Dalio earned $2 billion by worrying about income inequality
Look no further for the Holy Grail of economic irony: Ray Dalio made an estimated $2 billion last year through his Westport hedge fund company, Bridgewater Associates, by betting against the markets — in part because he’s concerned about the effects of income inequality.
Doesn’t get any better than this, folks, whether you’re cynical about Dalio’s wealth, envious, angry or admiring. Think about it: The famously iconoclastic Greenwich billionaire is so concerned about the rich-poor divide and where it’s sending America that he figures out a way to make a fortune off it.
Correction, add to a fortune. Dalio was already pegged at $18 billion in net worth before his 2018 runup, making him No. 25 on the Forbes list of the richest Americans. The $2 billion haul for last year is the estimate of Institutional Investor, a publication that follows the hedge fund industry.
Institutional Investor has now installed Dalio as a frontrunner of its Rich List, the top earners of the industry, due out in May.
“This is the reward for the macro maven’s well-publicized bearishness and concerns about what he has described as an ever-widening wealth gap.”
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Bridgewater’s Pure Alpha fund, is flagship, turned in a 14.6-percent performance in 2018, beating the Standard & Poor’s 500 by a cool 19 percentage points, the magazine said. Another Bridgewater fund lost 6 percent last year, but who’s worried?
What does all this mean for the state of Connecticut? Bridgewater employs some 1,200 people in Westport and Stamford, and it’s safe to assume the 2018 bounty spread itself around pretty well, including to such notables as Ryan Drajewicz, who left as one of Dalio’s top lieutenants to become Gov. Ned Lamont’s chief of staff.
We don’t know the payroll figures, but get this: If we only count Dalio’s estimated $2 billion for 2018, and if he declared it as Connecticut income, he alone would pay $139.8 million just in the state income tax.
Consider, it’s a big deal that Connecticut’s coffers are $260 million per year ahead of where we thought they were in November. Dalio could be a huge part of that, although the latest run-up is mostly in withholding, not the sorts of capital gains associated with Dalio’s earnings.
And consider this: Dalio’s potential $140 million tax bill is about the size of a lot of very big debates at the state Capitol. For example, former Gov. Dannel P. Malloy and lawmakers battkled fiercely a year ago over restoring Medicare premiums for low-income people — at a cost of $130 million a year.
Dalio, who showed up at the inaugural ball for Gov. Ned Lamont, a fellow Greenwich swell, has had better years and worse years. In 2017, according to Institutional Investor, he snagged $1.3 billion for No. 4 on the Rich List.
That means he could pay $49 million more in state income taxes for 2018.
Here’s my takeaway: Clearly, income inequality matters. But it’s a national and global issue, not a state-by-state issue. Anyone who measures one state against another based on the states’ income division, a.k.a. the gini coefficient, is missing the point.
If you think equality of income makes a state better, ask yourself this: If Dalio were to exit the state like a handful of other billionaires have, would you feel better? Of course not, in part because he and his wife, Barbara, give away a lot of that dough close to home. But hey, Connecticut would instantly be a more equal state.
That’s why it’s ironic that Dalio’s views on equality help drive his fortune. And it’s a conundrum for the state, which has to figure out a way to tax him and keep him. But it’s not hypocritical for Dalio to go out and earn it.
“We have really two different economies...The top one-tenth of 1 percent of the population has a net worth that is equal to the bottom 90 percent combined,” Dalio told Charlie Rose on PBS in late 2017, as he formulated his investment strategy for 2018. “The biggest economic, social and political issue of our time is that split.”