Ray Dalio Prefers Cash Over Bonds Amid Concerns About Rising Interest Rates and Inflation

Renowned billionaire investor Ray Dalio has expressed his preference for holding cash instead of bonds due to mounting concerns over rising interest rates and inflation levels.

When asked how he would deploy capital in today’s investment environment, Dalio, the founder of Bridgewater Associates, stated, “I don’t want to own debt, you know, bonds and those kinds of things.”

At the Milken Institute Asia Summit in Singapore, Dalio further explained, “Temporarily, right now, cash I think is good … and the interest rates are fine. I don’t think [it] will be sustained that way.”

These remarks come as the yield on the 30-day U.S. Treasury bill climbs above 5%, while investors can earn 4% on certificates of deposit and high-yield savings accounts.

Dalio believes that the biggest mistake made by most investors is assuming that markets that have performed well are good investments, despite being more expensive.

For new industry watchers, Dalio advises being in the right geographies, diversifying, paying attention to the implications of disruptions, and selecting asset classes that are utilizing new technologies effectively.

Addressing Rising Debt

In relation to the global debt crisis, Dalio highlights that when debt accounts for a substantial share of a country’s economy, the situation tends to compound and accelerate. This is because interest rates must be high enough to satisfy creditors without harming debtors.

According to Dalio, the real problem arises when individuals or investors do not hold the bonds, as it creates a supply-demand issue. He cautions that investors will sell their bonds if they are not receiving sufficiently high real interest rates.

When there is a sell-off in bonds, prices fall and yields rise due to their inverse relationship. As a result, borrowing costs increase, leading to inflationary pressure and presenting a challenge for central banks.

Dalio explains, “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 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.”

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Clayton Turner is a news reporter and copy editor for 24PalNews. Born and raised in Virginia, Clayton graduated from Virginia Tech’s Frank Batten School of Leadership and Public Policy and majored in journalism.

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