By Tom Beck
Ray Dalio, founder of Bridgewater Associates, the largest hedge fund ever, is officially bearish on stocks, and he has now changed his tune towards a severe depression in the major indices. We have been studying Ray Dalio's investment returns going back all the way to the 1970’s, and the one thing he always gets right is an economic slowdown. In fact, his fund performs better when the market is correcting. Dalio is famous for saying that Buffett is making a huge mistake by not owning gold, and he remarked that investors “who don't own gold don't know history or economics.”
At the moment, the “Trump honeymoon” is losing serious ground. What's causing this is the fact that investors were betting on frequent Fed rate hikes, thus a higher U.S. dollar, but Fed Chairwoman Janet Yellen just flashed a reluctant outlook for additional hikes. The Fed is once again rigging rates!
Meanwhile, inflation is rising, so real interest rates stay close to negative, and all this uncertainty with regards to “protectionist” policies are causing a sell-off for multinational companies. Remember, every time countries have put up barriers between them and the rest of the world it sparked a short-term excitement, followed by long-term systemic decline. This is what Ray Dalio sees now, and that's a big driver for gold prices. Precious metals are crisis hedges, and as you can see, there are risks inherent in the system – now more than ever before.