- In today’s CEO Daily: Diane Brady talks to Bridgewater founder Ray Dalio.
- The big story: Trump urges confrontation with L.A. protestors.
- The markets: Looking up.
- Analyst notes from UBS on the impact of the L.A. riots, Goldman Sachs on U.S. debt, Pantheon Macroeconomics on China exports rebounding.
- Plus: All the news and watercooler chat from Fortune.
Good morning. This past week, I talked with Ray Dalio, the billionaire investor and founder of Bridgewater Associates, about the period of profound political and economic change we’re in right now. In his latest book, How Countries Go Broke: The Big Cycle, he writes about the confluence of forces threatening to undermine U.S. prosperity. (We also ran this excerpt on his views of AI.) Of particular concern to Dalio and others: America’s escalating national debt, which is about to hit $37 trillion and could increase by $2.4 trillion under the Republican bill now moving through Congress.
In Dalio’s view, servicing that debt squeezes out more productive spending, makes us beholden to investors who are increasingly reluctant to buy our bonds (Hello China!), and prompts actions like interest-rate hikes or currency devaluation that can harm the economy. “You get both the central government and the central bank creating debt to pay for debt and you begin a spiral,” he says. “There are no easy answers.”
He also suggests a “3% solution” that involves halving the annual deficit-to-GDP ratio to 3% by cutting spending, raising taxes, and lowering interest rates. For investors, Dalio has long preached diversification, which he defines as a portfolio of 15 uncorrelated assets. As for Fortune 500 leaders, Dalio’s advice is to “immunize yourself: What is a currency-neutral position? What is an interest rate-neutral position? Do you have secure funding? What is your flexibility for being able to source?”
“We are coming into a period of much greater risk,” adds Dalio. “I made a lot of money with these kinds of understanding for many years. I’m now at a point in time where I want to pass along knowledge that could be helpful.”
More news below.
Contact CEO Daily via Diane Brady at diane.brady@fortune.com
Top news
Trump demands arrests in Los Angeles
Late last night, the president demanded that the National Guard move more forcefully against pro-immigration protestors in L.A. “Looking really bad in L.A. BRING IN THE TROOPS!!!,” he said on Truth Social. “ARREST THE PEOPLE IN FACE MASKS, NOW!” He also added, without evidence, “Paid Insurrectionists!”
California Gov. Gavin Newsom railed against Trump for sending troops
“The federal government is moving to take over the California National Guard and deploy 2,000 soldiers. That move is purposefully inflammatory and will only escalate tensions,” he said on Facebook. “This is the wrong mission and will erode public trust.”
LAPD imposes “unlawful assembly” order on downtown L.A.
After a day of dozens of arrests as protestors closed highway 101 and burned several cars, the LAPD declared all of downtown L.A. an “unlawful assembly.” “You are to leave the Downtown Area immediately,” officials said in an X post. Lost Angeles Times live blog of the action here. Photos from the NY Post here.
The president’s phone addiction makes him vulnerable to scammers and hackers
Trump’s habit of answering his personal phone, even to unknown numbers, is a national security risk, Axios claims.
Trump says he has no desire to make up with Elon Musk
The president also told NBC there would be “very serious consequences” if Musk began backing Democratic candidates.
WPP CEO Mark Read steps down
He had been with the company for more than 30 years. Speculation about Read’s future began earlier this year when former BT boss Philip Jansen became chair of the group. The board will now begin a search for a successor.
How easy is it to wean off Chinese suppliers?
Fortune recently spoke with Michael Einhorn, the CEO of manufacturer Dealmed, who was all-in on Trump’s tariff agenda and decoupling with Chinese suppliers. Now, however, Einhorn says that “cutting out China is not an option.”
U.S.-China trade talks are happening in London today.
Palantir CEO warns of “societal upheavals” due to AI
Palantir CEO Alex Karp warned last week that unless the tech industry works “very, very hard at it,” AI will cause “deep societal upheavals.” “Those of us in tech cannot have a tin ear to what this is going to mean for the average person,” he said.
Tesla’s humanoid robot chief exits
Milan Kovac, the man spearheading Tesla’s humanoid robot program, announced on X last week that he is leaving the company. Kovac made it clear his decision is solely to spend more time with his family, but the departure is another hit to Elon Musk following his public feud with Trump.
Negative interest rates in Switzerland show deflation is still a thing
The Swiss National Bank is likely to cut its base rate to zero at its next meeting on June 19. Two-year Swiss debt is already trading at -0.2% and consumer price inflation has gone negative. The culprit: the Swiss franc, which has strengthened against the euro recently. (China has deflation, too.)
The markets
- S&P 500 futures traded up marginally this morning. Investors seem to be taking the U.S.-China trade talks—happening in London today—as a positive sign. The index itself closed above 6,000 on Friday, re-achieving a level it last saw in February. It’s up 2% YTD. The Stoxx Europe 600 and the UK’s FTSE 100 were both flat in early trading. Hong Kong’s Hang Seng closed up 1.63% this morning. South Korea’s Kospi was up 1.55%. Japan’s Nikkei 225 was up 0.92%. China’s SSE Composite was up 0.43%.
From the analysts
- UBS on the impact of the L.A. riots: “Tensions in the federal government system might lead international investors to seek a risk premium for US assets,” per Paul Donovan.
- Goldman Sachs on U.S. debt: “While investors have accepted higher yields as adequate compensation for holding US debt in recent years, fiscal sustainability concerns and a waning appetite for US assets from foreign investors could now make fiscal expansion more costly via both higher yields and a weaker Dollar,” per Isabella Rosenberg and Stuart Jenkins.
- Pantheon Macroeconomics on China exports: “China's monthly exports rebounded in May, thanks to tariff reprieve. … Exports rose 4.8% y/y in May, after climbing 8.1% y/y in April. Consensus was 6.0%,” per Kelvin Lam.
Around the watercooler
The CEO of Sweet Loren’s makes new hires sit through a personality test—they don’t get the job if they’re too corporate by Emma Burleigh
Hedge fund titan Bill Ackman shares the secret that got him through his lowest moments by Irina Ivanova
What Elon Musk’s feud with Trump means for Tesla shareholders by Shawn Tully
Two months after CoreWeave’s IPO fizzled, the AI company has surged 250% and left doubters baffled by Alexandra Sternlicht
After an American Airlines plane caught fire, the National Transportation Safety Board finds engine parts installed backward by Sasha Rogelberg
CEO Daily is compiled and edited by Joey Abrams and Jim Edwards.
