Reuters / Ruben Sprich
- Billionaire investor Ray Dalio still views cash as a bad investment even after the coronavirus sell-off.
- “I still think that cash is trash relative to other alternatives, particularly those that will retain their value or increase their value during reflationary periods,” the Bridgewater Associates boss said in a Reddit “ask me anything” session on Wednesday.
- Dalio argued that rock-bottom interest rates and mushrooming money supply will erode the value of dollars.
- Holders also risk missing out on bigger gains from other assets once the global economy starts to recover, he said.
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Ray Dalio, the billionaire boss of the world’s largest hedge fund, still views cash as a poor investment even after the novel coronavirus tanked global markets.
The Bridgewater Associates chief proclaimed that “cash is trash” in a CNBC interview in late January, arguing that a weakening dollar and mushrooming money supply would erode its value over time. Unsurprisingly, Bridgewater’s flagship fund eschewed cash in favor of betting on stocks, commodities, and other assets to rise this year.
The strategy meant it suffered a 20% loss in the first quarter, according to Bloomberg. Yet Dalio doubled down on his disdain for cash during a Reddit “ask me anything” session on Wednesday.
“I still think that cash is trash relative to other alternatives, particularly those that will retain their value or increase their value during reflationary periods,” he said, giving “gold and some stocks” as examples.
Cash is less volatile than other assets, Dalio said, but holders risk missing out once the global economy starts to recover.
“There is a costly negative return to it in relation to goods and services and other financial assets that amounts to about a couple of percent a year, which adds up,” he said.
The dollar’s value is currently being supported by immense demand amid a global shortage, Dalio said, describing the situation a “short squeeze.”
However, once the Federal Reserve creates enough greenbacks to satisfy demand — or the shortfall leads to mass defaults and bankruptcies — demand will drop and the dollar will weaken, he predicted.
The currency could also fall if bondholders, tired of surging money supply and rock-bottom interest rates, ditch dollar-denominated debt, he added.
“I believe that cash, which is non-interest-bearing money, will not be the safest asset to hold,” Dalio said.
Dalio differs significantly in his views from another billionaire investor, Warren Buffett, whose Berkshire Hathaway conglomerate had $128 billion in cash and short-term investments at last count.
“I will never risk getting caught short of cash,” Buffett said in his letter to shareholders last year.
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