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Billionaire investor Ray Dalio is sounding an alarm that the mounting tension between the US and China could result in a full-blown economic crisis.
Hedge fund guru Ray Dalio believes that a new economic crisis is on the horizon – and is offering advice on how best to prepare for it. According to the founder and co-chief investment officer at Bridgewater Associates, the looming crisis could stem from the tenuous relationship between the US and China. Dalio asserts that the US’ attempts to ‘Americanize’ the East Asian nation may prove more costly than anticipated. In a recent conversation with CNBC, he said:
“I think we’re at risk of a war with China largely due to misunderstandings.”
Although Dalio suggests that his prediction should not be taken as gospel, he argues that catastrophes are inevitable. The veteran investor ascribes this argument to historical patterns spanning the last 500 years.
The trade war between the US and China heated up during the Trump Administration in 2018. This subsequently resulted in American companies reducing wages, lowering profit margins, and increasing consumer prices. In addition, according to a study by Moody Analytics, the war resulted in the loss of no less than 300,000 American jobs. Also, last year, a New York Federal Reserve Bank study discovered that the trade war also directly impacted American companies. It reportedly led to the loss of a collective $1.7 trillion in market capitalization for American firms.
Recent Dalio Comments on China Sparked Controversy
Dalio recently came under fire for some recent comments he made about China’s human rights policies. Last week, in a session with CNBC, he likened the Asian country’s human rights policies to those of a “strict parent.” In light of the resulting backlash, Dalio took to LinkedIn for clarifications. He explained that he directly lifted his comments from an opinion shared with him by a Chinese leader. Additionally, the seasoned hedge fund investor also wrote, “I was not expressing my own opinion or endorsing that approach.”
Dalio also stated that he hoped that the US and China would not cause further agitations that may escalate into a full-blown conflict. According to Dalio, doing this would ultimately have far-reaching ramifications. According to the financial guru:
“What I think and what Bridgewater does are of minuscule importance relative to the rapidly growing risk of US war with China. I hope that thoughtful attention will be paid to that issue and that mutual understandings will increase and inclinations to fight will diminish.”
Ray Dalio Suggests Tips For Surviving the Impending Economic Crisis
Should a disaster eventually break out, Dalio offered two key financial tips for braving it. Firstly, he says that people should assess their financial risks. Dalio encourages that physically moving locations to cut costs may prove a very practical decision. The world-renowned investor emphasized flexibility. According to him, how people live and work can directly impact their standard of living. Dalio also stated that people should measure their financial risks using inflation-adjusted metrics, instead of current dollar earning value.
Secondly, Dalio suggests that people save and diversify their portfolios, emphasizing that cash is not a safe investment. Some of the securities he advises to add to individual portfolios are inflation index bonds and physical assets like gold.