Billionaire investor Ray Dalio says he’s worried about a possible economic collapse, with monetary policy issues and the ever-present threat of a Chinese stock market crash being his main concerns.
It really doesn’t matter if they do or do not raise the interest rate by 25 basis points, said Dalio in a Bloomberg interview on Wednesday. (Source: Bloomberg, last accessed September 17, 2015.)
The economy is in seriously bad shape, and a significant downturn may be coming. The scope of that crash is what scares Dalio most, considering how inflated asset prices are and the constrictions placed on central banks to adjust monetary policy. (Source: Reuters, last accessed September 17, 2015.)
The billionaire founder of Bridgewater Associates went on to predict that returns across asset classes are not likely to average more than three or four percent in the next decade. (Source: Bloomberg, last accessed September 17, 2015.) The narrowing of spreads is about to make it more difficult for asset buying to have as large of an effect on broader markets.
Indeed, with slumping commodity prices and ever-growing worries about a possible Chinese stock market crash, it’s no wonder that one of the biggest names in financial markets is telling us to look at the bigger picture.
China’s market rout erased nearly $5.0 trillion in equities, sending broader global markets into a tailspin that no one really knows the trajectory of.
Now, if you think that’s crazy talk, you should keep in mind that Dalio has the track record to make him a credible authority on the topic of economic health.
His “Pure Alpha” hedge fund strategy, accounting for approximately half of Dalio’s total assets, has risen by a reported six percent this year alone.
Dalio has hinted at this being the new normal for China, if it manages to pull itself out of a dangerous financial vortex with volatile political implications. (Source: Bloomberg, last accessed September 17, 2015.) Both manufacturing and economic growth rates will likely slow down in the Middle Kingdom, which will likely put the rest of the global economy into a lower gear for some time.