You'll Never BELIEVE Ray Dalio's POSTURE On USA Potential Decline
Money Counsel
15,242次观看 2023年2月28日
https://www.youtube.com/watch?v=GW4LcK5atjo
In this video, billionaire investor and founder of Bridgewater Associates, Ray Dalio, shares his insights on China and reserve currencies. Dalio discusses China's rise as a global economic power and its potential to challenge the US dollar's status as the world's reserve currency. He examines the historical patterns of reserve currencies and how China's growth may impact the global financial system. Dalio also provides his thoughts on how investors can navigate these changes and position themselves for success in the future. With his wealth of experience in the financial industry, Dalio provides valuable insights and perspectives on this important topic.
在此视频中，亿万富翁投资人兼桥水基金创始人雷·达里奥 (Ray Dalio) 分享了他对中国和储备货币的见解。 Dalio 讨论了中国作为全球经济大国的崛起及其挑战美元作为世界储备货币地位的潜力。 他研究了储备货币的历史模式以及中国的增长可能如何影响全球金融体系。Dalio 还就投资者如何驾驭这些变化并为未来的成功做好准备提供了他的想法。 凭借在金融行业的丰富经验，Dalio 就这一重要话题提供了宝贵的见解和观点。
Ray Dalio Says The Dollar Global Order Is 'Fading Away': SPY Implications
Summary
- Billionaire Ray Dalio recently said that the dollar-dominated global order is 'fading away'
- We analyze his thoughts on the causes and ramifications of this phenomenon.
- We also share the implications for the performance of the S&P 500 moving forward.
- We also share our approach and one of our top picks to profit from this trend.
- Looking for a portfolio of ideas like this one? Members of High Yield Investor get exclusive access to our subscriber-only portfolios. Learn More »
- Billionaire and legendary investor Ray Dalio recently said that the dollar-dominated global order is 'fading away', going on to say:
We are now going to have the major powers and their allies form economic, currency, and military blocs.
In this article, we analyze his thoughts on the ramifications of this phenomenon. We also share the implications for the performance of the S&P 500 (NYSEARCA:SPY) moving forward.
The Fading Dollar-Dominated Global Order
Mr. Dalio's theory is based on the assumption that we will see a continuation of the recently accelerating trend away from globalization under an economic system where the U.S. Dollar was effectively the global reserve currency. Instead, we will see the world increasingly divide into competing blocs along military, currency, and economic lines.
He sees this trend continuing in large part because:
each country's populism and nationalism [is] growing in preparation for greater conflicts... conflict with outside powers, most importantly the United States.
He went on to point out that he believes there are greater risks and consequences for a potential war between great powers today than during the Cold War:
because the Soviet Union was never a comparable power to the United States.
In contrast, today we have China which has emerged as a true peer challenger to the United States across the military and economic domains. It is this growing rivalry that is rapidly approaching military and economic parity which is bringing about the end of the U.S. Dollar dominated global order. As a result, countries like Russia are increasingly emboldened in challenging the existing U.S. led global order by launching its military invasion of Ukraine and openly flouting the international Dollar-dominated economic system.
Back on February 26th, 2022 the G7 and European Union responded to Russia's invasion of Ukraine by freezing its U.S. Dollar and Euro currency reserves at the Russian Central Bank (60% of Russia's international currency reserves). Russia's response was to establish a gold price floor for its currency while announcing that Euros were no longer acceptable payment for its exports. Russian Duma energy committee chairman Pavel Zavalny summarized the Russian position by saying:
Let them pay either in hard currency, and this is gold for us, or pay as it is convenient for us, this is the national currency.
With China buying gold hand over fist and its military and economic power nearing parity with the United States, more and more countries may decide to buck the U.S. Dollar "standard" in favor of a different - and potentially more advantageous (at least on paper in the short term) - economic system offered by China.
SPY Implications
What are the implications of this trend? First and foremost, it means that economic and even military conflict are increasingly possible. The potential impacts on the SPY are pretty much universally negative.
The loss of the U.S. Dollar's hegemony will likely increase inflation in the United States because foreign economies will have less desire to hold Dollars on their balance sheets. As a result, they will send them increasingly back to the United States, where they will enter circulation and drive up the money supply.
Meanwhile, at the same time, a potential decline in access to cheap labor and crucial raw materials like those found in China, Russia, and Iran will increase the cost of goods and services across the globe, including the United States. In particular, the increasing coziness between the Saudi Arabians and the Chinese and Russians is a troubling trend for the United States because if that trend continues, the cost of energy will likely increase moving forward given that Russia and Iran - two other major oil producers and exporters - are currently on extremely poor terms with the United States and are increasingly being sucked into China's economic and military orbit.
