Ray Dalio: Forget About Debt Assets, It's Time To Invest In Gold and Bitcoin

Ray Dalio, co-founder of one of the world's largest hedge funds, Bridgewater Associates, recently stated at a financial conference in Abu Dhabi that in the context of most major economies facing intensifying debt issues, he prefers to invest in assets like gold and Bitcoin, while avoiding debt-related assets.

"I believe that there would likely be a pending debt money problem. I want to steer away from debt assets like bonds and debt, and have some hard money like gold and bitcoin."

Hard currencies typically refer to currencies backed by physical commodities like gold and silver, and Bitcoin is also classified as a hard currency due to the stability and controllability of its supply.

Gold and Bitcoin have recently been near historical highs as investors attempt to hedge against economic uncertainty, geopolitical tensions, and new monetary policies. Last week, driven by the positive remarks of the US President-elect Trump on digital assets, Bitcoin broke the $100,000 mark for the first time in history.

Dalio has always believed that gold has a significant negative correlation with assets such as stocks and bonds in a typical investment portfolio. During major crises, gold usually witnesses an inflow of funds, leading to a surge in gold prices. If one considers including gold in an investment portfolio using portfolio optimization tools, the results often indicate that it can reduce the overall risk of the investment portfolio and increase expected returns.

Dalio pointed out that the debt levels of many major countries have reached unprecedented levels, which is unsustainable. He warned that it is inevitable that these countries will face a debt crisis in the future, leading to a significant devaluation of the currency.

Dalio previously stated that facing a massive debt of $35 trillion, the Federal Reserve needs to maintain a "delicate balance" of interest rates. The United States will increasingly rely on monetizing debt, taking a path similar to Japan's, which means the risk of devaluation of the dollar and other currencies will increase.

Dalio believes that debt, currency, and the economy are one of the five key forces driving almost everything. The other four driving factors include: The internal political order within nations, triggered by wealth and value gaps, the external geopolitical order, natural disasters, such as droughts, floods, pandemics, and climate change, as well as the invention of disruptive technologies. When talking about disruptive technologies, Dalio said that he prefers to invest in companies that use technology to improve their own businesses, rather than those that sell the most products or services.

Dalio emphasized not to focus too much on the twists and turns of daily news but to consider these major trends more. "Think strategically and tactically, and adopt a global perspective, while recognizing that what you don't know about the future far exceeds what you know."

He added that diversification and functionality are elements that should be present in investment strategies to effectively deal with threats and seize opportunities.

In October 2022, Dalio officially relinquished control of Bridgewater Associates, having previously resigned as CEO and Chairman in 2017 and 2021, respectively. His current role is primarily to provide guidance to the committee overseeing the company's investment strategy.