Billionaire Ray Dalio Shuns Bonds, Embraces Cash: What's Behind His Strategy?

Ray Dalio, the billionaire hedge fund investor and founder of Bridgewater Associates LP, has taken a bold stance against the conventional wisdom of owning bonds.

In an interview with Bloomberg during the 10th Milken Institute Asia Summit in Singapore, he declared his aversion to debt, bonds, and their ilk.

Instead, he’s betting big on something that might raise more than a few eyebrows in the current financial landscape: cold, hard cash.

Cash Is King

Dalio’s reluctance to embrace bonds underscores the growing complexity that investors face as global central banks grapple with the specter of inflation. He admitted that, for now, cash appears to be a prudent choice.

Cash-like instruments, particularly exchange-traded funds (ETFs) linked to Treasury bills or short-dated Treasury bonds, are experiencing a remarkable surge in demand. The SPDR Bloomberg 1-3 Month T-Bill ETF BIL witnessed a staggering $2 billion inflow this month, while the iShares Trust 0-3 Month Treasury Bond ETF SGOV attracted $1.7 billion.

Chart: Treasury Bills Maturing Within 6 Months Break the 5% Yield Barrier

The Turning Point

Dalio’s concerns run deeper than a mere preference for cash. When probed about addressing the world’s mounting borrowings, he issued a stark warning.

According to him, when debt becomes a significant portion of the economy, a troubling trend emerges where the situation tends to compound and accelerate. This ominous scenario is further exacerbated as interest payments burgeon.

The billionaire investor asserted that the world is at a turning point of acceleration. As the U.S. grapples with a burgeoning deficit that necessitates selling bonds to global investors, a precarious balancing act ensues. Keeping interest rates at an attractive level for creditors while not burdening the issuer with excessive rates becomes an intricate dance.

Dalio noted that when investors choose to sell, driving up yields, central banks face a critical decision—whether to print money and buy bonds, a move that can stoke inflation pressures, Bloomberg reported.

He concluded that, in his view, bonds are not a good investment in the longer term.

Read now: Cash Is King: 5 Bond ETFs Unlocking Attractive Returns In A 5% Rate World

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo: Web Summit on Flickr