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Ray Dalio says the Fed faces a tough balancing act

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Ray Dalio, Bridgewater Associates co-chairman and co-chief investment officer, speaks during the Skybridge Capital SALT New York 2021 conference.

Brendan McDermid | Reuters

As the U.S. Federal Reserve implemented its first interest rate cut since the early Covid pandemic, billionaire investor Ray Dalio flagged that the U.S. economy still faces an “enormous amount of debt.”

The central bank’s decision reduces the federal funds rate to a range of 4.75% to 5%. The rate not only determines short-term borrowing costs for banks, but also impacts various consumer products like mortgages, auto loans and credit cards.

“The challenge of the Federal Reserve is to keep interest rates high enough that they’re good for the creditor, while keeping them not so high that they’re problematic for the debtor,” the founder of Bridgewater Associates told CNBC’s “Squawk Box Asia” on Thursday, noting the difficulty of this “balancing act.”

The U.S. Treasury Department recently reported that the government has spent more than $1 trillion this year on interest payments for its $35.3 trillion national debt. This increase in debt service costs also coincided with a significant rise in the U.S. budget deficit in August, which is approaching $2 trillion for the year.

On Wednesday, Dalio listed debt, money and the economic cycle as one of the top five forces influencing the global economy. Expanding on his point Thursday, he said he was generally interested in “the enormous amount of debt that is being created by governments and monetized by central banks. Those magnitudes have never existed in my lifetime.”

Governments around the world took on record debt burdens during the pandemic to finance stimulus packages and other economic measures to prevent a collapse.

When asked about his outlook and whether he sees a looming credit event, Dalio responded he did not.

“I see a big depreciation in the value of that debt through a combination of artificial low real rates, so you won’t be compensated,” he said.

While the economy “is in relative equilibrium,” Dalio noted there’s an “enormous” amount of debt that needs to be rolled over and also sold, new debt created by the government.”

Ray Dalio says the U.S. needs a strong leader of the middle and 'broad-based prosperity'

Dalio’s concern is that neither former President Donald Trump or Vice President Kamala Harris will prioritize debt sustainability, meaning these pressures are unlikely to alleviate regardless of who wins the upcoming presidential election.

“I think as time goes on, the path will be increasingly toward monetizing that debt, following a path very similar to Japan,” Dalio posited, pointing to how the Asian nation has kept interest rates artificially low, which had depreciated the Japanese yen and lowered the value of Japanese bonds.

“The value of a Japanese bond has gone down by 90% so that there’s a tremendous tax through artificially giving you a lower yield each year,” he said.

For years, Japan’s central bank stuck to its negative rates regime as it embarked on one of the most aggressive monetary easing exercises in the world. The country’s central bank only recently lifted interest rates in March this year.

How do negative interest rates work?

Additionally, when markets do not have enough buyers to take on the supply of debt, there could be a situation where interest rates have to go up or the Fed may have to step in and buy, which Dalio reckons they would.

“I would view [the] intervention of the Fed as a very significant bad event,” the billionaire said. Debt oversupply also raises questions of how it gets paid.

“If we were in hard money terms, then you would have a credit event. But in fiat monetary terms, you have the purchases of that debt by the central banks, monetizing the debt,” he said.

In that scenario, Dalio expects that the markets would also see all currencies go down as they’re all relative.

“So I think you’d see an environment very similar to the 1970’s environment, or the 1930 to ’45 type of period,” he said.

For his own portfolio, Dalio asserts that he does not like debt assets: “so if I’m going to take a tilt, it would be underweight in debt assets such as bonds,” he said. 

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Apple iPhone assembly in India won’t cushion China tariffs: Moffett

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Street's biggest Apple bear says a production move to India is unrealistic

Leading analyst Craig Moffett suggests any plans to move U.S. iPhone assembly to India is unrealistic.

Moffett, ranked as a top analyst multiple times by Institutional Investor, sent a memo to clients on Friday after the Financial Times reported Apple was aiming to shift production toward India from China by the end of next year.

He’s questioning how a move could bring down costs tied to tariffs because the iPhone components would still be made in China.

