Bridgewater's Ray Dalio on 'capital war' fears: The monetary order is breaking down
Speakers
Ray Dalio
— Founder, Bridgewater Associates
Summary
Bridgewater founder Ray Dalio, speaking from Davos on CNBC's Squawk Box, argues the monetary order is breaking down as fiat currencies and debt lose their role as stores of wealth, with 'capital wars' threatening foreign demand for US debt. He says gold is the main beneficiary, with central banks and sovereign wealth funds still underweight and a neutral portfolio weight of 5-15%, while he personally tilts away from bonds and keeps part of his portfolio in new technology.
- Dalio says the monetary order is breaking down as fiat currencies and debt lose status as stores of wealth.
- He frames trade wars as having a 'capital war' counterpart that could reduce foreign willingness to buy US debt.
- Gold is described as the second-largest reserve currency, with central banks and sovereign wealth funds buying it as a diversifier and still underweight.
- He suggests a 5-15% gold weight for a neutral portfolio and says he runs a greater-than-normal gold allocation.
- In his tactical tilts he moves away from bonds and toward gold.
- He remains positive on new technology, saying the disruption rewards companies that use it more than hyperscalers.
- He notes gold was last year's biggest market mover and that US markets underperformed foreign markets.
Ideas
Stay overweight gold as under-owned diversifier.
Dalio argues the monetary order is breaking down, with fiat currencies and debt no longer held by central banks the way they once were, and he highlights that gold was the biggest market to move last year, far better than the tech markets, while US markets underperformed foreign markets. Central banks, sovereign wealth funds and other official holders are buying gold as a diversifier because gold is effectively the second-largest reserve currency rather than a metal to speculate on, and the entities that should hold it are still underweight, 'still short of gold,' even after the run-up. He says a neutral diversified portfolio should hold 5-15% in gold because it does very well when other assets don't, and he personally runs a greater-than-normal gold allocation, emphasizing proper sizing over active trading.
Own new tech within diversified portfolio.
Dalio says we are in a wonderful technological revolution in which new tech will create great disruptions, and he wants part of his portfolio positioned in it, describing his stance as a mixture of new tech and a diversified portfolio with an element of gold. He notes the impact of the disruption comes less from the hyperscalers themselves than from the companies that are going to use the new technology.
