Billionaire investor and founder of Bridgewater Associates, Ray Dalio, has issued a significant warning about the financial stability of the U.S., suggesting investors should consider allocating 15% of their portfolios to either Bitcoin or gold. This advice comes as concerns mount over what Dalio terms a "debt doom loop" affecting the United States and other Western economies.
Speaking on the Master Investor podcast, Dalio explained that such an allocation would optimize a portfolio's return-to-risk ratio in the face of currency devaluation and mounting national debt. The U.S. national debt has surged to $36.7 trillion, with the U.S. Treasury projecting the need for additional borrowing. Dalio warned that the U.S. government might need to issue another $12 trillion worth of Treasurys in the next year to service its debt.
This recommendation marks a significant increase from his previous suggestion of a 1% to 2% Bitcoin allocation in January 2022. While Dalio stated he is "strongly preferring gold to Bitcoin," he acknowledged that both assets can act as an "effective diversifier" against the devaluation of fiat currencies. He left the exact split between the two up to the investor's discretion. Dalio himself confirmed he holds "some Bitcoin, but not much."
The "debt doom loop" describes a cycle where debt accumulation and currency depreciation reinforce each other. Dalio pointed out that this issue is not confined to the U.S., as other Western nations, including the United Kingdom, face similar fiscal challenges. The central concern is the "devaluation of money" as governments issue more debt to fund their expenses. This, in turn, can lead to a loss of purchasing power for fiat currencies relative to hard assets like gold and Bitcoin.
Dalio's philosophy has long been rooted in the importance of diversification across uncorrelated assets to manage risk. His "All Weather Portfolio" strategy, developed in 1996, was designed to perform well in various economic environments. His recent emphasis on Bitcoin alongside gold reflects a growing acknowledgment of the digital asset's role as a potential hedge in an uncertain macroeconomic landscape.