billionaire Ray Dalio on income inequality

Ray Dalio, founder of the investment firm Bridgewater Associates, last week had lunch courtesy of the Financial Times at the Jackson Hole burger bar in midtown Manhattan . In the Great Recession he “propelled his flagship fund, Pure Alpha, to gains of almost 10 per cent in 2008, at a time when most funds suffered searing losses”.

Surprisingly, the billionaire is not bullish on markets today, for political reasons. We know the world economy is in trouble when billionaires worry about unequal distribution of income and wealth.

Dalio thinks inequality is rising so fast that it has created multiple “economies”: although the elite live in an expanding economy, “for the bottom 60 per cent, 80 per cent, there is a depressed economy that is not growing well”. ….

[H]e thinks this inequality is creating so much strife that it will be political conflict — not economics — that drives markets in 2018 and beyond. “[These days] there’s not the same volatility of inflation, growth and interest rates. So political issues are more important than macro [economic] issues,” Dalio says. “The world was driven by central bank policies [before]. That’s not the case now,” he adds, noting that what investors should watch is not (just) Fed statements, but “the next election in France or in the UK, or how hospitable will Jeremy Corbyn be to capital?” ….

What about a move to politics or public service? He shakes his head. “It’s not my thing.” He does not even like using his wealth to shape politics: unlike other hedge fund titans, such as Robert Mercer …, who was the biggest single donor to the Trump campaign. Dalio does not endorse political candidates. “The only candidate I [ever] supported was John McCain … because he was bipartisan and I thought he had a good character.”

Gillian Tett, “Bridgewater billionaire Ray Dalio: ‘I have an affinity for mistakes’”, Lunch with the FT, Financial Times, 13 January 2018 (gated paywall).

Raymond Dalio (born 1949) is one of the world’s 100 wealthiest people, according to Bloomberg. His book, Principles: Life & Work, was published last September by Simon & Schuster. The total bill for lunch was $52.09 for the two patrons, including tip.

 

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