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Ray Dalio: The World Order Has Unraveled
Ray Dalio says investors should prepare for a riskier, changing world with diversified portfolios rather than market timing.
Prof G Markets · Ed Elson
The best minutes
- 13:09Diversification matters more than timing in a stagflationary cycle4 min
- 9:19Dalio sees a riskier U.S. transition as debt demand weakensPro pick 4 min
- 18:59AI cloud leaders are earning returns on rising capex4 min
Also worth watching
- 24:27Microsoft is cheaper despite similar growth3 min
- 4:43Dalio sees a return to power-based world order3 min
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Full analysis · 7 min read
Real Alpha · Nov 8
Ray Dalio says U.S. spends 40% more than it takes in
- Dalio says the U.S. spends $7 trillion and takes in about $5 trillion, a 40% overspend.
- His case rests on debt supply, weaker demand and politics, but offers no date-specific market trigger.
- He favors broad diversification, with somewhere between five and 15 percent in gold as an example.
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Dalio says debt demand faces a widening gap
Dalio's most repeatable figure is the federal budget gap. He said the government spends $7 trillion and takes in about $5 trillion.
He called that 40% overspending. Subtracting about $5 trillion from $7 trillion leaves about $2 trillion, our calculation.
That rough gap makes the debt question tangible. But it is not a default date or a forecast of an immediate funding crisis.
Dalio said demand for U.S. debt is falling as the government must sell more. He also said foreign holders may worry about sanctions during conflict.
That is a possible buyer concern in his account, not proof that buyers are exiting. He gave no scale or timing for any decline.
For example, Dalio said China is accumulating dollars while running large trade surpluses. He asked what those holdings mean for U.S. balances, without giving a quantified flow forecast.
Elson separately said the national debt had passed $39 trillion. That was the host's figure, distinct from Dalio's budget-gap arithmetic.
Our read
The spending figure makes the financing pressure legible, but it does not tell investors when demand breaks. Track issuance and buyer composition separately from the debt total.
Dalio links shocks to a power-based order
Dalio's cycle links monetary order, debt, domestic politics, geopolitics, nature and technology. His point is that these forces interact rather than arrive as isolated market events.
He said the postwar multilateral order had given way to a power-based one. He described the earlier system as lacking an enforcement mechanism.
That diagnosis explains his frame, but does not assign odds to a specific conflict. The distinction matters when operators translate geopolitics into budgets.
For example, he described Iran as one front in wider conflicts involving China, Russia, North Korea and others. The episode does not establish a coordinated bloc or shared intent among them.
Treating his list as one alliance would go beyond what he said. For companies, the framework is a prompt to map where policy, finance and supply exposure overlap.
Yet a broad framework still needs concrete triggers before it can guide investment or contingency decisions.
Our read
Dalio's framework is useful for connecting risks investors often separate. Its breadth also makes specific triggers essential before it becomes an operating plan.
Dalio sees greater risk around coming elections
Dalio said he would call the period after the 2026 midterms and before the 2028 presidential election particularly risky. He also said the next two to three years could bring rapid change.
His phrasing matters because he offered a risk window, not a market-timing date. He said the period could feel like going through a time warp.
On the midterms, he said there was a likelihood Republicans would lose the House. He expected possible investigations, impeachments and material political conflict.
That is his political forecast, not an established outcome. He connected the window to debt supply, weaker demand and conflict over dollar holdings.
But he gave no probability, yield threshold or observable signal for reducing risk. Elson's opening supplied context about debt, Iran and tariffs, not independent confirmation of Dalio's timing.
Our read
Dalio gives investors a risk window, not a forecast they can trade mechanically. The election prediction and debt-demand concern should be tested separately.
Diversification is Dalio's answer, not market timing
Dalio's portfolio answer was to avoid trying to time wars and other shocks. Instead, he urged a well-diversified structure, judging assets in relation to one another.
That advice fits his uncertainty thesis, because none of his forces has a precise arrival date. He offered somewhere between five and 15 percent in gold as an example allocation.
He said gold can diversify other assets, but cautioned against having too much or too little. That is an inclination, not a mandate for every investor.
He said cash is normally a bad investment because its return is lower, and especially bad in stagflation. He described the current environment as kind of stagflationary, or uncertain.
He also said diversification should include assets outside the United States. And he warned that revolutionary technologies can still produce bubbles when investors ignore price.