“You have a tremendous menu of problems created by tariffs, and moving to India doesn’t solve all the problems. Now granted, it helps to some degree,” the MoffettNathanson partner and senior managing director told CNBC’s “Fast Money” on Friday. “I would question how that’s going to work.”

Moffett contends it’s not so easy to diversify to India — telling clients Apple’s supply chain would still be anchored in China and would likely face resistance.

“The bottom line is a global trade war is a two-front battle, impacting costs and sales. Moving assembly to India might (and we emphasize might) help with the former. The latter may ultimately be the bigger issue,” he wrote to clients.

Moffett cut his Apple price target on Monday to $141 from $184 a share. It implies a 33% drop from Friday’s close. The price target is also the Street low, according to FactSet.

“I don’t think of myself as the biggest Apple bear,” he said. “I think quite highly of Apple. My concern about Apple has been the valuation more than the company.”

Moffett has had a “sell” rating on Apple since Jan. 7. Since then, the company’s shares are down about 14%.

“None of this is because Apple is a bad company. They still have a great balance sheet [and] a great consumer franchise,” he said. “It’s just the reality of there are no good answers when you are a product company, and your products are going to be significantly tariffed, and you’re heading into a market that is likely to have at least some deceleration in consumer demand because of the macro economy.”

Moffett notes Apple also isn’t getting help from its carriers to cushion the blow of tariffs.

“You also have the demand destruction that’s created by potentially higher prices. Remember, you had AT&T, Verizon and T. Mobile all this week come out and say we’re not going to underwrite the additional cost of tariff [on] handsets,” he added. “The consumer is going to have to pay for that. So, you’re going to have some demand destruction that’s going to show up in even longer holding periods and slower upgrade rates — all of which probably trims estimates next year’s consensus.”

According to Moffett, the backlash against Apple in China over U.S. tariffs will also hurt iPhone sales.

“It’s a very real problem,” Moffett said. “Volumes are really going to the Huaweis and the Vivos and the local competitors in China rather than to Apple.”

Apple stock is coming off a winning week — up more than 6%. It comes ahead of the iPhone maker’s quarterly earnings report due next Thursday after the market close.

To get more personalized investment strategies, join us for our next “Fast Money” Live event on Thursday, June 5, at the Nasdaq in Times Square.

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Warren Buffett’s top stock picks come with 15% income bonus in new ETF

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Invest like Buffett: VistaShares CEO on new ETF that follows the investor

In a year that hasn’t been kind to many big-name stocks, Warren Buffett’s Berkshire Hathaway is standing near the top. Berkshire shares have posted a 17% return year-to-date, while the S&P 500 index is down 6%.

That performance places Berkshire among the top 10% of the U.S. market’s large-cap leaders, and the run has been getting Buffett more attention ahead of next weekend’s annual Berkshire Hathaway shareholder meeting in Omaha, Nebraska. It’s also good timing for the recently launched VistaShares Target 15 Berkshire Select Income ETF (OMAH), which holds the top 20 most heavily weighted stocks in Berkshire Hathaway, as well as shares of Berkshire Hathaway. 

Berkshire is currently the biggest holding in the ETF, at 10.6% of the fund. Other top holdings in the ETF from among the ranks of Berkshire’s biggest bets include Apple, American Express, Kroger, VeriSign, Bank of America, Citigroup, Visa and of course Coca-Cola, a long time favorite of the man known as the Oracle of Omaha.

“It’s a really well-balanced portfolio chosen by the most successful investor the world has ever seen,” Adam Patti, CEO of VistaShares, said in an appearance this week on CNBC’s “ETF Edge.”

Berkshire’s outperformance of the S&P 500 isn’t limited to 2025. Buffett’s stock has tripled the performance of the market over the past year, and its 185% return over the past five years is more than double the performance of the S&P 500.

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Berkshire Hathaway is one of 2025’s top performing stocks.

In addition to this long-term track record of success in the market, Berkshire Hathaway is getting a lot of attention right now for the record amount of cash Buffett is holding as he trimmed stakes in big stocks including Apple, which has proven to be a great strategy. The S&P 500 has experienced extreme short-term volatility since President Donald Trump’s inauguration on January 20. Even after a recent recovery, the S&P is still down 8% since the start of Trump’s second term.

