Ray Dalio Says It’s Time to Buy Stuff Amid ‘Stupid’ Bond Economics

(Bloomberg) -- Ray Dalio has long been known for his disdain of holding cash amid rising money printing and inflation, but the billionaire investor now says bonds may be a bad bet as well -- or any-U.S. dollar denominated asset for that matter.

“The economics of investing in bonds (and most financial assets) has become stupid,” he said Monday in a post on LinkedIn. “Rather than get paid less than inflation why not instead buy stuff — any stuff — that will equal inflation or better?”

Dalio thinks it may even be a good time to borrow cash to buy higher-returning non-debt investment assets in a new paradigm he said could be characterized by “shocking” tax increases and prohibitions against capital movements. With rising amounts of government debt and “classic bubble dynamics” among many different asset classes, Dalio recommends a “well-diversified” portfolio of non-debt and non-dollar assets.

“I also believe that assets in the mature developed reserve currency countries will underperform the Asian (including Chinese) emerging countries’ markets,” he wrote, adding that Chinese bond holdings by international investors are rising fast.

Other Key Quotes:

• “I believe cash is and will continue to be trash (i.e., have returns that are significantly negative relative to inflation) so it pays to a) borrow cash rather than to hold it as an asset and b) buy higher-returning, non-debt investment assets.”

• “There’s just so much money injected into the markets and the economy that the markets are like a casino with people playing with funny money.”

• “If history and logic are to be a guide, policy makers who are short of money will raise taxes and won’t like these capital movements out of debt assets and into other storehold of wealth assets and other tax domains so they could very well impose prohibitions against capital movements to other assets (e.g., gold, Bitcoin, etc.) and other locations. These tax changes could be more shocking than expected.”

• “The United States could become perceived as a place that is inhospitable to capitalism and capitalists.”

• “Because of limitations of how low interest rates can go, bond prices are close to their upper limits in price, which makes being short them a relatively low-risk bet.”

• “Watch central bankers’ actions—i.e., see if they increase their bond buying when interest rates are rising led by long-term interest rates and when the markets and economy are strong—because that action would signal that they are experiencing supply/demand problems.”

• “Also, watch the rates of change in the injections of these stimulants in relation to the effects they are having on the economy’s vigor because the more stimulants that are being applied per unit of growth, the less effective they are and the more serious the situation is.”

Read More: Ray Dalio Sees 5% of Top U.S. Stocks in Bubble Territory; Ray Dalio Sees ‘Flood of Money’ With Soaring Asset Prices

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