That warning cuts both ways, cautioning against concentration without denying technology's potential. Dalio did not map his gold range or global allocation to an investor's liabilities, risk budget or time horizon.
Our read
The actionable point is portfolio structure, not a call to chase gold or exit U.S. assets. Any allocation still needs to fit the investor's liabilities and risk limits.
Cloud margins support an AI return case, with limits
Gil Luria, D.A. Davidson's technology research head, read higher cloud margins as evidence that AI spending is earning returns. His three provider figures make the operating case concrete.
He described Microsoft's $100 billion business growing 40%, and Amazon's $140 billion business growing 27%. He said Google's $80 billion business was growing 63%.
Luria said each was growing at higher margins than before. That combination supports monetization more strongly than revenue growth alone.
Still, it is not a full return calculation for each data center or AI workload. The exchange gives no project payback period, capacity utilization or depreciation bridge.
Luria contrasted Meta, whose rising capex was not matched by revenue acceleration. Elson said Meta had reported revenue up 33%, alongside higher-than-expected capex and disappointing user growth.
Take Meta's contrast as a reason investors distinguish its spending from cloud providers' investment. The revenue gap explains concern, but does not prove the spending will fail.
Luria later preferred Microsoft on valuation. That is analyst judgment, not company guidance, and investors still need to separate accounting margins from returns on new capacity.
Our read
The earnings support a case that cloud demand is monetizing, but not a full return-on-capital verdict. Higher margins matter, while project costs and payback remain unshown.
Later conversations frame AI demand and financing limits
Separate later conversations add context to infrastructure economics, not a test of these April earnings. They speak to demand visibility, capacity timing and financing.
Amazon CEO Andy Jassy said this on the a16z Podcast in October 2026. He said $220 billion in capex this year would leave meaningful demand unmet.
That supports demand pressure, not returns on every asset or a particular provider's build plan. Demand can be strong while individual projects still face execution risks.
Google CEO Sundar Pichai said this on Big Technology Podcast in October 2026. He described compute planning around demand signals, contracts and technical capability.
Pichai also said component bottlenecks can still produce overbuild. This complicates any assumption that visible demand guarantees disciplined timing.
Gil Luria, on Prof G Markets in October 2026, described Microsoft pairing long-term data-center commitments with short-term neocloud capacity. He said that structure can help it meet demand while staying cash-flow positive.
In another October Prof G Markets discussion, Luria said debt and equity funding for AI infrastructure is finite. Companies farther down the value chain face greater funding risk.
Together, these separate conversations highlight demand visibility, overbuild, financing and construction timing. None revises the April earnings figures or proves the same project economics hold across providers.
Andy Jassy · a16z Podcast · Oct 23Customer demand guides Amazon’s AI infrastructure spending
Sundar Pichai · Big Technology Podcast · Oct 20Google plans compute around demand but accepts overbuild risk- GLGil Luria · Prof G Markets · Oct 29Microsoft limits AI spending to what its cash flow can support
- GLGil Luria · Prof G Markets · Oct 29AI infrastructure funding may become harder to secure
Our read
These later conversations frame the tradeoff rather than test April's earnings optimism. Demand, construction timing, cash flow and external financing each affect project risk.
OpenAI's reported miss shows market sensitivity
Elson said a Wall Street Journal report that OpenAI missed its 2025 revenue target coincided with sharp declines in related names.
He listed NVIDIA down 4%, Oracle down 6%, CoreWeave down 7% and SoftBank down 12%. He estimated nearly $400 billion in combined market value was erased.
That is the host's tally, not a measured statement of direct exposure or single-cause attribution. Still, the move shows how a private company's disclosures can move public-market expectations.
Elson said OpenAI's plan remained to go public in 2026, despite CFO concerns. He framed revenue and compute disclosures as a test for OpenAI and related companies.
That is his scenario, not evidence that an IPO necessarily confirms or breaks the market. Elson also said the answer was unknown, although the recent reaction looked negative.
So the useful budget question is whether your own AI commitments depend on a narrow set of companies meeting expectations. This episode gives no basis for treating the market reaction as an all-clear or a collapse signal.
Our read
The reaction makes concentrated expectations visible, but it does not prove every linked company has the same underlying risk. Disclosure and cash generation matter more than headline sensitivity alone.
What it means for you
- Map debt buyers. Track issuance alongside buyer composition and yields. Dalio's concern is weaker demand meeting more supply, not merely a large debt total.
