Ray Dalio, founder of Bridgewater Associates, the largest hedge fund ever, is officially bearish on stocks, and he has now changed his tune towards a severe depression outlook in the major indices.
At Portfolio Wealth Global, we have been studying Ray Dalio's investment returns going back all the way to the 1970s, and the one thing he always gets right is economic slowdown.
In fact, his fund performs better when the market is correcting.
Dalio is famous for saying that Buffett is making a huge mistake by not owning gold, and he remarked that investors "who don't own gold don't know history or economics."
At the moment, the "Trump honeymoon" is losing serious ground, with the S&P 500 having its worst one-day performance in 38 weeks a couple of days ago.
What's causing this is the fact that investors were betting on frequent Fed rate hikes, thus a higher U.S. dollar, but Fed Chairwoman Janet Yellen just flashed a reluctant outlook for additional hikes. The Fed is once again rigging rates!
The market was forecasting much higher rates, and now, seeing the debt ceiling on the agenda and the polarization in D.C. over the healthcare issue and the insistent calls for impeachment, investors are beginning to set their expectations back to reality.
Trump has to fight for every item on his agenda, and progress will be slow.
Meanwhile, inflation is rising, so real interest rates stay close to negative, and all this uncertainty with regards to "protectionist" policies are causing a sell off for multinational companies.
Going back to 1976, you can see a direct correlation between real interest rates and precious metals performance, but the interesting phenomenon, which is now starting to catch the attention of major hedge funds, is the fact that while real rates stay negative, stocks are affected negatively by rising rates.
Remember, every time countries have put up barriers between them and the rest of the world it sparked a short-term excitement, followed by long-term systemic decline.
This is what Ray Dalio sees now, and that's a big driver for gold prices.
Precious metals are crisis hedges, and as you can see, there are risks inherent in the system—now more than ever before.
What's truly important to realize is that gold and silver stocks are, at this point, like a spring ready to shoot up, but the catalyst would be gold $1,300 and silver $19.00.
Once this confirmation occurs, you will see fireworks.
That's why Dalio and others are turning to gold and industrial commodities right now.
The only policy that is set to move forward without friction is infrastructure, which will affect the price of zinc, silver, and gold stocks, and in the private sector there's electric cars and housing, which will impact cobalt and lithium stocks.
Dalio's Hottest Theme
Without a doubt, Dalio is now telling investors to think about cutting-edge technologies in the electric car market, as he knows that batteries are too expensive to allow electric cars to become popular at the moment.
My research partner and I found, after sinking our teeth into 98 stocks, a company that owns patents in the nanotechnology sector.
The beauty is, exactly as Dalio says, this type of company can flourish no matter what the rest of the market is doing.
His biggest theme right now is called populism, and he is afraid of rising turmoil.
Therefore, he focuses, as should you, in the one sector that provides wealth consistently: cutting-edge technology. And if you think that lithium batteries will be important for the future of the auto industry, this company is on the verge of cracking the "long-lasting, cheap price" challenge.
Tom Beck is senior editor of Portfolio Wealth Global. Known as one of the first millennial millionaires in the United States, Beck is a relentless idea machine. After retiring two years ago at age 33, he's officially come out of retirement to head up Portfolio Wealth Global. He brings a vision of setting a new record for millionaires with his seven-year plan to accelerate any subscribers' net worth who will commit to the income lifestyle. Beck delivers new ideas on the marketplace that were once only available to the rich. Traveling the world, he's invested in over a dozen countries, including real estate.
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