Investor Ray Dalio foresaw the financial crisis in 2008 in the past, so could USA Bankruptcy. He then predicted the long-term financial burden of the US economy due to the coronavirus pandemic. He now warns that the United States may have a problem again.
Ray Dalio about American economy and USA Bankruptcy
Ray Dalio is an American billionaire and one of the most successful investors who built Bridgewater Associates, the world’s largest hedge fund, managing $ 140 billion in assets.
According to the business website Business Insider, now 72-year-old Dalio warns of a new economic crisis on the horizon, for which investors should prepare. At the same time, he advises them to diversify their funds and keep a minimum of cash.
According to Dalia, growing inequality, combined with colossal debt combined with the rise of China, which is a big rival for the United States, could lead to a problem for the United States.
“The United States is at a crossroads. Either the country manages to cope with differences within its population, and people start cooperating more, or we may face civil war or war with another country,” Dalio warned. The famous investor also noted that his predictions are not facts; he was also wrong.
Unless the upcoming US-China conflict destroys the economy, it will be because of something else
This highlights 50 years ago when, as a young investor, he believed that ending the US gold standard would have a catastrophic impact on markets. However, the opposite was true. The weakening of the US dollar led to a rise in stocks, However, according to historical models, Dalio stressed that future disasters have been inevitable in the last 500 years.
“If the coming US-China conflict does not destroy the economy, it will be because of something else,” predicts Dalio, who is also studying history carefully and is interested in famous empires and their infamous endings.
Dalio also notes that studying history has helped him anticipate some significant crises. “When the financial crisis occurred in 2008, we were able to make money in an uncertain environment while other investors lost money,” says the successful investor.
In his latest book, “Principles for Dealing with the Changing World Order,” Dalio wrote that American attempts to make China and its culture more “American” could eventually fail and provoke conflict.
This could intensify the two countries’ trade wars launched by the Trump administration in 2018, leading to lower wages, declining profit margins, and rising consumer prices in American society.
Moody’s analysts found that the trade war cost Americans at least 300,000 jobs during the first year alone. A previous year’s study by the Federal Reserve in New York calculated that the trade war cost American companies $ 1.7 trillion in market capitalization.
He told the CNBC news agency, Dalio, that he hoped the United States and China would eventually back down from the impending conflict. No matter how the situation continues to develop, Dalio advocates a simple principle of approaching future events. “If you are worried, you do not have to worry. And if you’re not concerned, you have to be afraid, “said the investor.
According to him, the fears encourage you to take a close look at your risks – and encourage you to take action against them. One of the risks may be, for example, the physical place where you live and work. In his book, Dalio refers to the “Health Index,” which rates about a dozen countries based on 18 factors such as debt burden, military strength, and economic performance.
This index should be used as a resource to assess risks and create strategies for where to live and invest. According to Forbes magazine, Dalio plans to launch a real-time data website.
The famous investor also advises paying attention to inflation. “For example, if you have cash in a savings account, its value is likely to increase at a different rate than other investments because it is ‘taxed’ by inflation. In a chaotic time, you need your emergency savings to be financed by a secure, well-diversified portfolio,” says the successful investor.
It is always worthwhile to find out the worst-case scenario and be prepared for it, in case of USA Bankruptcy
Dali’s first step to a quality portfolio is to assess your current investment strategy, if you have one, to see how many weeks you will survive financially if you lose your job. “It’s always worthwhile to find out the worst-case scenario and be prepared for it,” Dalio said.
Dalio also advises not to have all the cash in one place, mainly due to high inflation. “Cash is not a safe investment,” Dalio told CNBC. Instead, he proposed building the most diverse portfolio possible – from inflation-linked bonds that Dalio recommended over common bonds to physical assets such as gold.
According to Dalia, the portfolio may include digital assets such as cryptocurrencies. In May last year, Dalio told CoinDesk’s specialized cryptocurrency server that he owned a “small amount” of bitcoins, despite a previous critical view of cryptocurrencies.
“It’s a hedging bet created solely for diversification,” Dalio said in an interview. “I urge those who like bitcoin or gold not to make all or nothing decisions out of it,” the investor and philanthropist concluded. So will this all lead to USA bankruptcy?