sixth technological revolution. Now, if I go backwards, I don’t want to go super far, but we have that well, the Industrial Revolution, steam engines and railways. Here we had steel and electricity, heavy equipment. Here we add oil, automobiles, mass production. Here we add microprocessors, telecommunications, personal computers, the internet. And now we have a brand new one starting right now. Now, just real quickly, it’s very simple. What drove the markets for the last 50 years? What’s dominated them? Of course, telecom, personal computers, internet, what dominated the markets before that? Ford, GM, GE, what dominated the markets before that? Steel, oil, are you starting to get the drift? So you want to have your circle of competence in these core areas.

You can see this sort of illustrated here, these are some of the richest people in the world. Of course, in the computer era, we have Bezos, we got Gates, et cetera, right in the automobile era, Henry Ford, et cetera, the bankers, the railroad people, the oil people, you get the idea. Okay. Now, in this new market, the sixth technological revolution is the revolution of decentralization. So the world is starting to break apart. And you’ve seen me talk about this quite a bit. The world is breaking apart, we’re moving into a multipolar world.

We have people taking their laptops and being digital nomads. And the internet has helped that. But this next era is being led by Bitcoin, cryptocurrencies, and the decentralization there, as well as AI is very decentralizing. Yes, the LLM who controls it is somewhat centralizing, but now I can do the work of 20 or 30 people. So I don’t need big teams. So there’s lots of technology around that specifically. So AI and crypto really is like the trend. And what we can see, if we look at crypto versus the internet is each new technology has happened.

I showed you all the cycles. They have an adoption cycle. How long does it take for people to start using them? Now, each one has a faster adoption cycle because they build on the one from the past. So for example, when the phone came out, it took about 60 years to get to 80% adoption, which is considered full adoption. But the internet, for example, happened much faster. Now, what we’re seeing here is the technology adoption curve, the cryptocurrency versus the internet. So this white line right here is the internet adoption. And the yellow line is the cryptocurrency users adoption.

And we can see that it’s happening at a much faster rate. So this is the next trend that we’re on. Now, the next thing we can see here, we’re putting Bitcoin here to show you the cryptocurrency gain, as we can see in that same period, as cryptocurrency is being adopted at a faster rate than the internet did, we can see the price charge has gone up exponentially. Yes, it’s volatile. Of course, it goes up and down, and it goes up and down, it goes up and down, but it stayed in this trend of going up, up, so it’s done pretty well.

So these are the trends that we’re on. Now, what’s interesting, you see me talk about this quite a bit, the liquidity growth cycle. So the liquidity is the money, the amount of money that’s all around the world. This is the central bank’s balance sheets, all the global central bank’s balance sheets of the world, as well as available credit, things like that. And what we can see is that the world, the world’s M2 growth, this is the Fed, the ECB, the PBOC, and the BOJ, the year over year growth, we can see that the money supply growth is going up at an astronomical rate as well.

As a matter of fact, the supply of money is growing at about 8% a year, and actually from 2019 until now, it’s growing at about 10% per year. So it’s growing up at an astronomical rate. So we have these two opposing forces. We have a brand new technological revolution, the starting, and we have a massive amount of fuel for the fire, if you will, right? This liquidity is coming in to help build this out. Now, if we look at the different asset classes from 2011 until the end of 2023, what we can see is that we have Bitcoin right here, the NASDAQ, large cap stocks, safe stocks, gold, treasuries, high yield bonds, tips, cash, REITs, et cetera, commodities all the way down.

So we have all these different asset classes, and then year by year by year, we have the profits and losses. Now, Bitcoin moves in like a three to one cycle, three good years and then a bad year, three good years and a bad year, three good years and a bad year. And now what we can see is that Bitcoin has been the best performing asset since 2011. I talk about this quite a bit. The next best performing one has been the NASDAQ. Of course, it’s the tech stocks. So Bitcoin and the NASDAQ, the tech stocks have been the two best.

