Ray Dalio, founder and co-chief investment officer of Bridgewater Associates (BWB), the world’s biggest hedge-fund manager, is talking cash again.
After famously saying that cash is trash, he signaled a different outlook in October 2022 in a tweet.
"As John Maynard Keynes is credited with saying: 'When the facts change, I change my mind. What do you do, sir?' Along these lines, the facts have changed and I’ve changed my mind about cash as an asset: I no longer think cash is trash," he wrote.
Dalio doubled down on this outlook Feb. 2 in a CNBC interview that was posted to Twitter.
Dalio Explains His Reasoning
First, he set up how he sees the current environment.
"So we're now in a classic spot where we've got a relatively high real interest rate. Real interest rates went from minus 175 basis points to plus 175 basis points. You've got a cash rate that's relatively high," he said. "Cash used to be trashy. Cash is pretty attractive now. You've got an inverted yield. Cash was negative. One and a half, two percent real rates, terrible."
Next, Dalio said cash is now a desirable place to be.
"Now, cash is relatively attractive. It's attractive in relation to bonds, it's actually attractive in relation to stocks."
Then, Dalio expanded on his reasoning.
"You have the classic movement, of course, as rates go up and money becomes tight, you lose the parts of the economy, the parts of the market that are the bubble parts, that needed the cash flow," he said.
"So you're seeing it reflected in not only long duration stocks, those that didn't have cash," Dalio continued. "So you see the tech stocks come down, all of that come down, you see private equity, you see venture capital, because they needed cash. All of that comes down."