- Stress-test gold range. Compare portfolio outcomes with and without gold, including Dalio's example range of somewhere between five and 15 percent. Treat it as a scenario, not a target.
- Measure cloud returns. Pair cloud growth and margin data with capex, depreciation and payback information. Luria's examples show why revenue and margins alone cannot complete return analysis.
- Separate demand from capacity. Record contracts, expected commissioning dates and funding sources for each planned AI project. Pichai's overbuild warning and Luria's financing comments make those distinct checks.
What to watch
- Whether U.S. debt demand weakens as issuance continues, particularly across Dalio's post-midterm to 2028 risk window.
- Cloud margins and capex together, especially whether Meta's spending begins to show matching revenue acceleration.
- What OpenAI discloses if its stated 2026 IPO plan proceeds, especially revenue and compute commitments.
Send this to CFOs, treasurers and product leaders approving AI infrastructure.
Watch the minute where Dalio gives the U.S. spending figure.
Written by Real Alpha from the episode's transcript and the other moments it links, then checked against the transcript. Quotes are the speaker's exact words.
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Read it with Pro, 7 days free- 2:02Five forces shape the world order
Ray Dalio said investors should look beyond day-to-day news to five forces that move markets: monetary order, debt, domestic political and social order, international geopolitics, acts of nature and technology. He said these forces operate in cycles.
- 3:18Debt service can squeeze spending
Dalio said borrowing can support productivity and income, making debt service manageable. But when debt and debt service rise relative to income, they squeeze spending; if governments also need to sell more debt as demand falls, he said, supply and demand become a problem.
- 4:33Dalio sees power replacing multilateral order
Dalio said the post-1945 multilateral order, with institutions such as the United Nations and World Bank, has ended. He sees a return to a power-based order resembling the pre-1945 world, and said the Iran conflict is part of a wider global contest involving China, Russia, Iran and North Korea.
- 9:19Dalio warns of a riskier election window
Dalio called the period after the 2026 midterms and before the 2028 presidential election especially risky. He said Republicans could lose the House, leading to major conflict, investigations and impeachments. He said the government spends $7 trillion and takes in about $5 trillion, while demand for U.S. debt is falling.
- 13:36Dalio recommends a diversified portfolio
Dalio advised investors not to market-time events and instead to diversify across assets and geographies. He suggested considering 5% to 15% in gold, which he described as a reserve currency and a diversifier, and warned that cash can fare poorly in stagflation.
- 18:59AI growth is lifting cloud returns
Gil Luria said high expectations weighed on the reaction to strong results. He cited businesses at Microsoft, Amazon and Google of $100 billion, $140 billion and $80 billion growing 40%, 27% and 63%, respectively, with higher margins. He said Google stood out, with search growth accelerating to 19% and demand for its TPUs.
- 21:31Capital spending returns vary
Luria said Microsoft, Amazon and Google sell AI compute capacity and are getting strong returns on capital spending. Meta uses its data centers internally and increased spending without corresponding revenue acceleration. He said chipmakers and the major compute providers are capturing value from AI demand.
- 23:12Iran has little direct impact on tech
Luria said oil is not a direct input for big tech, so the Iran war affects these companies mainly if it slows the wider economy. He said demand for AI compute is their main driver and appears largely separate from the Middle East conflict.
- 24:34Luria favors Microsoft on valuation
Luria said Microsoft traded at a low-20s multiple, while Google and Amazon were in the high 20s or 30s, despite comparable growth; he preferred Microsoft. He said its lower-than-expected capital spending likely reflected data-center bottlenecks, including memory prices that had quadrupled within a year, rather than a change in investment policy.
- 27:02OpenAI has become market-critical
Ed Elson said a Wall Street Journal report that OpenAI missed its 2025 revenue target coincided with declines in Nvidia, Oracle, CoreWeave and SoftBank, erasing nearly $400 billion in market value. He said OpenAI's planned IPO would expose more of its business and could test the broader stock market.
Published Apr 30, 2026.
Transcript · 19 min read
Prof G Markets, hosted by Ed Elson, with Ray Dalio and Gil Luria.
Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.
