Billionaire hedge-fund manager Ray Dalio advises savvy investors to buy gold now as tension between the United States and North Korea show no signs of easing.
"Prospective risks are now rising and do not appear appropriately priced in," The Bridgewater Associates founder wrote in a LinkedIn blog post.
"The emerging risks appear more political than economic, which makes them especially challenging to price in," wrote Dalio, manager of the world's largest hedge fund.
"Two confrontational, nationalistic, and militaristic leaders playing chicken with each other, while the world is watching to see which one will be caught bluffing, or if there will be a hellacious war," wrote Dalio, who was initially bullish on President Donald Trump’s ability to stimulate the economy.
"We can also say that if the above things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen, and treasuries) would benefit," Dalio wrote.
Investors should allocate 5 percent to 10 percent of their portfolios to gold, Dalio wrote.
He also warned about the potential of Congress not being able to increase the debt ceiling in a fight with Trump over his border wall and the risk of a government shutdown later this year, CNBC explained.
"When it comes to assessing political matters (especially global geopolitics like the North Korea matter), we are very humble. We know that we don't have a unique insight that we'd choose to bet on," Dalio wrote. "We aim to stay liquid, stay diversified, and not be overly exposed to any particular economic outcomes."
Dalio, who said in December that the Trump era could “ignite animal spirits” and attract productive capital, began souring on the leader after he banned visitors from several mostly Muslim countries and proposed border taxes on Mexican goods, Bloomberg has reported.
Trump’s “America First” policy, his executive order on immigration and bent toward U.S. trade protectionism are reminiscent of the policies of populist governments in the 1930s, Dalio and co-chief investment officer Bob Prince told clients earlier this year.
Meanwhile, Trump’s vow to unleash “fire and fury” against North Korea sounded a lot like the rhetoric Kim Jong Un uses to threaten America. And it may prove to be just as empty, Bloomberg warned.
Trump has no good military options in the face of mounting evidence that Kim will soon be able to hit Los Angeles or Denver with nuclear missiles.
North Korea’s weapons and nuclear facilities "are dispersed and hidden throughout the country’s mountainous terrain. Failing to hit them all would leave Japan, South Korea and U.S. military bases vulnerable to attack -- with either conventional or nuclear warheads." And even if the U.S. managed to destroy everything, Seoul would still be vulnerable to North Korea’s artillery, Bloomberg explained.
To be sure, investors have grown cautious over escalating tensions between the United States and North Korea.
The loss of appetite for risk followed North Korea's claim it was completing plans to fire four intermediate-range missiles over Japan to land near the U.S. Pacific territory of Guam in an unusually detailed threat, Reuters reported.
Trump said on Thursday afternoon that his earlier warnings to North Korea may not have been tough enough.
The three major U.S. stock-market indices have sold off this week amid investors' jitters after Trump said on Tuesday that threats from Pyongyang would be "met with fire and fury like the world has never seen."
(Newsmax wires services contributed to this report).
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