Hedge fund titan Ray Dalio is worried that the current landscape is starting to resemble Depression-era conditions that could hammer investors.
in which gold will serve as a profitable hedge as investors get caught holding too much risk.
In the latest essay, he spoke of how central banks are being forced to keep interest rates low and "print money to buy financial assets" in order to prop up markets and make huge fiscal deficits affordable. He said there are "strong deflationary forces at work" as capacity has surged. "These forces are creating the need for extremely loose monetary policies that are forcing central banks to drive interest rates to such low levels and will lead to enormous deficits that are monetized, which is creating the blow-off in bonds that is the reciprocal of the 1980-82 blow-off in gold," he said.
Dalio's firm, which manages $124.7 billion for clients and is the largest hedge fund operation in the world, has performed poorly this year. Bridgewater's Pure Alpha fund was recently off 6% year to date and Pure Alpha II is down 9%,Dalio directed readers to study the economic and investing conditions of 1935-45 as "there is a lot to be learned by understanding the mechanics of what happened then in order to understand the mechanics of what is happening now.
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