Over the years, Ray Dalio has established a decent reputation for himself through his long-term thesis related to the US economy. Initially, all of this was carried out purely via LinkedIn articles. But Ray Dalio has since then compiled all of them in the form of a book. Over time, the billionaire has let out multiple warnings to investors, pleading to avoid cash considering higher inflation rates.
In addition to this, Ray Dalio has warned about the further degradation of stocks. However, Ray Dalio claiming cash to be trash is not something new. He has been out and about, repeating the same statement over the years.
Why Does Ray Dalio Criticize Cash?
In his interview at the World Economic Forum, the founder of Bridgewater Associates made it pretty clear that no matter how much someone might defend cash, it is bound to remain trash. According to him, the main reason is the fact that cash plays a fundamental role in snatching away buying power from the people.
Moreover, Ray Dalio also said that cash might be trash, but equities are trashier. The best alternative for investments in comparison to these two is real-return assets. Investors are more likely to benefit from real return assets such as real estate. He believes that real estate is most likely to outperform stocks over the course of the next five years.
Furthermore, Dalio also laid down a clear explanation of the environment of negative real estate returns. It is a fact that things do not always seem to go up, and the volatility might pull them down at any time. He believes that this is how the system works. But this will not make cash superior to real estate.
Over a decade of groundbreaking equity returns, Dalio stated that the problem with the system was the crowding of investors. The last few months can be easily described as a phase of relentless selling. It is still necessary to take out a big piece before a proper market equilibrium could be achieved.
Ray Dalio was also asked if the FED would play a considerable role in order to reduce demand without crippling the economy. He replied that the FED rates would not be able to keep up with inflation in any way possible. However, the FED would ultimately fail to increase interest rates as a whole to provide the investors with moderate returns on their investments.