Furthermore, a decline in access to foreign markets through increased trade wars and other forms of economic sanctions could deeply harm many SPY constituents, including many of its largest members such as Tesla (TSLA) and Apple (AAPL) which lean heavily on China for the production and consumption of their products.
Last, but not least, the global recession that would likely result from a severe deterioration in U.S. - China relations, especially if it turned into open conflict or at the very least the severe fragmentation of the world's major economies and supply chains, would undoubtedly hurt the profitability and growth potential of SPY's constituents.
When combined with the fact that the U.S. is already facing significant inflationary and slowing growth challenges - with many calling for a recession this year - the picture for SPY is not pretty. The risk-reward profile is even less attractive when you consider that according to several popular stock market valuation models (including the Yield Curve, the Buffett Indicator, the P/E, and Interest Rate models), the stock market looks to be trading at a meaningful level above fair value.
Investor Takeaway
These are certainly very uncertain times for the global economy and the United States economy - by virtue of its leadership position and close entanglement with and interdependence on other economies like China's - is no exception.
While the current geopolitical and macroeconomic trends and the SPY's current valuation make SPY look like a less than attractive investment at the moment (we rate it as a Hold for long-term oriented investors), there are pockets of opportunity. In particular, Ray Dalio thinks that countries that are relatively sheltered from geopolitical conflict are in a position to benefit as a safe haven for globalism. As he stated:
A study of past wars and logic shows that those who were in the wars were greatly harmed, and those who were not involved in the wars prospered...Those desiring globalization will now look beyond the United States, China and Europe.
He pointed to Latin America as one region which could benefit, highlighting Mexico as an example:
You're seeing a movement of production from China to Mexico because it's cheaper and they can export easily into the United States.
As a result, at High Yield Investor we are steering increasingly clear of major multinational corporations that are highly dependent on trade with China and instead are investing aggressively in businesses poised to profit from de-globalization and/or a shifting of economic demand from China to Latin America. One such pick we really like at the moment is leading Latin American alternative asset manager Patria Investments (PAX).
Ray Dalio Says America's Decline Will Upend Lives, Not Just Portfolios
Ray Dalio, founder of Bridgewater Associates, speaks at the World Economic Forum in Davos, Switzerland in 2017.The billionaire investor who built the world’s largest hedge fund paints a dire scenario in his new book.
“No empire lasts forever,” says Ray Dalio. Humble words for a man who’s built the world’s largest hedge fund, with assets in excess of $150 billion. But the billionaire founder of Bridgewater Associates, 72, isn’t talking about the empire he created and stepped down from managing as CEO in 2017. (Dalio remains Co-Chairman and Co-CIO.) Instead, the empire that worries Dalio is the one in which he resides: the United States.
“Right now, money and credit and how it’s behaving are affecting the financial markets, it’s affecting inflation,” says Dalio in an interview with Forbes as U.S. inflation has spiked to its highest rate in over 30 years.
America’s domestic issues and decline as the world’s leading superpower are more than simply a matter for debate to Dalio. They underpin the core thesis of his latest book, Principles for Dealing with the Changing World Order: How and Why Nations Succeed and Fail, that comes out on November 30. In it, he builds the case that the confluence of rising U.S. debt and income disparities, along with America’s diminished influence, has put the country at risk of not just economic hardship but war. Specifically, he points to growing debt and near-zero interest rates that have led to a massive printing of money ($16 trillion of debt at negative interest rates this year, by Dalio’s estimates), increased conflict and polarization due to widening wealth gaps and China’s increased ability to challenge U.S. hegemony on the world stage.
Dalio believes there’s a 30% chance that the U.S. will enter into a major “civil-war-type” conflict within the next five years. While other countries face similar challenges, America looks especially vulnerable. “It’s very important that we deal with this now,” he says. “We can have a type of civil war or international war based on how we are behaving with each other and our financial conditions.” What’s more, the U.S. is not alone in facing this dire scenario.
“It’s very important that we deal with this now. We can have a type of civil war or international war based on how we are behaving with each other and our financial conditions.”
Dalio has built his business and net worth, which Forbes estimates at roughly $20 billion, on figuring out where the world is going and designing investment strategies to profit from it. Former U.S. Treasury Secretary Hank Paulson describes him as a “big thinker and brilliant academic disguised as an investment manager.” Moreover, Paulson adds, Dalio’s assessment of macroeconomic risks and strategies is often right. He famously made money during the 1987 stock market crash and predicted the 2008 financial crisis, which enabled his fund to outperform during that crash, too.
