Ray Dalio is not a fan of tires.
The founder of Bridgewater Associates, the world’s largest hedge fund firm, expressed the ‘ridiculously low returns’ of bonds in a LinkedIn blog post on Monday while urging a diversified portfolio.
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‘The economy of investing in bonds (and most financial assets) has become stupid. . . Instead of being paid less than inflation, you can not buy things – any goods that are equal to inflation or better? ‘
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(The yield on the ten-year-long US treasury note TMUBMUSD10Y,
On Monday withdrawn from one-year highs ahead of a meeting by the Federal Reserve.)
Dalio has also never been a fan of cash holding – and he still is not.
“I believe cash is and will remain a junk (that is, returns that are significantly negative relative to inflation). debt investment assets, ”he wrote.
‘History and logic show that central banks are facing the demand / imbalance situation that will raise interest rates to more than is desirable in the light of economic circumstances, push the money to buy bonds and’ yield rate control ‘to a set a limit on the yields of bonds and will devalue cash, ”Dalio said. “It makes cash terrible to own and great to borrow.”
Read: Advice: Why inflation makes holding bonds more risky in the long run than owning shares
Dalio also warned that a wealth tax in the US, like the one proposed by Senator Elizabeth Warren, would only lead to capital outflows and attempts to evade taxes. “The United States can be seen as a place inhospitable to capitalism and capitalists,” he wrote.
So what does Dalio recommend in today’s market?
‘I believe a well-diversified portfolio of non-debt and non-dollar assets, coupled with a short cash position, is preferable to a traditional equity / equity mix that is strongly skewed to US dollars. I also believe that assets in mature countries with reserve reserves will outperform the Asian (including Chinese) emerging market markets. I also believe that one should pay attention to tax changes and the possibility of capital controls. ”