Why Ray Dalio Just Loaded Up on Gold
By Justin Spittler
Ray Dalio just issued a serious warning.
Dalio, as you may know, is one of the world’s top investors. He manages more than $160 billion at Bridgewater Associates, the world’s largest hedge fund.
Dalio is at the top of Wall Street because he can spot massive threats and opportunities that most people can’t.
For example, he predicted the U.S. housing bubble would burst in 2007. He also said that a housing crisis would spread to the banking sector.
This wasn’t a popular opinion at the time. But Dalio was right.
That same year, the U.S. banking sector imploded. This triggered the worst financial crisis since the Great Depression. The average U.S. stock plummeted 57% over the next two years.
• In short, it pays to listen to Dalio…
And last week, Dalio urged investors to take shelter.
He explained why in a letter to his clients. You can read it here if you like. But he basically thinks the world’s becoming a very dangerous place for investors.
But Dalio didn’t just issue a warning. He also bought a ton of “insurance.”
In a minute, I’ll tell you how Dalio’s protecting his clients. But let’s first look at why he did this.
• Dalio is nervous about global politics…
He’s especially worried about the situation in North Korea.
Last week, Dalio wrote that we’re seeing “two confrontational, nationalistic, and militaristic leaders playing chicken with each other, while the world is watching to see which one will be caught bluffing, or if there will be a hellacious war.”
And he’s absolutely right.
Tensions between the U.S. and North Korea are at the highest level since the Cold War. The two countries are now a tweet away from attacking each other.
This would obviously rattle global financial markets. But that’s not the only thing he’s worried about.
• Dalio’s nervous about the federal debt, too…
And you can’t really blame the guy.
The federal debt has more than doubled over the past decade.
The U.S. government now owes more than $19 trillion. That’s more than the annual economic output of the U.S. economy. And that figure doesn’t even include massive liabilities like Social Security and Medicare.
The U.S. government now has until next month to raise the “debt ceiling.”
The debt ceiling is supposed to limit how much money the government can borrow. But it doesn’t.
Whenever the federal debt gets close to its ceiling, Congress just raises it. It’s actually done this around 74 times since 1962.
In other words, the debt ceiling is a farce.
• Still, there’s a chance that the government won’t raise the debt ceiling next month…
And Dalio says this would have severe ramifications.
It could trigger a “technical default, a temporary government shutdown, and even loss of faith in our political system.”
Investors aren’t taking this threat seriously.
If they were, the price of gold would be much higher.
That’s because gold is real money. It’s held its value for thousands of years. And it’s survived every kind of financial crisis imaginable.
• This is why Dalio thinks every investor should own gold…
He wrote last week:
If you don’t have 5-10% of your assets in gold as a hedge, we’d suggest that you relook at this.
Now, this isn’t the first time that Dalio’s encouraged investors to own gold. In 2015, he said “if you don’t own gold, you know neither history nor economics.”
Dalio also bought a ton of gold for his clients.
Last quarter, his hedge fund Bridgewater took positions in SPDR Gold Shares (GLD) and iShares Gold Trust (IAU) for a combined market value of over $100 million.
These are the world’s two largest gold funds. They’re two of the easiest ways to profit from higher gold prices.
But if you’re looking to truly protect your wealth, you’d be much better off owning physical gold.
This is gold that you can hold in your hand. It’s a much more secure way to own gold than GLD, IAU, or any other “paper gold” fund.
As longtime Dispatch readers know, physical gold is one of the simplest ways to protect your wealth from catastrophic losses. And it often rises in times of uncertainty, like we’re seeing today.
• North Korea and the debt ceiling are just two reasons to own gold…
The stock market is also a giant bubble. The bond market is a super bubble. And to top it off, the average American is drowning in debt.
If any of these problems trigger a genuine crisis, the price of gold should skyrocket. You’ll obviously want to own gold before that happens.