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Ray Dalio Advises Holding Cash Temporarily, Cautions Against Debt and Bonds

Billionaire investor Ray Dalio is opting for cash over bonds in the current investment environment, citing concerns about rising interest rates and inflation levels. Dalio, the founder of Bridgewater Associates, expressed his preference for cash during an appearance at the Milken Institute Asia Summit in Singapore. He noted that while cash is currently a viable option with acceptable interest rates, he doesn’t believe this situation will persist.

Dalio’s comments come as the yield on the 30-day U.S. Treasury bill has exceeded 5%, and investors can earn 4% on certificates of deposit and high-yield savings accounts.

One of Dalio’s key insights is that many investors mistakenly believe that assets that have performed well in the past are good investments, even if they have become more expensive. He advised new industry participants to focus on the right geographic regions, diversify their portfolios, consider the implications of disruptions, and select asset classes that are at the forefront of new technologies.

Regarding the global debt situation, Dalio warned that when a country’s debt reaches a significant portion of its economy, it can lead to compounding and accelerating problems. The critical issue arises when investors no longer wish to hold bonds, creating a supply-demand imbalance. If investors sell their bonds due to insufficient real interest rates, it can result in rising yields, increased borrowing costs, and inflationary pressure, posing challenges for central banks.

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