Ray Dalio is not a fan of the links.
The founder of Bridgewater Associates, the world’s largest hedge fund firm, on Monday denounced the “ridiculously low yields” of the bonds in a LinkedIn blog post, while urging a diversified portfolio.
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“The economy of investing in bonds (and most financial assets) has become stupid. . . Instead of charging less than inflation, why not buy things (something) that equal inflation or better? ”
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(The performance of the 10-year U.S. Treasury note TMUBMUSD10Y,
withdrew from the one-year highs on Monday, ahead of a Federal Reserve meeting.)
Dalio has also never been a fan of having cash, and he still isn’t.
I think cash is and will continue to be rubbish (i.e., it has significantly negative returns relative to inflation), so it pays to a) lend cash instead of keeping it as an asset and b) buy higher returns, non-debt investment assets, ”he wrote.
“History and logic show that central banks, in the face of the situation of imbalance between supply and demand that would lead to rising interest rates in addition to the desired in light of economic circumstances, will print the money to buy bonds and will create “yield curve controls” to put a limit on bond yields and devalue cash, ”Dalio said. “That makes the money terrible for being homeowners and great for borrowing.”
Read: Opinion: Why inflation makes long-term bond holding more risky than stock ownership
Dalio also warned that a tax on wealth in the U.S., like the one proposed by Senator Elizabeth Warren, would only lead to capital outflows and efforts to evade taxes. “The United States could be perceived as an inhospitable place for capitalism and for 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 is preferable, along with a short cash position, rather than a traditional stock / bond mix heavily skewed against the US dollar. I also believe that the assets of countries with mature reserve currencies will perform less well in Asian (including Chinese) emerging markets. I also think we need to take into account tax changes and the possibility of capital controls. ”