Like the rest of us, Ray Dalio has been on a bit of a roller-coaster ride since Nov. 8 of last year. Indeed, if anything, he’s been whipsawed even more violently, because as much as $17 billion helps cushion one from these things, the ascent to the United States presidency of an unscrupulous and effortless liar such as Donald Trump has shaken the fanatical believer in transparency and truth to his core, especially after that president fired his friend. And so Dalio has gone from apprehensive uncertainty to exceedingly cautious optimism to slightly less cautious optimism to a twinge of concern to some very serious worry to calmly and discreetly moving towards the door to “buy gold because dollars will be useless when you emerge into the post-apocalyptic nuclear winter."
During the calm of the August vacation season, we are seeing 1) two confrontational, nationalistic, and militaristic leaders playing chicken with each other, while the world is watching to see which one will be caught bluffing, or if there will be a hellacious war, and 2) the odds of Congress failing to raise the debt ceiling (leading to a technical default, a temporary government shutdown, and increased loss of faith in the effectiveness of our political system) rising. It’s hard to bet on such things, one way or another, so the best that one can do is be neutral to such possibilities….
We can also say that if the above things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen, and treasuries) would benefit, so if you don’t have 5-10% of your assets in gold as a hedge, we’d suggest that you relook at this. Don’t let traditional biases, rather than an excellent analysis, stand in the way of you doing this (and if you do have an excellent analysis of why you shouldn’t have such an allocation to gold, we’d appreciate you sharing it with us).
Until then, you can find Ray in his fallout shelter deep beneath Westport, stacking all of the bullion he bought from the way-too-optimistic Stan Druckenmiller next to his hoard of tinned fruits and meat.