New Haven Register (New Haven, CT)
Dalio warns of U.S./China conflict
Hedge fund guru speaks at economic forum
GREENWICH — A few years ago, the founder of Westport-based Bridgewater Associates, the world’s largest hedge fund manager, wrote a No. 1 bestseller explaining the principles that guide him in business and other pursuits.
Now, in the midst of the COVID-19 pandemic, Greenwich resident Ray Dalio said he has been thinking and writing about the precepts needed to respond to a world that is not only grappling with the worst public health crisis in 100 years but also contending with massive political and economic disruption.
On Tuesday morning, Dalio shared many of those insights — including his take on increasingly tense U.S.- China relations and his belief in a diversified investment strategy — during the opening event of the 2021 Greenwich Economic Forum. Held at the waterfront Delamar hotel, the conference represents one of the country’s top gatherings for business and political leaders.
“The United States and China are in a classic greatpower conflict,” Dalio said during an on-stage interview with Gillian Tett, chairwoman of the editorial board and editor-at-large of the “Financial Times” in the U.S.
“There are five kinds of war, and they’re not all shooting wars. There’s a trade war, there’s a technology war, there’s a geopolitical war, there’s a capital war and there could be a military war. We are certainly, in varying degrees, in the first four of those types of wars,” he said.
“And there’s a good reason to worry about the fifth type of war.”
Dalio, who made his first of many visits to China in 1984, described a top-down approach in the world’s most-populous country, a nation ruled by the Chinese Communist Party. With data, for instance, he said, “they don’t want the companies to control it, they want to control the data and the data policy.”
At the same time, he observed parallels between the U.S. and China. Despite the Communist Party’s control, the Chinese government has long accepted the influence of capitalism, Dalio said.
“Deng Xiaoping (the late Chinese Communist Party leader) said, ‘It’s glorious to be rich.’ And he said, ‘It doesn’t matter whether it’s a black cat or a white cat as long as it catches mice.’ Which he meant is — as long as it works.”
“Capitalism has been the best way of creating wealth,” Dalio said. “But what it does is it creates wealth very unevenly, and it creates large wealth gaps. And it can get very overdone, which creates debt crises, too.”
Dalio, 72, remains one of the most prominent figures in financial services through his roles as founder, co-chief investment officer and chairman of Bridgewater. The firm ranks as the world’s largest hedge fund manager, with about $152 billion in assets under management, according to Preqin, a provider of data and analytics for the financialservices industry.
In response to a question from Tett about whether he expected the Federal Reserve to raise interest rates in the next year, Dalio said, “Despite all this fiscal stimulation, there’s going to be a lesser amount of it — so there’s a fiscal cliff that’s going to come in the next year. But there’s going to be a much higher level of inflation, so that I suspect there will be tapering and maybe, I couldn’t tell you, whether there’s a minor rate rise.”
“Tapering” is widely defined as a gradual slowdown of the pace of the Federal Reserve’s large asset purchases.
Dalio’s estimated net worth totals $15.6 billion, according to the Bloomberg Billionaires Index. He ranks as the wealthiest Connecticut resident, according to that index and other measures of personal wealth.
His portfolio includes the bitcoin cryptocurrency and gold.
“I’m into diversification,” he said. “I want a lot more gold than I want bitcoin. And I don’t want a lot of either of those two things relative to my whole portfolio. I’m sort of an ‘antimoney guy.’”
Tett also asked Dalio whether he saw real estate as “a good hedge for inflation. Should everyone here be loading up on yet more Connecticut properties?”
“Real estate is not a great hedge for inflation, ironically, because it also has the interest rate component,” Dalio replied. “You can’t move it from one place to another, and it has the interest-rate risk as interest rates rise. It’s OK, but it’s not an optimal investment.”
“So if you’re a Realtor, don’t start cracking open the champagne just yet,” Tett said.
Dalio’s upcoming book, “Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail,” is scheduled to be released in November. His first “Principles” book was published in 2017.
Return to the Delamar
Dalio also spoke at the three previous Greenwich Economic Forum conferences — including last year’s edition, which was held in an all-online format because of the pandemic.
GEF officials said they expected to draw about 250 attendees Tuesday to the Delamar, which was also the site of the first two GEF conferences, held respectively in 2018 and 2019.
Other speakers Tuesday included Lawrence Calcano, CEO and chairman of financial technology firm iCapital Network, which this week opened offices in Greenwich; Annie Lamont, co-founder and managing partner of Greenwich-based venture capital firm Oak HC/FT; and Gov. Ned Lamont, who is the husband of Annie Lamont.
“We have a big hedge fund industry, a lot of private and alternative investments,” Ned Lamont told Hearst Connecticut Media at the conference. “We had RBS and UBS, and now we’re moving into crypto and bitcoin and a lot of the 21st-century financial instruments. I want to be here to say ‘You can grow here in Connecticut.’”
There will be another day of GEF events on Wednesday at the Delamar. It will be followed by a final day of programming on Thursday, with all of the events on the last day being held online.
Resuming a partnership that underpinned the 2019 gathering, the “Financial Times” events team was hired to produce this year’s conference in partnership with the Greenwich Business Institute, the entity that owns and operates the Greenwich Economic Forum.
GEF co-founder Jim Aiello told attendees in introductory remarks Tuesday morning that the organizers hoped that the issues discussed during the conference “will prompt stimulating conversation and debate, and we look forward to having this dialogue with you.”