Dalio Says Get Yourself Some Gold
Back in December, before Donald Trump put his hand on the Bible, Ray Dalio wrote, "This new administration hates weak, unproductive, socialist people and policies, and it admires strong, can-do, profit makers," Dalio, who founded hedge fund Bridgewater Associates, wrote in a LinkedIn post. "It wants to, and probably will, shift the environment from one that makes profit makers villains with limited power to one that makes them heroes with significant power."
“Billionaire Ray Dalio thinks people should brush up on their Ayn Rand if they want to understand Donald Trump's economic philosophy, which raises a question for a lot of people,” wrote Ted Kemp for CNBC.
Here we are a few months later and Dalio says, batten down the hatches. “As a rule, periods of lower risk/volatility tend to lead to periods of greater risk/volatility.”
He goes on,
prospective risks are now rising and do not appear appropriately priced in because of a) a backward looking at risk and b) corporate leveraging up has been high because interest rates are low relative to many companies’ projected ROEs and because past risks have been low. The emerging risks appear more political than economic, which makes them especially challenging to price in. Most immediately, during the calm of the August vacation season, we are seeing 1) 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 2) the odds of Congress failing to raise the debt ceiling (leading to a technical default, a temporary government shutdown, and increased loss of faith in the effectiveness of our political system) rising. It’s hard to bet on such things, one way or another, so the best that one can do is be neutral to such possibilities.
So what’s a guy who manages billions of dollars doing? He writes,
we aim to stay liquid, stay diversified, and not be overly exposed to any particular economic outcomes. We like to hedge our bets, though we are never completely hedged. We can also say that if the above things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen, and treasuries) would benefit, so if you don’t have 5-10% of your assets in gold as a hedge, we’d suggest that you relook at this.
Meanwhile Treasury Secretary Steve Mnuchin visited Fort Knox. Before going in he said, “I assume the gold is still there,” “It would really be quite a movie if we walked in and there was no gold.” After the visit, he playfully reassured Americans the treasure was still secure.
But is your treasure?