Ray Dalio Praises Trump: Predicts “Huge” Changes; It Will Be “Glorious To Be Rich”
The eccentric yoga enthusiast, hedge fund maverick and finance philosopher says structural change is coming in a BIG way.
In one of the most euphoric endorsements of The Donald and the president-elect’s fledgling ‘alpha team’ administration, Bridgewater founder and finance doyen Ray Dalio said economic changes under the Trump camp may be more dramatic than shifts from “the socialists to the capitalists” in the U.K., U.S. and Germany from 1979 to 1982, and predicted that “we are about to experience a profound, president-led ideological shift that will have a big impact on both the US and the world.”
Comparing Trump to Margaret Thatcher, Ronald Reagan and Helmut Kohl, Dalio said the incoming administration may have a much bigger impact on the U.S. economy than can be measured by tax changes and fiscal spending. The Trump era could “ignite animal spirits” and attract productive capital. The dominant paradigm is about to shift. BIGLY.
In his summary of Trump’s economic policies, Dalio urges readers to explore Ayn Rand (“her books pretty well capture the mindset”). This new administration “hates weak, unproductive, socialist people and policies, and it admires strong, can-do, profit makers. It wants to, and probably will, shift the ideological climate from one that makes profit makers villains with limited power to one that makes them heroes with significant power.”
The shift from the past administration to this administration will probably be even more significant than the 1979-82 shift from the socialists to the capitalists in the UK, US, and Germany when Margaret Thatcher, Ronald Reagan, and Helmut Kohl came to power. To understand that ideological shift you also might read Thatcher’s “The Downing Street Years.” Or, you might reflect on China’s political/economic shift as marked by moving from “protecting the iron rice bowl” to believing that “it’s glorious to be rich.”
He adds that the “shift by the Trump administration could have a much bigger impact on the US economy than one would calculate on the basis of changes in tax and spending policies alone because it could ignite animal spirits and attract productive capital. “Regarding igniting animal spirits, if this administration can spark a virtuous cycle in which people can make money, the move out of cash (that pays them virtually nothing) to risk-on investments could be huge.”
Regarding attracting capital, Trump’s policies can also have a big impact because businessmen and investors move very quickly away from inhospitable environments to hospitable environments. Remember how quickly money left and came back to places like Spain and Argentina? A pro-business US with its rule of law, political stability, property rights protections, and (soon to be) favorable corporate taxes offers a uniquely attractive environment for those who make money and/or have money.
Looking at foreign policy under Trump, Dalio predicts that “we should expect the Trump administration to be comparably aggressive. Notably, even before assuming the presidency, Trump is questioning the one-China policy which is a shocking move. Policies pertaining to Iran, Mexico, and most other countries will probably also be aggressive.”
“By and large, deal-maker businessmen will be running the government,” said Dalio, who runs the world’s largest hedge fund, Bridgewater Associates. “Their boldness will almost certainly make the new four years incredibly interesting and will keep us all on our toes.”
So far the market has agreed with Dalio: since the election, more than $1.5 trillion in value has been added to U.S. share prices and lifted indexes to records as investors expect greater tax cuts and fiscal stimulus under Trump to boost business prospects. Higher returns under Trump could benefit endowments and foundations that have struggled to meet funding targets in the low-yield environment.
There is just one question on Dalio’s mind:
“The question is whether this administration will be a) aggressive and thoughtful or b) aggressive and reckless. The interactions between Trump, his heavy-weight advisors, and them with each other will likely determine the answer to this question. For example, on the foreign policy front, what Trump, Flynn, Tillerson, and Mattis (and others) are individually and collectively like will probably determine how much the new administration’s policies will be a) aggressive and thoughtful versus b) aggressive and reckless. We are pretty sure that it won’t take long to find out.”
Read Ray Dalio‘s thoughtful notes here.
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