Ray Dalio Bets BIG on GOLD

This video is sponsored by Stake. Download the Stake app today and use the referral code AWC to receive a free stock when you fund your account. Details in the description.

Ray Dalio has always been a pretty big believer in holding at least a little bit of gold in your portfolio, and his reasoning for that is, of course, because gold is a finite resource. Thus, it can act as a store of wealth that says better than cash during tough economic times. In fact, earlier on this year, he actually went on the record saying this: "The issue is you can't jump into cash. Cash is trash."

Okay, and the reasoning behind that viewpoint is essentially what we're seeing at the moment: central banks around the world printing a lot of money. That means that the dollars that we have in our bank account are slowly just getting diluted. So, dollars in general become more abundant, and therefore the value of each dollar just drops a little bit. I think that you have to have a certain amount of gold in your portfolio, right? Or you have to have something that's hard.

There are three monetary systems that happen. The first is in the old days; it had intrinsic value, carrying around gold coins. Then we come up with the idea of banks or even central banks, and what they do is they create certificates we call notes that are claims on those things. We put many more certificates than there is money in the bank, and then that's a linked system. So, we did that and we broke that in 1971.

Then you have a fiat monetary system, which means that you can print whatever amount of money you want, and you can put that. That's what governments do, so we're in that part of the cycle. Bigger picture, when you think about things like the depreciation of the exchange rate and the printing of money, I think over the next few years it's going to be the biggest. You want to buy gold.

Here, Ray talks about the three different monetary systems we've had. Originally, the gold coins themselves were that store of value because of what the coins were actually made out of. Then we moved to a system of, you know, paper money, and instead we just said that there was a link between the paper money and gold, right? A direct link. Since that time, we've now cut that direct link, and paper money is actually not linked to anything.

So now there can be, in essence, unlimited money, right? And the central bank has the power to print as much money as it wants to. That's what we've seen in 2020: central banks around the world printing a lot of money and creating more and more dollars. That's why Ray is so keen for investors to at least have a little bit of gold in their portfolios.

I know this is going to be the headline of gold. I want to emphasize a bit of gold is a diversifier, okay? And that's the advice I can give. I know I'm going to come out of here like Ray Dalio's wild on gold, and that's not exactly... I'm not saying "Cash's trash" is your headline, but cash is trash.

So I find this interesting. Ray goes on to clarify that he doesn't want the headline to be "Ray Dalio thinks you should go and buy gold." This interview was done back in January, I think, and it's very interesting to see that back then, his opinion was very much the same as the opinion that he has held for a very, very long time: that is, that gold should be a part of your portfolio, but not in a big way.

Money can be produced; gold is somewhat limited. It's an alternative that should be part of everybody's portfolio, but not in a big way. So it's not like Ray Dalio's telling us to go out and, you know, bet the whole house on gold, for example. He just thinks it should be a small but important part of an investor's portfolio as a differing store of wealth to just straight-up cash.

So that's been his viewpoint for a very, very long time. However, what's very interesting is that his latest 13F filing, which essentially says what his hedge fund Bridgewater Associates has been buying and selling in Q2 of 2020, actually goes against his opinion on gold that he has held for a very, very long time. It actually shows that Bridgewater Associates is getting pretty cozy with the idea of holding lots of gold.

Bridgewater's total portfolio was worth $5.96 billion at the end of Q2 2020, so that is up around about one billion dollars from the last quarter. However, that is to be expected because, of course, we've just... we've seen that be the general trend of things through all of these 13Fs, just because the markets themselves have recovered so much in the past three months. So that's definitely been a bit of a trend of late.

However, what really caught my eye about this quarter's 13F from Bridgewater is what they've been doing with the really big positions in their portfolio. Now Bridgewater, I should say, has a very, very large portfolio; they have 383 stocks in this portfolio, and only four stocks have a larger than five percent weight in the portfolio. So this portfolio is very diversified.

But if we start looking at those largest positions, then we can start to see some interesting patterns emerging. So, first of all, his largest position is in SPY, which is an S&P 500 ETF—the largest ETF in the world. He actually holds 26 percent of his portfolio just in SPY. He's actually added 42 percent to that holding over the past three months, so that money gets spread across the 500 largest stocks in the United States.

So that's his biggest position. But the second biggest position is the one that's much more interesting or a bit more telling, and that is in GLD, which is the SPDR Gold Shares ETF. This is the largest gold ETF in the whole world, and what's really interesting is that Bridgewater's current position in the ETF is worth $900 million.

Now that's not five percent of their portfolio; that's edging up to 15 percent of their portfolio. So literally, 15 percent of their portfolio is in the world's largest gold ETF. So Dalio is currently holding about three times the amount of gold that he would normally like to hold just in standard normal conditions. This is a pretty obvious sign to me that Ray Dalio doesn't want to be caught holding too much cash right now; he would much rather hold gold.