Below that, then we have the large caps, that’s like the S&P 500. Below that, you know, gold, et cetera. If I just jump over here, what we can see is the annualized returns from 2011 to 2023 for Bitcoin was 150%. For the NASDAQ, it was 7%. Third place, the S&P 500 was 12%. And the fourth one was, yeah, stocks was 4.5%. So basically, first two Bitcoin 150%, NASDAQ 17%. Both of those were the two dominant ones. The problem is though, is that, again, we have about this hurdle rate, the money supply is growing at about 10%.

Plus we have consumer price inflation of whatever three and a half percent now. So we have about a 13% hurdle rate. So the S&P 500 did 12%, but that’s less than the rate of monetary expansion of debasement. So the only two things that you should have invested into, forget diversification, the two things that you should have invested into concentration would have been either cryptocurrencies or the NASDAQ, which are tech. Okay. But here’s the problem with that. If I look at this and I price NASDAQ, the second best performing asset in Bitcoin, what I can see is that the NASDAQ priced in Bitcoin has completely folded and it’s down 99%.

So if cryptocurrencies have been the best NASDAQ has lost 99% of its value to Bitcoin. So in light of that, do you want to be in a diversified portfolio? Should you be splitting your money up perfectly evenly between all of these things in so many baskets that you can’t even watch them? Or would you put them in the one or two best performing baskets and just watch those baskets? And more importantly, if there’s only two baskets, I should even be paying attention to. And one of the baskets is actually lost 99% of its value to the other basket.

Then you might even want to think about more concentration from there. Okay. Now, as I said, it’s not just Bitcoin, right? We’re seeing the rise of AI as well. Now the best proxy for us to see this right now is of course, Nvidia, which is absolutely amazing. No analyst has been able to predict this because it’s not a predictable thing. This is complete market mania driven by this rise of AI, which is big and it’s here to stay. And we don’t have a lot of ways to play it. So Nvidia is like this perfect proxy for it right now.

And you can see the rise in this and it’s completely outperformed Bitcoin. It’s just that Nvidia is not an asset class. It’s individual equity. It’s gone up 2500% in that same timeframe. So you can see that diversification is diversification. Ray Dalio’s fund shows you the math. The best guy in the world of diversification is losing all his money. It’s been underperforming. It’s underperforming S&P 500. It’s underperforming the rate of monetary debasement. And his fund has lost over $70 billion or it’s been withdrawn because people no longer trust that model anymore. We know that Warren Buffett and Andrew Carnegie say that no, no, we want to concentrate our bets.

Warren Buffett does have more bets, but he has a big, pretty big wide circle of competence. We want to invest in things that we know. And if we don’t know a lot, we need to invest some time to learn those things and expand that circle. Our deal box. We know that right now, we know that technology cycles is what drives the markets and we’re entering a new one. And so this is where we want to build our deal box and we should be spending our time focused on finding the best plays in that deal box.

The two, if I really break that down are crypto and AI. If you want to know the exact plays that I’m doing, not just Bitcoin plays that can move multiples of that or not just Nvidia plays that can move multiples of that and come hang out with me live. I’m going to break this down. It’s going to take like an hour. Probably I got 20, 30 charts. We’ll run through all this. I’ll show you what I’m doing and I’m going to answer all your questions live so you know how to apply this, how this fits into your portfolio.

And it’s fun. Just come hang out. I’d love to meet you. And then finally, we have to understand that most assets are failing the hurdle rate. So even though all those other asset classes, they well underperformed Bitcoin and Nasdaq, they underperformed the hurdle rate, which is the rate of the monetary expansion, which is 10% plus inflation of three. So you’re at least 13%. So everything else has failed that. So why would you diversify into an asset class that can’t beat the rate of loss? You tell me, leave me a comment down below.

Let me know what you think. Of course, as always, give me a thumbs up if you liked the video. If you don’t, you can give me a thumbs down. That’s okay. Uh, either way, let me know in the comments down below. And of course, subscribe if you’re not already subscribed and that’s what I got to your success. About
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