Renowned investor and Bridgewater Associates LP founder Ray Dalio has expressed a strong preference for cash over bonds, emphasizing the challenges faced by investors in light of ongoing efforts by global central banks to grapple with inflation. Dalio made these remarks during his appearance at the 10th Milken Institute Asia Summit in Singapore on Thursday.
“I don’t want to own debt, you know, bonds and those kinds of things,” the billionaire stated when queried about his approach to macro investing in the current economic landscape. “Temporarily right now, cash I think is good.”
The perspective of Dalio’ on the matter of cash over bonds suggests a cautious stance towards traditional debt instruments, advocating for a more liquid asset in the form of cash. He further opined on the intricate dynamics surrounding global debt burdens, cautioning that as debt assumes a larger portion of an economy, complications tend to intensify, compounded by the escalating weight of interest payments.
“We’re at that turning point of acceleration,” Dalio asserted, underscoring the critical juncture the global economy currently finds itself in.
Addressing the colossal scale of the deficit, Dalio underscored the necessity for the United States to issue a substantial volume of bonds to a diverse array of global investors. However, he highlighted the delicate balancing act required to maintain interest rates at an attractive level for creditors without pushing them to unmanageable heights.
When faced with the prospect of elevated yields due to increased selling activity by investors, Dalio posed a pivotal question: Should the central bank respond by injecting more money into the system and purchasing bonds, thereby potentially heightening inflationary pressures?
“We’re seeing that dynamic happen now,” Dalio remarked, indicating the real-time relevance of these considerations.
Expanding on his counsel, Dalio advised investors to seek out entities well-positioned to leverage emerging technologies, diversify their portfolios, and remain vigilant for potential disruptive forces. While it remains unclear whether these recommendations extend to his own aversion to bonds, it is evident that Dalio is aligning his investment strategy with his own guidance.
Rather than opting for traditional debt instruments, Dalio appears to have assessed that, at least in the current economic climate, alternatives present more favorable prospects. His prognostication indicates that, in the long run, certain bonds may not prove to be the most prudent investment.
Source: Bloomberg