“The market has been momentum driven for many years, the switch has flipped and we’re looking at quality in terms of exposure, and Berkshire Hathaway has performed incredibly well this year, handily outperforming the S&P 500,” said Patti.

Berkshire Hathaway famously doesn’t pay a dividend, with Buffett holding firm over many decades in the belief that he can re-invest cash to create more value for shareholders. In a letter to shareholders in February, Buffett wrote that Berkshire shareholders “can rest assured that we will forever deploy a substantial majority of their money in equities — mostly American equities.”

The lack of a dividend payment has been an issue over the years for some shareholders at Berkshire who do want income from the market, according to Patti, who added that his firm conducted research among investors in designing the ETF. “Who doesn’t want to invest like Buffett, but with income?” he said.

So, in addition to being tied to the performance of Berkshire and the stock picks of Buffett, the VistaShares Target 15 Berkshire Select Income ETF is designed to produce income of 15% annually through a strategy of selling call options and distributing monthly payments of 1.25% to shareholders. This income strategy has become more popular in the ETF space, with more asset managers launching funds to capture income opportunities and more investors adopting the approach amid market volatility.

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More Americans buy groceries with buy now, pay later loans

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People shop for produce at a Walmart in Rosemead, California, on April 11, 2025. 

Frederic J. Brown | Afp | Getty Images

A growing number of Americans are using buy now, pay later loans to buy groceries, and more people are paying those bills late, according to new Lending Tree data released Friday

The figures are the latest indicator that some consumers are cracking under the pressure of an uncertain economy and are having trouble affording essentials such as groceries as they contend with persistent inflation, high interest rates and concerns around tariffs

In a survey conducted April 2-3 of 2,000 U.S. consumers ages 18 to 79, around half reported having used buy now, pay later services. Of those consumers, 25% of respondents said they were using BNPL loans to buy groceries, up from 14% in 2024 and 21% in 2023, the firm said.

Meanwhile, 41% of respondents said they made a late payment on a BNPL loan in the past year, up from 34% in the year prior, the survey found.

Lending Tree’s chief consumer finance analyst, Matt Schulz, said that of those respondents who said they paid a BNPL bill late, most said it was by no more than a week or so.

“A lot of people are struggling and looking for ways to extend their budget,” Schulz said. “Inflation is still a problem. Interest rates are still really high. There’s a lot of uncertainty around tariffs and other economic issues, and it’s all going to add up to a lot of people looking for ways to extend their budget however they can.”

“For an awful lot of people, that’s going to mean leaning on buy now, pay later loans, for better or for worse,” he said. 

He stopped short of calling the results a recession indicator but said conditions are expected to decline further before they get better.  

“I do think it’s going to get worse, at least in the short term,” said Schulz. “I don’t know that there’s a whole lot of reason to expect these numbers to get better in the near term.”

The loans, which allow consumers to split up purchases into several smaller payments, are a popular alternative to credit cards because they often don’t charge interest. But consumers can see high fees if they pay late, and they can run into problems if they stack up multiple loans. In Lending Tree’s survey, 60% of BNPL users said they’ve had multiple loans at once, with nearly a fourth saying they have held three or more at once. 

“It’s just really important for people to be cautious when they use these things, because even though they can be a really good interest-free tool to help you kind of make it from one paycheck to the next, there’s also a lot of risk in mismanaging it,” said Schulz. “So people should tread lightly.” 

Lending Tree’s findings come after Billboard revealed that about 60% of general admission Coachella attendees funded their concert tickets with buy now, pay later loans, sparking a debate on the state of the economy and how consumers are using debt to keep up their lifestyles. A recent announcement from DoorDash that it would begin accepting BNPL financing from Klarna for food deliveries led to widespread mockery and jokes that Americans were struggling so much that they were now being forced to finance cheeseburgers and burritos.

Over the last few years, consumers have held up relatively well, even in the face of persistent inflation and high interest rates, because the job market was strong and wage growth had kept up with inflation — at least for some workers. 

Earlier this year, however, large companies including Walmart and Delta Airlines began warning that the dynamic had begun to shift and they were seeing cracks in demand, which was leading to worse-than-expected sales forecasts. 

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