Ray Dalio Warns Janet Yellen About Perils of a Weaker Dollar

The hedge fund chief cautions the new Treasury secretary against complacency over the greenback’s continued role as the world’s reserve currency.

Ray Dalio hopes Treasury Secretary Janet Yellen will steer clear of many pitfalls. Among them? Trusting that the US dollar will remain the world’s reserve currency, a warning many investors have already been sounding after the dollar lost value this past year.

“I think the United States has gotten used to being the world’s reserve currency, which meant that they think that whatever we can sell the rest of the world, the world will buy and we’re not subject to constraints or that dynamic, so that concerns me a bit,” Dalio told the Washington Post on Friday.

According to one forecast, the dollar could fall as much as 20% this year, given that global investors anticipating an economic recovery do not feel the need to seek a safe haven, and because of the rise of China. Goldman Sachs has even advised investors to short the US dollar in favor of Australian and Canadian currencies.

Many challenges lie ahead for Yellen. She and Dalio have had their differences in the past, but the leader of Bridgewater Associates said the new Treasury secretary was “skilled” and “open-minded,” though she has entered a “very difficult situation.”

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As Washington mulls how to expedite a swift recovery, Yellen must help sell Congress on President Joe Biden’s $1.9 trillion stimulus program, which entails further increasing federal debt—all amid intensifying class warfare, a charged political atmosphere, and the rise of China as a world power, Dalio said.

“And so the issue really, I think, is can we face those things in a skillful way and a bipartisan way so that we don’t do ourselves even more harm than the circumstances have brought us,” Dalio added.

Dalio and Yellen have butted heads previously, particularly in 2015 when she was the Federal Reserve chair and boosted interest rates. The hedge fund leader and other investors staunchly opposed that move, arguing hiking rates too soon would slow economic growth.

“I do think that she might overemphasize the business cycle part of it,” Dalio commented. “In other words, when she tightened monetary policy, I think she was thinking that the traditional economy would have a higher level of inflation.” But later, he added, “there was a readjustment in that thinking, which was appropriate.” Her successor at the Fed, Jerome Powell, reversed the rate increases.

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Tags: hedge, Hedge Fund, Investment Fund, Janet Yellen, Ray Dalio, Stock Market, United States Department of the Treasury, United States Secretary of the Treasury

Concerned with “the erosion of political stability” in the United States, a group of state treasurers and public pension funds overseeing more than $1 trillion are demanding BlackRock provide more transparency regarding the political contributions made by the world’s largest asset manager and its portfolio companies.

The group of institutional investors includes the state treasurers of Illinois, Massachusetts, Colorado, Oregon, Maryland, and Maine, as well as pension fund giants the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS), among others. They made their demands in a letter to BlackRock CEO Larry Fink that was in response to the Jan. 6 assault on the US Capitol building by an angry mob seeking to keep then-President Donald Trump in power.

“A functioning democracy is foundational to a stable economy, and as institutional investors we rely on economic and political stability in order to generate consistent investment returns on behalf of our beneficiaries,” the group said in the letter.

The investors said they believe that the attack on the Capitol adds “greater urgency” to the disclosure of corporate political spending and lobbying transparency and practices. They said they want to know how BlackRock will reform its corporate practices and investment stewardship “regarding the lack of transparency, alignment, and accountability in portfolio companies at which BlackRock votes proxies.”

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The letter cited BlackRock corporate literature released in December regarding its investment stewardship team’s perspective on corporate political activities, saying the expectations the firm has set for its portfolio companies exceed its own political contribution disclosure.

“BlackRock fails to specify the purpose of its political participation, referring only to vague ‘contribution policies and public policy goals,’” said the letter, adding that BlackRock neither specifies its process for monitoring political contributions nor provides information about board oversight of trade association memberships. The group also noted that BlackRock ranks behind more than 150 S&P 500 companies in the 2020 CPA-Zicklin Index of Corporate Political Disclosure and Accountability.

“Had BlackRock followed its own policy recommendations, perhaps the firm could have avoided the reputational damage related to its political action committee (PAC) donating $85,000 to 15 legislators who continued to deny the results of the 2020 presidential election even after the invasion of the US Capitol,” the letter stated.

The group also accused BlackRock of “inadequate” disclosure of trade association payments, saying the relevant information on the firm’s website is outdated and fails to provide amounts paid or how that money was spent. However, the group said in the letter that it was able to find out that the political action committees of at least five trade associations that received contributions from BlackRock in 2019 made donations in 2020 to 64 members of the US House of Representatives and five US senators who objected to electoral votes on Jan. 6 following the invasion of the Capitol.

The trade associations that made the contributions are the US Chamber of Commerce, Securities Industry and Financial Markets Association (SIFMA), Insured Retirement Institute (IRI), Small Business Investor Alliance (SBIA), and National Association of Manufacturers (NAM).