Billionaire investor Ray Dalio says that the “cash is trash” mantra is no longer true amid significant shifts in the macroeconomic landscape.
In a new discussion at the Greenwich Economic Forum, Dalio says financial conditions have changed enough in the last several years that cash is now a “relatively attractive asset class,” at least for the time being.
“Cash now has a relatively attractive appeal. When I said ‘cash is trash,’ that got a lot of attention. But that’s when cash was nil.
Now, when you look at the expected returns for this moment, cash is a relatively attractive asset class at this moment. It’s not just attractive because it has a relatively decent – decent, not great, but decent – in other words it has something like a 1.5% real return. Not bad. And not bad in comparison to the other things, and it doesn’t have price risk. So it looks relatively attractive.”
The Bridgewater Associates founder previously touted the benefits of minimizing cash exposure in order to avoid losses stemming from rampant currency debasement.
In December of 2021, Dalio said,
“I would like to say that cash – I’ve been quoted [saying] ‘cash is trash’ – which most investors think is the safest investment is, I think, the worst investment. And that it’s important because it loses buying power.
The one thing I would say to investors is don’t judge anything in your returns or your assets in nominal terms, in terms of how many dollars you have. View it in terms of inflation-adjusted dollars.
And like so cash this year, you’ll lose 4% or 5% to inflation. So pay attention to [that], because I believe that that’ll be the worst investment.”
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