Billionaire Ray Dalio is no stranger to predicting bubbles or crises, and he sees another storm brewing on the horizon.
The founder of hedge fund Bridgewater Associates said the supply and demand for debt in the world is out of balance and will spiral into a crisis “somewhere in the next two years.”
Speaking in a virtual interview at the annual Greenwich Economic Forum on Tuesday, the longtime investor said he’s short debt as governments and large-scale tech companies flood the market with paper while institutional buyers, such as China and Japan, pull back.
“We are certainly in a risky period,” the author of “How Countries Go Broke” said.
Dalio warned in an earlier interview that the US is approaching the limits of how much debt it can sustain, as rising interest costs consume a growing share of government spending. He has also said geopolitical tensions are weighing on foreign demand for US debt.
Beyond his bet against bonds, Dalio said an ideally diversified portfolio would have between 5% and 15% in gold. He has a small amount, around 1%, allocated to bitcoin, though he said he’s not a supporter, especially as artificial intelligence models have shown their abilities to break into digital strongholds.
Dalio, who relocated his family office to Abu Dhabi in 2023, is also looking outside the US for diversification. He said “surplus countries” like Singapore and the United Arab Emirates, which are cash-rich and don’t rely on foreign borrowing, have attractive profiles, as well as isolated opportunities across Europe.
“Are they innovative? Are they on the wave or are they being swept away?” Dalio said about evaluating countries’ potential.
He also talked up inflation-indexed bonds, which rise and fall with inflation, as a hedge against sticky cost increases.
“What you don’t know is greater than anything you do know,” he said.
“But I do think we have a debt issue.”
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