And it's not like this position has been this large in the past; he's actually been adding quite a lot to it over the past three months. He's actually added 34.66 percent to this position, so to me this says that Ray Dalio wants gold, and he wants it now because he's literally the value of Bridgewater's position in this ETF has gone up by $300 million in just the past three months.

So that's actually five percent of their whole portfolio that has been sunk into this ETF just in the past three months. It's quite a bit. But the crazy thing is it doesn't stop there. The third largest position in the portfolio is IVV, which is another S&P 500 ETF, and that occupies 8.7 percent of Bridgewater's portfolio.

Then next up is VWO, which is an emerging markets ETF that occupies 7.5 percent of the portfolio. Then we get down to the fifth largest position in this portfolio, and it's in IAU, which is the iShares Gold Trust ETF—literally the second largest gold ETF in the whole world. So Dalio's got 15 percent of his portfolio in the world's largest gold ETF, and then he's got five percent in the world's second largest gold ETF.

So he's not even just holding 15 percent of the portfolio in gold; he's holding 20 percent of Bridgewater's portfolio just in gold in the two largest gold ETFs in the whole world. I find this really interesting because not many people are talking about this right now. You know, Ray Dalio, who forever has said, you know, gold should be a part of the investor's portfolio, but not in a big way... No, no, please don't make the headline "Ray Dalio buys gold." That's not really what I meant: only a small amount in gold, it's not a very good investment over the long run.

All of a sudden, bang! Q2 2020, 20 percent of Bridgewater's $6 billion share portfolio is in gold ETFs. And as I was saying, it's not like these positions have just been there forever; he's been actively adding to these positions in a big way over the past few months. As I said before, he added 34.66 percent to GLD, and now he's added 35.45 percent to IAU just in the last quarter.

So Bridgewater wants gold now; they want protection from the Federal Reserve going bananas. And if you've been paying attention to what Ray Dalio has been saying just in interviews throughout this year, he definitely believes that the future looks pretty grim. So he definitely wants some protection from, you know, economic conditions going a bit haywire again into the future.

So anyway, I thought that was a really interesting takeaway from Ray Dalio or Bridgewater Associates 13F for Q2 2020. Now, if you wanted to actually have a look in-depth as to their top holdings and what they've been adding to and what they've been subtracting from, then I'll leave this up on the screen. Just pause it now if you'd like to learn more in detail, and if you actually want to look at what they've been doing with all 383 stocks that are actually in that portfolio, then just check out the link down in the description, and that will take you straight over.

But anyway, guys, that will do me for today. I'd love to hear your opinion on gold. I've been talking about gold a fair bit recently because, of course, we had that news with Warren Buffett's company, Berkshire Hathaway, buying, um, G-O-L-D, Barrick Gold, which is a gold miner. And now obviously, we're getting Ray Dalio, who's just stocking up on, well, I guess physical gold, by buying into the gold ETFs. Man, 20 percent of the portfolio? That's pretty nuts—20 percent of $6 billion just sunk into gold ETFs.

But anyway, I'd love to hear from you guys. Do you guys hold shares, maybe in gold ETFs, or you know what are your thoughts around gold and its place in an investor's portfolio? I'd love to hear from you guys, so drop that stuff down in the comments section below. Leave a like on the video if you did enjoy it or if you found it useful.

But that's it from me for today. If you'd like to learn more about my personal investing strategy, then head over to Profitful; links are down in the description. But apart from that, guys, I'll see you all in the next video. Thanks for watching the video.

Guys, I just wanted to let you know that this video is being sponsored by Stake. So if you don't know Stake, Stake is the brokerage platform that I use to trade U.S. stocks. The reasons that I like them, first of all, they are a brokerage-free trading platform, which is awesome, and you can also access fractional share trading, which is super helpful if you don't have heaps of money. You can still get started up with your investing over in the U.S. markets.

So the Stake platform is really intuitive; it's very simple to use. So I definitely encourage you guys to check it out and download it. Also, check out the brokerage packs that they are setting up so that you can access the pack that is right for you with your trading or your investing. Now, the other thing I'll let you know is that if you download the Stake app and you use my referral code AWC, then Stake are going to give you one free stock. They're going to give you a share in either GoPro, Nike, or Dropbox, which I think is an awesome incentive that will help you guys get started.

So definitely make sure when you make an account, use the referral code AWC to take advantage of that free stock. So a pretty good deal—make sure you get on it. Thanks always to Stake for sponsoring the channel, and I'll see you guys in the next video. [Music]