Hedge Fund Billionaire Ray Dalio Explains the World

The Business Insider

Provided by The Business Insider's Courtney Comstock:

Ray Dalio says some Euro countries will default on their debt or go into recession, and that countries like China and India will be the next world leaders.

"We worry about Europe not being able to solve its problems," he told Bloomberg Markets Magazine.

Dalio's fund places trades based on its (and Dalio's) view on the global macro economy. He's one of the best at it, and arguably THE best right now, with an incredible (15% annualized returns since inception) track record and stunning performance that is currently returning investors 25% in the flagship fund within his massive $122 billion Bridgewater, the biggest hedge fund in the world. Other hedge funds managers are returning ~15% at best.

In other words, he's been right about the economy in the past, and currently, he's more right than most.

He puts the world in perspective in Bloomberg Markets Magazine, which just named him one of the 50 most influential people in global markets.

Dalio divides the world into two groups.

Here's how he describes the first, developed debtor nations (the U.S, Greece, Spain, and Italy, for example):

  • They spent years overspending, financed by their government's borrowing

  • They are in the process of deleveraging debt

  • As a result, they are being forced to lower their debt relative to their income levels, constrain spending levels and make improvements in the job market

  • Some are worse off than others. Greece, Spain and Italy, for example, can't print money to pay off their debts. To make up for slow credit growth, they will have decade-long depressions and debt defaults.

  • The U.S. is trading like a country in decline

The second are emerging creditor countries (Brazil, India and China, for example). Here's what's happening there:

  • They are leveraging up

  • They will account for 70% of global GDP in 15 to 20 years versus 47% now. Read: They will be tomorrow's economic leaders.

  • Some, such as India and China, have currencies and monetary policy linked to those in the U.S. They are experiencing inflation because their interest rates are too low. They will have to unlink from the U.S. or face intolerable conditions.

  • They are trading more like blue chips

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