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Dalio Agrees With Klarman's Warning Of Recession Risk

Dalio Agrees With Klarman's Warning Of Recession Risk

Billionaire hedge fund manager Seth Klarman is dominating headlines at the World Economic Forum after writing in a letter that the global economy can not continue "business as usual."

What Happened

Klarman oversees the $27-billion hedge fund Baupost Group and said in a letter seen by New York Times' Andrew Ross Sorkin that the growing political and social divide worldwide could usher in an economic disaster. The world simply cannot continue "business as usual" amid worldwide protests, riots, government shutdowns and other trends that are resulting in a "world increasingly adrift," the letter reportedly said. 

"Social cohesion is essential for those who have capital to invest." 

Billionaire Dalio: 'Significant Slowing In 2020'

Commenting on Klarman's letter to Sorkin — who also co-hosts CNBC's "Squawk Box" — billionaire investor Ray Dalio said concerning global trends have yet to become a "factor in terms of creating disruptions" in the stock market. Global disruptions are coming on the heels of a tax cut that by default "makes stocks worth more," along with continued stock buyback programs that have similar positive impacts on stocks, he said. 

"Capitalism and making profits is what motivates the stock market," Dalio said. "It's not what motivates the whole economy."

In terms of the health of the economy, Dalio said the global economy is in the later stages of the cycle and at a point where central banks across the world won't be able to "ease as much."

This "cauldron" has a high likelihood of ushering in a "significant slowing" of the U.S. and global economy, leading to a recession next year, Dalio said. 

Cramer: 'I Don't Buy It'

The combination of President Donald Trump's "mercurial" personality and the possibility of a new trade deal with China makes it difficult to predict what's in store for 2020, CNBC's Jim Cramer said Tuesday. If a trade deal is announced, anyone with a negative outlook will see their positions blow up in their face, he said. 

The year is off to a strong start, with big banks as a whole reporting "good numbers" in their quarterly reports, while smaller regional banks reported earnings that were "not that bad," Cramer said.

"I'm just saying you can't make these predictions," the CNBC host said. "The predictions themselves should be held off."

Related Links:

Ray Dalio: US Relationship More Concerning To China Than Tariffs

Cleveland Fed President: No Reason To Believe Recession In Sight


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