Welcome to Prof G Markets. I'm Ed Elson. It is April 30th. Let's check in on yesterday's market vitals. The S&P 500 and the Nasdaq were flat while the Dow declined as the Federal Reserve held rates steady. The yield on 10-year treasuries hit a one-month high as traders gave up hopes for a rate cut this year. Brent crude hit the highest level since 2022 after President Trump told aides to prepare for an extended blockade and big tech shares were mixed as earnings started. to roll in. More on that later. Okay, what else is happening? Earlier this year, legendary investor Ray Dalio declared that the world order had broken down. Since he made that claim, the national debt surpassed $39 trillion to reach a new record. We've also gone to war with Iran, which has cost at least $25 billion so far and sent the price of oil soaring. And on top of that, new projections show that tariffs are expected to add another $1 trillion to the deficit over the next 10 years.
In sum, the deficit is expanding. Inflation appears to be rising. And meanwhile, the Fed is stuck holding rates at a crucial time of transition. So we wanted to check in on all of these dynamics. So we decided to check in with the man himself, Ray Dalio, global macro investor, founder of Bridgewater Associates and New York Times bestselling author. Ray, thank you so much for joining us again on the show. I guess we should start with your main investment theme, which is the big cycle and the five main forces that drive the big cycle that you have been warning about for a long time. Could you just remind us what is the big cycle and what are those five forces that are moving markets? Yes, thank you. I think it's very important to step back from the day-to-day and see these cycles and the orders. And so I appreciate your question. There are five big forces that create the orders that we're talking about. There's a monetary order. There's a debt cycle. There is a political and social order within countries.
There is an international geopolitical order. There is acts of nature throughout history. Droughts, floods, and pandemics have been more disruptive, killed more people than wars and can't be ignored as a factor. And number five, technology. And all of those are operating and they operate in a cycle. So on the first, there is a debt cycle that I will describe, and people should consider the merit of that. I have done very well in a macro way. of anticipating the 2008 financial crisis, European debt crisis, and so on, by understanding this. Okay, the way it works is that the credit system is like a circulatory system that brings nutrients, buying power, to different parts of the economy.
Read the whole transcript
And if that money is borrowed and used to create productivity that produces income, Then there's debt service, and you make the debt service payments, and you do better, and you make profits, and it's a healthy system. When, on the other hand, debts and debt service rise relative to income, you see the debt service is like plaque in the circulatory system in that it squeezes out spending. So, in other words, income minus debt service becomes less, and so as a result, it squeezes out spending. And there's a supply and a demand. In other words, right now we have a certain amount of debt, one man's debts or another man's assets.
They have those holding them, expect to have a good return. And then you have to sell more. And when you have to sell a lot more, there's a supply-demand issue. And when those two things happen together, it's like plaque in the system. And then number three is the world order.
“So we have changed the world order to a world order that was analogous to pre-1945, which is a power rules kind of world order.”
Well, it's very helpful because, I mean, with each force, very, very obvious examples come to mind. I mean, with the first force, the thing that comes to mind is the fact that, as I said, the national debt has surpassed $39 trillion. We're sitting at a record high in the U.S. And our annual deficit spend so far, at least in the first half of the fiscal year, was $1.3 trillion. dollars. So it's clear where we're headed on a debt perspective there. In terms of the internal order, it's clear for most to see that there is more and more. polarization both between the left and the right but also between the rich and the poor we've seen some pretty disturbing attacks on ceos lately which i believe is at least somewhat indicative of of sentiment within the u.s starting to fray uh and then i mean you talk about on an international scale we have a war with iran which is also coming off of a moment at davos where most of the leaders got together and said the thing that you said and have been predicting for many is, which is that the world order, as we know it, is coming apart. This era of globalism is coming to an end. And even its proponents were the people who said outright, yes, this era is coming to an
end. So I guess my takeaway is the big cycle is happening. The things that you have been talking about, they are occurring. And the question for me then becomes, well, where are we in the big cycle what stage are we actually at and what are the what are these events that we have seen in the real world actually say to us and what does it mean for investors um we are um on the brink
“the United States, basically the U.S. government spends $7 trillion. It takes in about $5 trillion. So it's 40% overspending.”
Yes. Yeah. I mean, my next question is, what does this mean for portfolio management? Just think.
“the most important thing for most individuals is not to market time a lot of these things.”
Lots more we could get into, but we will have to continue it another time. Ray Dalio, founder of Bridgewater Associates and New York Times bestselling author. Ray, thank you so much for joining us again on Prof G Markets. We always love having you. Ed, it's my pleasure. After the break, Microsoft, Meta, Amazon, and Google report earnings.
