RAY DALIO WARNS OF LOOMING US DEBT CRISIS, BACKS GOLD AND BITCOIN

Ray Dalio, founder of Bridgewater Associates, said Treasury Secretary Scott Bessent's debt buyback announcement this week signals a broader pattern that could precede a debt crisis. Dalio wrote on LinkedIn that the government's financial condition has reached an inflection point, and warned that if the situation is not addressed, debt levels will accumulate to unmanageable levels. He recommended that investors prepare portfolios for increased risk by holding cryptocurrencies and gold. Dalio noted that the Treasury Department has limited capacity to purchase bonds back, despite Bessent's stated intention to make the market top $4 billion in purchases.

According to Dalio, the U.S. is currently spending approximately 40% more than it receives in revenue, creating a widening budget deficit. The U.S. budget deficit exceeded $432 billion in July. Bessent told CNBC that the deficit has likely peaked under President Donald Trump's administration and that his team is examining methods to reduce spending by hundreds of billions of dollars. Dalio stated there is very limited ability to cut spending given that much of it is either committed or regarded as essential. He also noted that coupled with the Japanese government reducing its exposure to U.S. bond markets and rising long-dated American bond yields, conditions suggest heightened economic risk ahead.

One report suggested that Dalio believes a U.S. debt crisis could occur within three years. Dalio said investors should consider reducing bond holdings and allocate as much as 15% of their portfolios to gold as a hedge against debt-related risks. His comments reflect concerns among some investors about the sustainability of current U.S. fiscal trajectories.