Billionaire investor Ray Dalio warns that wealth taxes could force the ultra-rich to sell large portions of their holdings, a move he says could help pop an AI-fueled stock bubble. The Bridgewater Associates founder points to rising debt and warning signs he likens to the run-ups before the 2000 dot-com crash and the 1929 Wall Street crash.
Ray Dalio says a wave of forced selling by the ultra-wealthy could be the trigger that pricks the AI-driven stock bubble. The Bridgewater Associates founder argues that wealth taxes are an overlooked way this could happen.
Taxes could force the wealthy to sell
Dalio told Bloomberg in June and repeated the warning at Forbes' Global CEO Conference in Singapore. Dalio said: "You cannot spend wealth. You have to sell wealth to get money", explaining that a wealth tax would require the ultra-rich to liquidate holdings just to cover the bill.
Many states are currently considering wealth taxes, according to the report. If several large individual shareholders had to sell at once to pay such a tax, Dalio argues that selling pressure could put pressure on markets.
Fortunes tied up in shares, not cash
Most of the richest people hold only a small slice of their net worth in cash, with the bulk tied up in company shares. Elon Musk, for instance, holds less than 0.1% of his wealth in cash, illustrating how concentrated the holdings of the ultra-wealthy can be.
A large enough tax bill could push some of the biggest individual shareholders to dump stock at the same time.
Echoes of 2000 and 1929
Dalio says rising debt has pushed the AI-driven market close to the point where the bubble bursts. He also says recent months have shown the same classic bubble signs that preceded the 2000 dot-com crash and the 1929 Wall Street crash.
Source: The Daily Hodl
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