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Ray dalio billionaire investor founder of one of the largest hedge funds in the world Bridgewater managing over a hundred billion dollars he's saying that now is the time for investors to consider holding more cash this is a bit surprising because previously he said cash is trash and then sort of modified his comments saying well it's less trashy or it's other things are trashier than cash so it is a bit of a U-turn but he literally wrote some of the investment books talking about how cash performs over long terms versus different other asset classes and how they perform in different environments so he he's the author I mean I have one behind me the changing World Order he knows that inflation eats cash long term you know the purchasing power of a dollar 100 years ago would buy you 30 Hershey's Bars man I love chocolate and I'd be all over that but now that same dollar only buys you one bar you're like oh well that's okay you've seen a 90 plus decline in the purchasing power of holding cash long term the US isn't alone other countries are worth worse you know because of inflation yet here it is he's saying temporarily right now cash I think is good and the interest rates are fine I don't think it'll be sustained that way this was Ray dalio at a Milken conference in Singapore earlier this week personally I keep my cash at interactive brokers where I'm getting over 4.8 percent see the link below and so what's he looking at he's looking at the yield curve where you're getting five percent Plus on two-year paper and shorter duration and you're only getting four percent at longer dated maturities you know 10 20 30 years so what I think he's saying is that in the future the Federal Reserve is going to have to cut rates and you're not going to be getting that five percent and also by the way there's a good chance that that four percent yield on 10-year maybe 30-year paper maybe that even goes up so what is the problem here the problem here is that long dated U.S treasuries have lost a lot of money so that means the investors in this so-called safe asset have lost roughly 40 percent this is TLT elongated ETF for 20-year plus treasuries lost 40 percent over the last three years this is supposed to be a safe asset so who's getting out well you have the Federal Reserve they've been trimming their balance sheet and that this includes significant amounts of treasuries they've reduced their balance sheet you know this is year to date and you can see each month with the exception of a huge uptick during the financial crisis the mini financial crisis earlier this year with Silicon Valley Bank you know imploding where their balance sheet you know stepped up by several hundred billion you know subsequently each month pulling liquidity out of the system by about a hundred billion dollars a month then you had the banks that were buying this like Silicon Valley Bank I did a video on them you know I did a video within 24 hours of them shuddering and I said you know what I don't think they're going to be able to you know get out of this they were some of the buyers they've been burned along with many other Regional Banks you know they're wondering well should I be buying it probably not I mean I lost a lot of money on this then you have international players they're not buying you have Tre you know China looking at their U.S treasury holding now reaching a 14-year low and by the way you know who who's running the shop here we're looking at the U.S government expecting to still spend five to ten percent of GDP each year so continued record spending in the years ahead is if completely out of touch with where we are so who's going to be buying government debt well consider unrivaled investing.com for compelling investment ideas real-time portfolio updates and our exclusive Discord server available for annual subscribers by the way I'm raising the rate later this month so now is the time to lock in the favorable pricing so what did Ray dalio have to say so here's picture of Jerome Powell in the background it's very relevant because Ray dalio was saying when the interest rates go up the central bank then has to make a choice do they let them go up and have the consequences of that or do they then print and print money and buy those bonds and that has inflationary consequences we're seeing that Dynamic happen now I personally believe that the bonds longer term are not a good investment so what's he talking about he's saying the consequences of monetary tightening has not been felt yet and this is the this is the power of super investors super investors aren't looking at what's going on today they're looking out six 12 months down the line and they're saying hey what do I think the economy is going to do what do I think asset prices are going to do and he's looking at the impact of significantly higher interest rates liquidity getting pulled out by the Federal Reserve and he's saying that transmission there's a lag there it could be 12 months it can be 18 months we haven't really felt the full impact but we will and when we will when we do the Federal Reserve is going to have to choose do we sort of suck you know suck it in you know suck it up buttercup and accept the pain with higher unemployment a tougher economy or do they then print money and buy those bonds and then you have inflation rip higher and so he's saying and I think he's suggesting and he goes they always ultimately choose to print money because enduring that pain is just too painful and so what he's suggesting is and that's the reason why saying long-term bonds don't make sense especially because the US government really doesn't have its spending under control so he's expecting that you will have an uptick in inflation potentially you will also have an economic impact from the higher rates so he I think he's saying there's a lot more pain ahead and I have a couple of different perspectives on this one I I don't disagree you know when I look at my own portfolio cash in a market hedge combined are arguably my largest position over 30 percent of my portfolio so I'm well prepared and eager for you know there to be a dislocation I would personally love it that said I'm also opportunistic so when something Falls even if Ray Daley was saying hold more cash or what have you I buy if I find something compelling you know and recently as I've called out to my subscribers on unrival investing some stocks have down have dropped like 50 in a couple of weeks and I still think the you know the com it's very compelling long term so if I can pencil out 200 300 upside then I'm buying and in some cases I can pencil out even more you know regardless of if you think you know cash is preferred now it's important to recognize you do get extremes just like how you had one extreme and the extremes always surprised with how far it goes you know like holy smokes digital monkey pictures for millions of dollars like it's just the jpeg folks like yet people were doing and they're like oh we're the exclusive Club of digital monkey pictures and it's like all right you know if you want to just trade some bananas among yourselves fine um so you do get extreme froth but you also get extreme you know greed or extreme fear and we haven't really seen that yet and when that happens especially if the Federal Reserve is like I'm not sure what we do not sure if we start printing money you can be surprised with how low things can get so I think it's important to remember that mindset because we really haven't seen it for many years in terms of wow how low can things go we haven't had that period of you know will the Federal Reserve not step up for us so that is a different sort of mindset for investors to consider and I think that's part of the reason why dalio's saying effectively expect pain ahead because you know there will be consequences to what happened and long term he doesn't want to own bonds yes right now cash is temporary temporarily the place he wants to be just because you're getting a better yield on it then let's say longer dated bonds and there's a good chance those long-dated bonds those yields have to go up because the US government who's going to be buying U.S debt and as I've covered there's a lot of players that got burned over the last few years so if the US government says hey we're going to spend a lot of money and then no one's showing up to buy the debt up interest rates are moving higher and if interest rates move higher wait a second that impacts everything that impacts corporations then they go oh man I now have to refinance our debt and then when they have to refinance their debt at a much higher level because the US government doesn't have its house in order then you know they have to make choices of oh we can no longer Finance this Expansion Project we can no longer hire these roles and so then you start seeing the impact in the economy we are just I mean it's that's the reason why he's talking about the dynamic happening now we haven't felt the full impact of the monetary tightening but like any great investor he's looking six 12 months out saying this is where I think we're heading I hope this video has been helpful for you you've been watching unrivaled invest thing for more on my personal Journey go to unrivalinvesting.com thank you so much for tuning in
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