Billionaire investor Ray Dalio delivered a stark dual warning Wednesday, telling Bloomberg Television U.S. equity markets were nearing bubble territory last seen before two of history’s worst financial crashes—even as a separate debt-driven crisis has already crossed a threshold from which there is no escaping.
“We are right now rising close to—not at—the same level in 2000 and the same level in 1929,” Dalio said, citing his proprietary bubble indicators that measure sentiment, concentration, and valuation. He was conjuring up two of the most famous bubble-popping moments in the last century: the onset of the Great Depression and the dot-com crash.
He was careful to note that a bubble forming and a bubble bursting are two distinct events, and the “pricking” comes when investors must convert wealth into cash to cover debts or tax obligations.
“You cannot spend wealth,” he said, stating an obvious, yet under-appreciated, dynamic. “You have to sell wealth to get money, because you can only spend money.”
On the debt side, Dalio was less equivocal. With the federal government spending roughly $7 trillion annually against $5 trillion in revenue, he said the dynamic has already become self-reinforcing and irreversible in the near term.