And by the way, we are heading out on tour at the end of May. So for more info and to get tickets to a show near you, head to ProfGMarketstour.com. We're back with Prop G Markets. Many of the world's most valuable companies reported strong earnings yesterday, but investors didn't seem too impressed. Microsoft beat on the top and bottom lines with revenue up 18% year over year. However, the stock slipped 2% after hours. Amazon also topped expectations with stronger than expected cloud growth, but its shares fell around 1% after hours. Meta posted a standout quarter with revenue surging 33% from a year ago, but higher than expected CapEx and disappointing user growth set the stock down nearly 7% after hours.
Google was the exception. Revenue beat estimates. Cloud sales topped $20 billion, and the stock rose over 6% offer hours. So lots to unpack here. We're speaking with Gil Luria, Head of Technology Research at DA Davidson. Gil, good to see you again. Lots to get into here. I mean, the thing that strikes me immediately is that these numbers, these growth numbers especially, are just mind-blowing. I mean, Google, their cloud revenue is up 63%. uh microsoft azure revenue up 40 percent like these are crazy numbers but based on the offer i was trading i guess investors aren't that about it. What do you make of these earnings and how the markets have reacted so far?
“They're all managing this growth so well that they're accelerating growth with higher margins.”
The results weren't great, and they're again increasing CapEx. One of the things that we saw when we launched this war in Iran was a lot of these names fell. I mean, basically, the markets as a whole fell, but a lot of that pain was seen among the tech companies. And then they started to rebound as it seems as though investors started to realize, like, this probably doesn't matter for these companies. This is the first time where we've gotten to see what those impacts actually were. It seems like there's been no impact. I mean, is there any relationship between what we're seeing in terms of the war in Iran and the broader impacts that that's happening on the global economy versus big tech?
Or is big tech just completely insulated its own thing? They're very insulated, right? Oil is not an input for these companies. exposure is only the second-order exposure. If the global economy was to slow down, then ad sales to Meta and Google would slow down, retail and Amazon would slow down, and some aspects of Microsoft business would slow down. But there's no direct impact on these companies. Their driver, again, by a mile, is the growth in demand for AI compute. And that seems to have very little to do with the conflict in the Middle East. And so they are mostly insulated from this unless we have a big deterioration in the overall economy,
“They're all growing in the high teens and Microsoft is not getting the credit for it.”
Head of Technology Research at DA Davidson. Gil, always appreciate your time. Thank you. Thank you. well the big story for investors this week is of course big tech earnings the four companies we just discussed make up for nearly a fifth of the entire s&p 500 so naturally it's those four companies that we care about but there is another company that is also proving to be systemic to the stock market a company that actually isn't even traded on the stock market and that company is OpenAI. Indeed, the AI startup that is yet to go public is proving to be one of the most structurally critical companies in the market, to the point where even small details about the business are eliminating hundreds of billions of dollars of market value. Yesterday, for example, the Wall Street Journal reported that OpenAI had missed its revenue target in 2025. And as a result,
We saw huge declines, not in OpenAI stock, which isn't public, but in other stocks, some of which are the most important companies in the world. NVIDIA, for example, fell 4% on the news. Oracle fell 6%. CoreWeave fell 7%. And SoftBank fell 12%. In fact, when you add up the market value that was erased, it comes out to nearly $400 billion, all because of one report about one company that isn't even publicly traded. Now, that is somewhat concerning, but it raises a more concerning question, and that is, what will happen to the markets when OpenAI is publicly traded? How will investors react when they are, say, required to report their revenue every quarter, or when they do have to tell us how much they actually plan to spend on compute over the next five years. Will investors be more excited than they are right now, or less excited? That is the trillion-dollar question, which will determine not only the value of this company, but also the value of many other companies, from NVIDIA to Oracle to Microsoft. Now, I don't know...
the answer to that question. But so far, each time we've gotten just a peek under the hood of OpenAI, such as this week, the reaction has been pretty negative. And yet, despite the CFO's concerns, the plan is still for OpenAI to go public this year. And when they do, investors won't just get to have a peek under the hood. They will conduct a full-scale examination of the company. They will inspect the business and all of its flaws from every single angle. So that will be a critical test for OpenAI. But more importantly, it will also be a critical test for the rest of the stock market. If OpenAI passes that test, then we are in the clear.
Markets will inevitably rip higher. But if they fail that test, well, this week's events should make it quite clear. The stock market, as we know it today, could start to come apart.
