Jeremy Grantham and Ray Dalio discuss the stock-market plunge, ring the inflation alarm, and share investing tips. Here are their 15 best quotes from a new conversation.

• Jeremy Grantham and Ray Dalio discussed markets and inflation, and offered tips to investors.
• Grantham predicted a broad crash in asset prices, touted natural resources, and slammed the Fed.

Jeremy Grantham and Ray Dalio are two of the best-known investors and market historians on the planet. The pair discussed the state of financial markets, the inflation threat, and how investors can protect their portfolios in a recent conversation hosted by Bridgewater Associates.

Grantham, the cofounder and chief investment strategist of GMO, predicted a sweeping crash in asset prices, blasted the Federal Reserve, and touted natural resources and clean energy as shrewd bets.

Dalio, Bridgewater's cofounder and co-chief investor, warned against holding cash or bonds, trumpeted gold and emerging markets, and touched on Tesla CEO Elon Musk's deal to buy Twitter.

Here are Grantham and Dalio's 15 best quotes, lightly edited for length and clarity:

1. Jeremy Grantham: "The market is showing signs of breaking down." (Grantham highlighted the recent declines in the Nasdaq and S&P 500, bitcoin, and Cathie Wood's Ark Innovation ETF. He also noted AMC and other meme stocks are in "ragged disarray.")

2. JG: "We have a market today which feels superficially like 2000, and I think it's going to play out initially like 2000. Then the deflationary effects on the economy and the stock market will result in a world rather like the 1970s, where all assets are simply much lower priced than they are today."

3. Ray Dalio: "Like all bubbles or paradigm shifts, the mentality that did exist — we don't have to worry about inflation, cash is a safe place, and so on — gets a shock. There's a punch in the face. There's been a 14-year bull market, and there's a punch in the face to all investors."

4. JG: "High levels of debt are just far too often seriously dangerous. The risks of a debt bubble breaking, and the risks of an equity bubble breaking, have simply not been understood by our Federal Reserve since Paul Volcker. They are incredibly naive, they haven't even got a clue. They don't realize that they're playing with such fire."

5. JG: "You have price pressure on raw materials, metals, food. You have long-term price pressure on labor. This surely feels like a new era, in which inflation will be part of the background music, just like it was in the 20th century, and perhaps more so."

6. JG: "If you believe in inflation, you know that resources do very well. In the long run, they're modestly negatively correlated with the rest of the portfolio. As we're seeing today, when they do well, it puts a burden on the rest of the economy, which does badly. So, there is a very strong case here for a resource portfolio."

7. RD: "Gold is a dead asset, it just sits there. But it's got characteristics that are limited in supply. As a hedge asset, as an overlay on top of a portfolio, it's really like a great insurance policy for when other assets go down."

8. RD: "Cash is trash, and it's not going to be good in bonds and debt."

9. RD: "I want to look at people, companies, and countries that have good income statements and balance sheets so that they can weather those things, and it's a sign of their productivity. Also, are they civil with each other? I really do believe that internal conflict and bad finances are going to be defining characteristics of where to invest, or even where to be."

10. RD: "Look to parts of the world that are not as plagued with this. Emerging Asia is very interesting, India is interesting. Look at neutral countries. Watch out for government controls on capital markets. Watch out for foreign-exchange controls."

11. JG: "We're so fragile. All you have to do is cough now, and it ricochets around the world in price spikes and shortages and bottlenecks. That is the world we better get used to living in."

12. RD: "There's been a transition to an ideological allocation of resources. The acquisition by Elon Musk of Twitter — it's not a financial transaction as much as it is for the purpose of having control." (Dalio also pointed to the clash between Disney and Florida Governor Ron DeSantis as an example of politics trumping economics and competition.)

13. JG: "We're going to have to rely enormously on research and our inventiveness to save our bacon. I do believe there is a decent chance that it will." (Grantham was discussing how 200 years of using fossil fuels has catapulted science, research, incomes, and consumption forward, but has had dire environmental impacts.)

14. JG: "In all probability, the lack of cheap, available, green energy is not the factor that will bring us to our knees. The problem is the time it will take to get there. We have wasted, arguably, 50 years getting the point that climate change is ultimately dangerous. By the time we have all this cheap, green energy, an enormous amount of damage will have been done."

15. JG: "It gives a sense of purpose, and it may very well be the best investment you can make. The top-line
revenue of people going to solve climate change is going to dwarf the rest of the economy." (Grantham was explaining why he invests in clean-energy startups.)

Read more: A portfolio manager at billionaire investor Mario Gabelli's $41 billion firm says to buy these 27 stocks that have the pricing power to deliver returns as inflation soars