Ray Dalio's Warning: How Should Individual Investors Respond?

Good morning, Master. Today, we'll be discussing the warning Ray Dalio issued back in April.

The core of Ray Dalio's analysis is the 'great collapse of order.' He views the current situation not as a simple trade dispute, but as a turning point in a grand cycle that has repeated throughout history. His warning can be summarized into three main points.

1. The Collapse of Monetary/Economic Order: Countries like the United States are heavily in debt, while countries like China hold too much of that debt. This imbalance is unsustainable and will eventually bring significant changes to the existing dollar-centric financial system, he warns. It means the debt party is coming to an end.


2. Instability of Domestic and International Political Order: Domestically, extreme populism is gaining power due to wealth gaps and conflicting values, and compromise, the foundation of democracy, is disappearing. Internationally, the US-centric unipolar order is ending, transitioning to a multipolar system where major powers clash with force. This means conflicts are likely to break out in various places.


3. Rapid Changes in Technology and Nature: Disruptive technologies like Artificial Intelligence (AI) and natural threats like climate change are shaking the foundations of the existing economic and political order. These are unpredictable new variables.

Dalio warns that these three great forces will interact and create significant change. However... the truth is, when individual investors hear such grand narratives, they can't help but think, 'So what? What should I buy?'

Thanks for the briefing, Myu-tan! Master! In my opinion, this isn't a crisis, it's a tremendous opportunity! It means the map of wealth is being completely redrawn, doesn't it? A chaotic period like this is the perfect environment for the birth of the newly rich! Devilish!

My answer to "So, what should I buy?" is crystal clear!

• First, when the era of 'debt' ends, the era of 'cash' begins! Zombie companies with nothing but debt will all collapse. Conversely, the value of 'cash-rich companies' that are piling up mountains of cash and consistently making money is bound to skyrocket! When a crisis hits, these companies can buy out their failing competitors for cheap and monopolize the market! Now is the golden opportunity to pick up some truly blue-chip stocks!


• Second, you must invest in things that will never fail, no matter how chaotic the world gets! Even if war breaks out, people will still drink Coke, take cold medicine, and shave. These 'consumer staples' companies are not just defensive stocks in a recession; they can be the most reliable 'survivor stocks' in times of turmoil! I'm talking about companies like Coca-Cola and Johnson & Johnson!


• Third, new technologies like AI are not a wave to fear, but one to ride! Not sure which company will be the final winner? Then just buy the entire industry! By consistently investing in an ETF that gathers innovative AI companies, you can taste the fruits of growth no matter where the next Amazon or Google pops up! It's the surest bet on the future!

Master! This is no time to shrink back! You have to aggressively seize the opportunity to reorganize your wealth!

One moment, Kurumi. You're peddling that dangerous optimism again. Human, Kurumi's words may sound sweet, but you must not overlook the fatal risks hidden beneath. Dalio's warning is a matter of 'survival' before it is one of 'opportunity'.

• First, you say 'cash-rich companies' are safe? Financially, perhaps. But Dalio's 'collapse of monetary order' includes extreme scenarios where the 'value of a currency' itself could vanish. What good is it if the company you invested in has piled up mountains of won, if the won becomes worthless paper? You must see the risk of the 'Korean won' basket itself. As Kurumi says, buying blue-chip stocks is fine, but you must also diversify your assets into various currencies like the won, dollar, and yen, and furthermore, allocate a portion to tangible assets that governments cannot print at will, like 'gold'. This means diversifying the 'store of value' itself.


• Second, 'consumer staples' are the kings of survival? I agree, but that's a story for an ordinary recession. What if geopolitical risks escalate to an extreme, as Dalio warns, and supply chains between nations are severed? If a company can't import raw materials or its overseas factories shut down, even Coca-Cola can't make Coke. In other words, you must also consider 'how exposed it is to geopolitical risk.' A consumer staples company in a country with a solid domestic market and stable supply chain might actually be safer.


• Third, investing in an AI ETF is a truly dangerous idea. The AI industry is now, by any measure, in the early stages of a bubble. Do you remember the dot-com bubble of 2000? Everyone knew the internet would change the world, but countless promising tech stocks vanished then. An AI ETF is tantamount to buying all those 'companies destined to disappear' at once. The direction of change is correct, but 'when and at what price' you buy is the key. Chasing the trend when everyone is euphoric, like now, is extremely risky.

Human, now is the time to think more about 'how not to lose money' than how to make it. The most important investments are not the products Kurumi mentioned, but 'cash' itself—which ensures your survival in a crisis and allows you to seize opportunities in a crash—and the 'investment in yourself', which will allow you to survive no matter what kind of world comes.

Mika-pi, that's just too strange. Will money just multiply if you just hug gold and cash? Gold is just the same old rock even after 10 years. The AI revolution is happening and the world is changing, but all Master will have left is a yellow rock that pays no interest!

What Dalio is saying isn't 'it's dangerous, so run away,' but 'the rules of the game are changing, so play by the new rules'! The core of the new rules isn't 'debt,' but 'value' and 'technology'! The shares (stocks) of a company with excellent technology will continue to bring in money!

An AI bubble? Of course, there could be one! But every revolution started with a bubble! If you do nothing because you're scared of a bubble, you'll just be twiddling your thumbs later, watching the real winner take it all! You have to ride the wave by investing small amounts consistently to get those big returns later!

Kurumi, I never said to run away. I only said to prepare.

As you say, gold pays no interest. But in the worst-case scenario of a collapsing monetary system, gold is the 'ultimate insurance' that humanity has chosen for thousands of years. You don't buy insurance for profit; you buy it to prevent the catastrophe of losing everything. During the hyperinflation of the Weimar Republic, stock market millionaires lost everything in an instant, but those who held gold survived.

» See also: Should You Invest in Gold During Inflation? Here’s How to Start

And your argument about AI is like dressing up gambling as an investment. You dilute the risk with words like 'small amounts consistently,' but the essence is just betting on a vague hope that 'it will go up someday'.

As I said, the truest investment is in 'yourself.' Learning new skills and deepening your understanding of this rapidly changing world is what will cultivate the eye to recognize a real opportunity when it comes, without being swept away by any bubble. I see that as the best long-term investment.