What’s different now is not just the scope of the problem but Dalio’s ability to amplify it. Instead of writing up his views on the global business landscape for an audience of clients who’ve bought into his fund and stand to profit from his investment strategy, Dalio is sharing them with the wider world. Thanks to his bestselling 2017 book Principles, Dalio has become something of a celebrity and cult hero to the millions of readers drawn to his leadership philosophy of “radical transparency.” As a result, Dalio’s new book could attract an audience far bigger than the usual fans of his macroeconomic missives.
Those readers may find The Changing World Order to be both eye-opening and potentially frustrating—it is more an academic study versus investment playbook. While Dalio inspired readers with his life story and leadership philosophy in Principles, his new book raises alarm bells about problems for which there are no clear solutions. If Dalio has a clear strategy for how to invest and hedge risk in this environment, he’s not going to explain it here. After all, creating strategies to build wealth amid seismic global shifts is why companies like Bridgewater exist. Rather, Dalio’s modus operandi typically is to establish an economic framework (usually in the context of cycles or “the economic machine”) and then provide key broader principles on how best to navigate the path forward. Anyone who has read Dalio’s writing on the rise of populism in 2017 or his two-part missive on why capitalism needs to be reformed two years later will be familiar with this approach. If they’re hedge fund investors, they’re used to reading pieces that explain how a manager sees the investment landscape.
In this new book, Dalio offers a deeper analysis and some new tools to measure and navigate the risks. Dalio says he felt compelled to write a book because of how swifty the economic climate has changed. As co-chief investment officer at Bridgewater, he explains, “I need to make decisions now.” There’s also an altruistic instinct to educate people about what’s around the corner. Says Dalio: “I'm at a stage in my life where I'm passing along the most important things I've learned, so I decided to put it out as a book for that reason.”
Dalio has created a “Health Index” in the book that rates around a dozen nations on 18 different factors ranging from debt burdens and economic output to military strength and innovation. It’s the kind of tool that readers can use themselves to assess risks and form strategies. He plans to create a website for people to assess objective data in real-time, much like doctors do when evaluating patients.
Dalio is as much a student of history as science. As the title suggests, his assessment of the current threats to economic health comes from years of studying the rise and fall of great empires. The U.S. is not the first nation to experience rising debt levels and income inequality while facing diminished power and influence on the world stage. “The last time those three things happened was in the 1930 to 1945 period,” says Dalio. “When they happen together, it’s a very telling story.”
To a boy born in Brooklyn during the post-war baby boom that followed America’s success in World War II, the threat of devastating consequences isn’t simply a compelling investment scenario. It’s a call to action. Through his writing and conversations with leaders like former U.S. Secretary of State Henry Kissinger and JPMorgan Chase CEO Jamie Dimon, Dalio hopes astute leaders and citizens can take action to stave off the worst outcome. The issues, after all, have been percolating for years. “It's high time we actually look at these things and take the warnings and deal with it,” he says.
As he has done for decades in writing about macroeconomic risk, Dalio is careful to clarify that the exact scope and timing of the risks he sees remain unclear. Much like a hurricane, he explains in the book, knowing the conditions for an economic storm and the signals that one is coming makes it easier to prepare and get out of harm’s way. “I’m not interested in making any more money,” he says. “I’m just trying to pass along now the things that have been valuable to me and to help others.”
One piece of advice on the safest hedge against what’s coming? “Not cash!,” he exclaims. In early 2020, Dalio caused a stir in Davos by saying “cash is trash” as people were pulling out of markets amid concerns that included a then-new coronavirus. Dalio’s argument then, as now, was to diversify across different asset classes, currencies and markets. Betting big on one or two things is rarely a winning strategy.
“I worry, too many Bitcoin holders, they better be right that it’s Bitcoin and it’s not something else,” he says. “What you’re seeing is in all assets, you’re seeing it in real estate, stocks, gold, silver, Bitcoin, and so on. From all of that [economic] stimulation they have all gone up,” he says. In his view, many investors overweight U.S. assets at the expense of attractive alternatives. “If I were to give it in a nutshell, I’d pick countries [to invest in] that are earning more than they are spending so that they have a good income statement and balance sheet.”
And if you want to know more, well buy the book. Dalio says it’s likely to be his second-last, as he plans to write one more book about economic and investment principles. “Once I get past that, I won’t have anything to say and I’ll be quiet,” says Dalio. Maybe so, but that doesn’t mean he’ll abandon his day job anytime soon. “I love the game I play—the markets.” While he wants to help improve the odds for continued growth in the U.S., Dalio knows there’s money to be made when you know how to play what comes next.
