Ray Dalio’s war with China is the latest red flag coming from the founder of the world’s largest hedge fund Bridgewater with a massive US$160 billion (2017) asset under management (AUM).
Ray Dalio’s recent tweet is somewhat eerie, “Today is the first day of the war with China”. But why did Did Ray Dalio leave out the word trade and wrote instead war with China?
One take is that this was no mistake Ray Dalio is informing his audience that the US Trump administration imposing $34 billion of tariffs on Chinese goods on Friday (July 6) is the first shot that will end with Ray Dalio’s war with China view. So a hot war, kinetic war with China is now on the cards, according to Ray Dalio.
Ray Dalio’s war with China is the latest red flag coming from the founder of the world’s largest hedge fund Bridgewater with a massive US$160 billion (2017)
Ray Dalio’s war with China view is by no means a voice in the wilderness
Indeed, The Coming War on China, a film directed by John Pilger (2016) explains that the world has been primed to regard China as the new enemy.
The great power game is called perpetual war. The US has surrounded China with 400 military, warships, bombers and missiles.
“The plan is to cut off China’s lifeline to oil and gas and raw materials”. Moreover, China’s economy runs on exports. Put another way China need to export to keep their wheels of industry spinning. Domestic consumption is not enough for China to consume and soak up everything that they produce. So by attacking China’s largest export market in the US, the world’s largest consumers, is a direct assault on China’s economy.
“The Coming War on China, a film directed by John Pilger (2016) explains that the world has been primed to regard China as the new enemy”
A nuclear war is no longer unthinkable
In fact, the doctrine of MAD Mutually Assured Destruction which kept the peace post-WWII is not relevant today. War hawk policymakers (with their own state of the art bunkers) now believe that a nuclear war can be winnable.
The doctrine of MAD has been replaced with a new (pathologically insane) doctrine of preemptive strike. In other words, be the first to strike hard and fast using “tactile nuclear weapons”. The nuclear powers are on tender hooks, bearing in mind that the current US President Trump cavalier approach to nuclear weapons. Trump reportedly asks why the US can’t use nuclear weapons. Moreover, US Yale psychiatrist says President Donald Trump has become increasingly mentally unstable, putting the US, the world at ‘extreme risk‘.
So Yale psychiatrists think Trump is mad, the political left thinks Trump is bad and his supports point to North Korea and think Trump strongman approach is good.
But it needs to be said that Ray Dalio’s war with China can’t be instigated by the US President alone. Nevertheless, as Trump surrounds himself with more “like-minded advisers” and appoints people in senior positions in the military and government that see eye to eye with him there is likely to be no opposition to his view, why the “US can’t use nuclear weapons”. Ray Dalio’s war with China could get ugly.
“a US-China trade war would be a tragedy” – Ray Dalio
Ray Dalio’s war with China view is based on an escalating series of tit for tats
“If tariffs are imposed as indicated, I would hope and expect the Chinese response to be small and symbolic so that both sides will have rattled their sabers without actually inflicting much harm. What will come after that will be more important? I wouldn’t expect it to amount to much anytime soon. If on the other hand, we see an escalating series of tit for tats, then we should worry” wrote Ray Dalio.
It is also worth noting that Ray Dalio has become increasingly bearish on risk assets.
In a recent letter to his clients, Dalio wrote…
“We are bearish on financial assets as the US economy progresses toward the late cycle, liquidity has been removed, and the markets are pricing in a continuation of recent conditions despite the changing backdrop” wrote Ray Dalio one month ago.
With regards to Ray Dalio’s war with China view the world’s top hedge fund manager expressed his bearish view on a trade war with China.
In early May, Dalio warned that “a US-China trade war would be a tragedy” and he confirmed the view that an escalation in trade tension between the world’s largest trading partners should be a cause for concern.
Indeed, analysts have recently attempted to quantify in monetary terms that cause for concern of escalating trade tension between the US-China could amount to over one trillion dollars, according to a recent article in the FT.
When traders/investors factor in all the doom loops, the central bank’s monetary tightening, the end of the credit cycle, a trade war and growing political instability then maybe that is why Jim Rogers says the next bear market will be the worst in our lifetime.
“If tariffs are imposed as indicated, I would hope and expect the Chinese response to be small and symbolic so that both sides will have rattled their sabers without actually inflicting much harm” – Ray Dalio
But if there is anything bullishness to say about Ray Dalio’s war with China it is that strategic industries (not just defense stocks) are likely to do well during turbulent times.
Strategic planners are going to start looking at what industries are vital in the event of supply chain disruptions as a result of a trade war/hot war. So domestic manufactures of critical components and parts could see a boom in these troubling times.
In mechanical engineering, it could be manufacturers of bearings. In electronics it could be makers of capacitors and resistors, already this industry is experiencing shortages with the boom of automation and smart machines whose brain is a circuit board.
Energy and food independence will also be important. So that too is the buying opportunity if Ray Dalio’s war with China unfolds.