Investment legend Dalio bids farewell to Bridgewater, warns of global debt crisis risks

Recently, 75-year-old Ray Dalio shared his "farewell letter" on social media, marking the official departure of the investing legend from the Bridgewater Fund, which he founded. Dalio has sold all of his remaining shares in the Bridgewater Fund and left the board.

Bridgewater Associates recently informed clients that it has repurchased all remaining shares of Dalio and issued new shares to a sovereign wealth fund. In this multi-billion dollar transaction, the sovereign wealth fund acquired nearly 20% of Bridgewater.

Looking back at Ray Dalio's investment career spanning over 50 years, he has successfully predicted major trends multiple times, including the 2008 financial crisis and the subsequent European debt crisis. However, looking to the future, Dalio has once again issued a warning: the probability of a global debt crisis occurring within the next 5 years is as high as 65%, and the dominance of the US dollar may consequently be severely impacted. He emphasized that if businesses, countries, and individuals cannot accurately locate their positions within the economic cycle, they will struggle to cope with this powerful "tide force."

Glorious Achievements and Investment Philosophy

In 1975, 26-year-old Ray Dalio founded Bridgewater Associates in his two-bedroom apartment. Since the flagship fund was established in 1991, Bridgewater has achieved a series of remarkable results under Dalio's leadership, becoming the largest hedge fund in the world.

In 2008, Ray Dalio successfully predicted the U.S. financial crisis, and that year, the Bridgewater flagship fund's performance increased by over 14%. He then foresaw the European debt crisis, and in 2010, the highest yield of Bridgewater's funds exceeded 40%.

However, Dalio's investment journey has not been smooth sailing. In 1982, he suffered huge losses due to his incorrect prediction that "the U.S. economy would fall into a great depression." This painful lesson became a turning point in his investment philosophy. Thereafter, Dalio dedicated himself to establishing a systematic principle to cope with uncertainty.

Dalio believes that the operation of the world is driven by five major forces: debt/money/economic cycles, internal order and chaos cycles, external order and chaos cycles, natural forces, and human creativity. These forces interact to create a large cycle in the process of evolution from the "old order" to the "new order," where peace and prosperity alternate with conflict and depression.

Controversies and Questions

In recent years, Dalio's debt theory has faced some scrutiny. Some economists have pointed out two errors in Dalio's methodology for analyzing macroeconomic issues: first, he incorrectly applies microeconomic thinking to macro problems; second, he mistakenly imagines the macroeconomy as a machine, thus failing to see the differences in operational logic under different macroeconomic conditions.

These economists believe that the analytical logic of corporate and personal debt should not be simply applied to the analysis of national debt. At the same time, they emphasize that macroeconomics should not be viewed as a machine, because the macroeconomy is composed of living individuals who have expectations for the future and whose behavior changes as those expectations change.

Farewell and Outlook

With Dalio selling all his remaining shares in Bridgewater, he officially "retires". Reflecting on Bridgewater's success over the past 50 years, Dalio summarized four important "work principles": choose outstanding talent and culture; establish a culture of "thought elite system"; allow mistakes but must learn from them; achieve progress through pain and reflection.

Dalio has a deep respect for investing, emphasizing the importance of balancing a portfolio and suggesting that investors appropriately diversify their allocations. He also warns investors to be cautious of blindly chasing prices when market sentiment is overheated.

Looking to the future, Dalio believes that five major forces will reshape the world in the next three to five years. He likens this change to a "time tunnel," suggesting that we will enter a radically different world. In this era of uncertainty, investors need to be prepared to cope with this irresistible "tide force."