I am Senior Editor at Forbes covering everything from Wall Street and billionaires to the intrepid world of entrepreneurs, startups and Silicon Valley. A former Forbes “Under 30” lister myself, I am author
...Why billionaire Ray Dalio thinks another economic disaster is coming — and how he recommends preparing for it
“First, Ray Dalio foresaw the 2008 financial crisis. Then, he predicted years of long-term financial strain on the U.S. economy from the Covid pandemic.
Now, the 72-year-old billionaire investor who built Bridgewater Associates into the world’s largest hedge fund is warning of a new economic catastrophe on the horizon — and he wants you to be prepared.
“I think we’re at risk of a war with China,” Dalio told CNBC Make It during a live-streamed Q&A on Friday. “Largely due to misunderstandings.”
Dalio noted that his predictions aren’t facts: He’s been wrong before, too. But, he said, future catastrophes are inevitable, according to historical patterns over the last 500 years.
In other words, if an upcoming U.S.-China conflict doesn’t tank the economy, something else will. Here’s why he thinks disaster is on the horizon, and his top two tips on financially preparing for it:
Why Dalio thinks the U.S.-China trade war could get worse
In his newest book, “Principles for Dealing with the Changing World Order,” Dalio wrote that American attempts to make China and its culture “more American” could eventually backfire, prompting a conflict.
That could intensify the two nations’ trade war, which was started by the Trump Administration in 2018 and has led American companies to cut wages, lower profit margins and raise consumer prices.
A Moody’s Analytics study found that the trade war cost Americans at least 300,000 jobs in just its first year. Last year, a Federal Reserve Bank of New York study found that the trade war had cost American companies $1.7 trillion in market capitalization.
Dalio’s comments about China have prompted recent controversy. After telling CNBC last week that China’s human rights policies were akin to those of a “strict parent,” he clarified his comments in a LinkedIn post. “I was attempting to explain what a Chinese leader told me about how they think about governing,” Dalio wrote. “I was not expressing my own opinion or endorsing that approach.”
In that post, he also expressed hope that the U.S. and China could back away from the precipice of conflict.
“What I think and what Bridgewater does are of minuscule importance relative to the rapidly growing risk of U.S. war with China,” he wrote. “I hope that thoughtful attention will be paid to that issue and that mutual understandings will increase and inclinations to fight will diminish.
His first tip: Assess your financial risks
Regardless of what happens, Dalio said on Friday, he has a simple principle for approaching future events: “If you worry, you don’t have to worry. And if you don’t worry, you have to worry.”
Worrying, he said, prompts you to take a close look at your own personal risks — and encourages you to take action on them.
One risk, for example, could be “location,” meaning the physical place where you live and work. Dalio’s book contains a “Health Index” that rates roughly a dozen nations on 18 factors like debt burdens, military strength and economic output. It’s intended as a resource for readers to assess risks and form strategies on where to live and invest, and according to Forbes, he plans to launch a website housing real-time versions of the data.
Moving is, of course, often a hassle — but Dalio said it’s worth considering under financially worrying circumstances. “Flexibility is key,” he added.
Similarly, he advised, measure your financial risks in inflation-adjusted terms instead of today’s dollars. If you have cash in a savings account, for example, it’s probably accruing value at a different rate than your other investments, since it’s being taxed by inflation.
But that doesn’t mean you should exclusively choose other investments over a savings account, or vice versa. Amid chaotic times, Dalio said, you need your emergency savings to be funded by a safe, well-diversified portfolio.
His second tip: Save and diversify your portfolio
Dalio’s first step to a strong portfolio is assessing your current investment strategy — if you have one — to figure out how many weeks you could financially survive if you lost your job. “It always pays to find out whatever the worst-case scenario is and cover yourself from that,” Dalio said.
Then, make sure your money isn’t all in one place. “Cash is not a safe investment,” Dalio told CNBC last week, as inflation hit a 31-year high in the U.S. Instead, he suggested on Friday, build as diverse a portfolio as possible — ranging from inflation index bonds, which Dalio recommended above regular bonds, to physical assets like gold.
Your portfolio could even include digital assets like cryptocurrencies. In May, Dalio told CoinDesk that he personally owns a “small amount” of bitcoin, despite years of criticizing crypto. The reason, Dalio said on Friday: It’s a hedge bet, made solely for the purpose of diversification.
“I urge those who like bitcoin — or those who like gold — to not make it an all-or-none decision,” he said.
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