Ray Dalio Gives Insights

Ray Dalio gives insights in his latest podcast entitled, “The All In Interview,” where the renowned macro investors discuss the AI arms race and the national debt crisis and how best to tackle it. 

“The AI war is a war that no country can lose, and it is more important than profits,” said Ray Dalio.                 

The great world powers Sino-USA are in the ring, eyeing each other up in the highest stakes wrestle of the century where the winner takes all. 

The prize is nothing less than world domination, hegemony where the winner sits at the helm of global economics, international trade and policy. The reserve currency is the trophy at stake, the exorbitant privilege of having the world trade and holding reserves in your currency, enabling the finance of debt at low interest rates.

The spokesperson added that AI inference “requires significant numbers of NVIDIA GPUs and high-performance networking.

Nevertheless, following DeepSeek’s release last month, tech stocks took a tumble, with the American chipmaker Nvidia’s market cap plummeting by nearly $600 billion in one day last month. .

Public debts are on an unsustainable trajectory; Ray Dalio gives his insights

“If you have a large supply of debt that has to be bought by someone,” he said.

Ray Dalio noted that there comes a point where there are debt risks. 

He explained there is not only a new supply of debts that has to be bought but also the possibility of existing holders of those debt assets selling those debt assets.

“Supply becomes overwhelming relative to the demand,” he said. 

“If the central bank doesn’t print money and buy it, then there has to be a rise in bond yields to constrict borrowing, which could weaken economic conditions,” he added. 

He acknowledged that when central banks create currency to buy the debt, that is both inflationary and lowers the value of the debt.   

“In either case, you do not want to hold that debt and bonds become a bad deal. Currency creation creates negative real interest rates,” he said. 

Ray Dalio gives insights into a debt death spiral when states go deeper into debt to service interest payments on compounding debts

What are the warning signs in the bond market?

“The red flag is when long-term yields for bonds rise relative to short-term treasuries, which underscores a balance problem of bonds in the free market,” he said.

“Typically, when this happens, all currencies go down relative to everything else.

Japanese bond investors lost 80% of their money relative to gold,” added Ray Dalio.    

Ray Dalio gives insights into tackling the public debt

There is no painless road to cutting the public deficit, which could entail increasing taxes, cutting spending or austerity.

The latter would lead to a loss of public services and social benefits, which could lead to domestic conflicts. 

Debt restructuring was also cited by Ray Dalio as a solution to the debt crisis, but he noted that everything would get revalued. 

He recommends cutting the deficit, equivalent to selling bonds to 3% of GDP, which is about $900 billion a year.

He believes debt reduction should be done in a good economy. 

Cutting spending would make the debts attractive, and the market would react to lower rates and buy the bond.

Servicing interest payments on the debt would become less expensive, which means less borrowing and fewer public debt cuts in the future.

Remaining on the same debt trajectory will lead to a debt death spiral and a mad max currency collapse.  

Tariffs are a tax providing revenue to the state. 

Ray Dalio believes, from a financial context, the US is better off with Trump as president. 

“We are at a civil war internally and an external war simultaneously,” he said. Ray Dalio sees the fragmentation of states from the central government playing out globally. The end of the EU superstate?  

Ray Dalio gives insights into how to invest in these turbulent times 

Assets that will perform well are those benefiting from the debasement of the currency, non economically sensitive commodities, and precious metals. Go for productive-producing assets that can not be taxed. 

“You want to invest in productivity, but there’s great disruption that’s going to take place, and they’re going to be the disruptors and the disrupters,” Dalio said.

The billionaire said many investors make the mistake of wanting to buy “good” things from “great” companies.

But with the hindsight of the dot-com bubble, the share prices that AI and technology companies are trading at have “to be paid attention to,” Ray Dalio said.

In the late 1990s, hysteria built up around internet companies before an eventual collapse in the early 2000s that erased trillions in market value.

“A great company that gets expensive is much worse than a bad company that’s very cheap,” he said.