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Ray Dalio Predicts ‘Dangerous Situation’ in the Debt Market

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Delivering Alpha conference

Many billionaire investors, market leaders, and fund managers gathered for CNBC and Institutional Investor’s Delivering Alpha conference on September 13, 2016, in New York City’s Pierre Hotel. Prominent names like Ray Dalio, Carl Icahn, Paul Singer, Stephen Schwarzman, and Bill Miller presented at the conference.

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Ray Dalio spoke at the Delivering Alpha conference

Ray Dalio is the founder, chair, and co-chief investment officer of Bridgewater Associates, the world’s largest hedge fund by assets. He spoke about the current market (QQQ) (IVV) (VOO) situation at the conference. He said that there is a “dangerous situation” in the debt market. He thinks central banks around the world (ACWI) are losing their ability to stimulate growth and that the effectiveness of monetary policy is waning.

Central banks have lowered their interest rates to stimulate inflation and thus increase consumer spending (SPY) (VGK) (EWJ). Consumer spending is now at a plateau, and the wealth gap is part of the reason why. Central banks can’t lower interest rates more.

Now, $11 trillion of government debt (BND) (TLT) (SHY) is facing negative yields. When these negative yield instruments reach maturity, we will see capital losses. If yields continuously turn negative, then the market might start to lose capital.

In the next part of this series, we’ll analyze why Ray Dalio thinks we are at the end of the long-term debt cycle.

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