Ray Dalio is not a fan of connections.
The founder of Bridgewater Associates, the world’s largest hedge fund, on Monday denounced the “ridiculously low yields” of bonds in a LinkedIn blog post, while calling for a diversified portfolio.
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“The economy of investing in bonds (and most financial assets) has become stupid. . . Rather than being paid less than inflation, why not buy things – anything – that are equal to inflation or better? ”
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(Yield on the 10-year US Treasury note TMUBMUSD10Y,
withdrew from the one-year highs Monday before a Federal Reserve meeting.)
Dalio has never been a fan of holding cash either – and he still isn’t.
“I think cash is and will continue to be rubbish (i.e. have significantly negative returns to inflation), so it is paid to a) borrow cash rather than hold it as an asset and b) buy in higher returns, non – debt investment assets “, he wrote.
“History and logic show that central banks, when faced with the imbalance of supply / demand that would lead to higher interest rates than desired in light of economic circumstances, will print money to buy bonds and create” “yield curve controls” to put a cap on bond yields and will devalue cash, “Dalio said.” That makes cash terribly worthwhile and great to borrow. ”
Read: Opinion: Why inflation makes long-term bondholding riskier than stockholding
Dalio also warned that a wealth tax in the United States, such as the one proposed by Senator Elizabeth Warren, will only lead to capital outflows and tax avoidance efforts. “The United States could become perceived as an inhospitable place for capitalism and capitalists,” he wrote.
So what does Dalio recommend in today’s market?
“I think a well-diversified portfolio of non-debt and non-dollar assets, along with a short cash position, is preferable to a traditional stock / bond mix, which is heavily distorted in US dollars. I also believe that assets in developed countries with mature reserve currency will perform poorly in emerging markets in Asia (including China). I also think that we should pay attention to fiscal changes and the possibility of capital control. ”