Hedge Fund Guru Says China Could Crush America This Way

It’s time to add another caveat to the ongoing U.S.-China trade war. One of the world’s largest and most revered hedge fund managers, Ray Dalio, believes China could use it’s massive holdings of U.S. debt to harm America — if Beijing wants. 

“We have a debtor-creditor relationship, not just a trade relationship. And that can be a dangerous thing,” Dalio recently told CNBC.

Analysts and investors see this as a potential card to play in the escalating trade conflict between these two world superpower economies. As of June 2019, China was the largest foreign holder of U.S. Treasurys. According to Treasury, the country holds $1.11 trillion of U.S. bond debt. 

Dalio argued that it’s difficult to predict the next moves each side would make. As the conflict deepens, the two powers could begin to take even more drastic measures to hammer down the other. 

“What we worry about — and I think it’s a reality — is that in this new world of adversely affecting each other economically and hurting each other’s businesses, each tries to think: ‘Now, how can I do the other the maximum harm?’ And the Chinese are clever at doing that,” Dalio said.

Bargaining chip

Many have dismissed this suggestion as it’s a play that’ll hurt China too. 

Yet Forbes analyst Leon LaBrecque thinks that China could weather through it. In the event of a tariff war, neither side wins. Tariffs hurt local economies and are usually passed onto the consumer in some way. 

Similarly, dumping Treasurys on the market would incur losses for the Chinese, but it would drastically disrupt the American economy.  

“Consider that the Chinese Premier occupies his position for life, whereas November 3, 2020, is a pivotal date in this conflict. The Chinese would likely prefer a less hawkish trade negotiator,” LaBrecque stated. 

If China dumps a significant portion of their Treasury holdings to disrupt the U.S. economy, they may be able to leverage a better negotiating position.

Nov. 3 is the next presidential election date in the United States.

Small-cap winners galore

The big stock market winners share one common attribute: Near the beginning of the ascent of their shares, the companies offer revolutionary products or services, are market leaders in their respective industries, or both. Some big stock market winners that possessed the attributes outlined above are Netflix (NFLX), which we recommended to investors in October 2002; Intuitive Surgical (ISRG), which we bought and recommended in July 2004; Baidu.com (BIDU), which we bought and recommended in August 2006; and MercadoLibre (MELI), which we recommended to investors in October 2010. Get up-to-date small-cap stock picks from David Frazier, editor of Small-Cap Profit Confidential.
Click here

Smarter cryptocurrency investments

The stock market crash of 2008 was the catalyst for his journey into alternatives. And interestingly, it was the impetus behind the creation of Bitcoin and the blockchain technology behind it. Keene Little wasn’t ready to risk his money yet but he was very curious, so he began charting Bitcoin’s technical patterns. What finally convinced him to dip a toe into digital currencies was seeing that they followed familiar price patterns that could be analyzed and successfully acted on. Now he shares those insights with subscribers to the Crypto Wealth Protocol.
Learn more

Leave a Reply

*