Ray Dalio: "Holding Cash Is Terrible... Borrow Cash to Invest in High-Yield Assets"

Chairman Ray Dalio [Photo by AP News]

[Asia Economy Reporter Park Byung-hee] Ray Dalio, founder and chairman of Bridgewater Associates, the world's largest hedge fund, wrote on his LinkedIn account on the 15th that holding cash is terrible, and borrowing cash to invest in other high-yield assets is great.

The reason Dalio expressed this view is that central banks are depreciating the value of currency by issuing large amounts of money to stimulate the economy. Dalio said cash is trash and will continue to be trash. The decline in currency value means inflation, where the value of exchanged goods rises. Therefore, Dalio pointed out that investing in U.S. Treasury bonds is also foolish. He advised not to hold cash by borrowing but to purchase investment assets other than bonds that can yield higher returns.

Dalio diagnosed that the current supply and demand of (currency) by central banks is imbalanced. This is interpreted as pointing out the situation where they are only focused on increasing money issuance. Furthermore, he explained that historically and logically, in such situations, the economy may improve, but inflation is more prominent. Central banks buy bonds to prevent interest rate hikes, and in this process, money issuance may increase again. Therefore, Dalio explained that holding cash is terrible, and borrowing cash is great. He expressed confidence that a portfolio invested in assets other than bonds or dollars while selling cash positions is desirable. He has long maintained the position that holding cash is not right when central banks continue to issue money and inflation rises.

Dalio also pointed out that too much money has flooded the market, turning it into a casino where people play with trivial money.

Dalio explained that in this situation, policymakers try to raise taxes and prevent money from flowing out of bonds. The money leaving bonds is invested in gold, Bitcoin, or flows to other regions with lower taxes, which policymakers do not want. Therefore, he pointed out that taxes could be raised more shockingly than expected.

Dalio opposed the recent bill proposed by U.S. Democratic Senator Elizabeth Warren to impose a wealth tax on the ultra-rich, saying it would cause capital flight and tax evasion. Earlier, Senator Warren proposed the Ultra Millionaire Tax Act, which imposes an annual 2% wealth tax on those with net assets exceeding $50 billion and an annual 3% tax on those with assets over $1 billion.

Dalio diagnosed that taxation on the ultra-rich could make the U.S. be perceived as hostile to capitalism and capitalists.

He also predicted that emerging Asian assets would yield better returns than developed country assets and that investors' holdings of Chinese bonds would rapidly increase.

This content was produced with the assistance of AI translation services.