Billionaire investor and hedge fund manager Ray Dalio has reiterated his previous statement that “cash is rubbish”. The Bridgewater Associates founder called stocks “lower quality” and said he prefers “digital gold like Bitcoin” instead.
“Of course cash is still junk,” Dalio said. “Do you know how quickly cash loses its purchasing power?” The investor spoke at the CNBC squawk box during the recent World Economic Forum (WEF) meeting in Davos, Switzerland.
“When I say cash is rubbish, I mean all currencies that are related to the euro or related to the yen,” Dalio explained. “All of these currencies will fall in relation to goods and services, just as they did in the 1930s.”
Dalio is the founder of one of the world’s largest hedge fund firms, Bridgewater Associates. The company manages about $ 223 billion. In January 2020, the 72-year-old US investor advised people to diversify their portfolios. Best of all, by “getting out of the cash,” which he described as “junk” at the time.
Bitcoin as “digital gold”
In Davos, Dalio spoke on a range of topics, including equities, the global economic outlook and the US Federal Reserve’s efforts to combat inflation. He said the stock markets were too crowded and that “stocks are cheaper” compared to cash.
“Everyone is looking for stocks and everyone wants everything to rise,” the investor said. “The more people hyper it, the more it becomes a financial asset belonging to another. However, it does not work, so there will be a negative real return environment.”
For the billionaire, Bitcoin (BTC) is the preferred form of investment in a time of global economic uncertainty. His list of safe investments also includes real estate and precious metals like gold.
“I think blockchains are amazing,” Dalio explained. He highlighted the potential of cryptocurrencies as a solution to what could be a tough year for the U.S. economy. This year may be marked by high inflation and a lack of real return on investment. He continued:
“Let’s just call it digital gold. I think digital gold, a kind of bitcoin, is something that has a small advantage over gold and over other assets. “
Spotlight on bitcoin as an inflation hedge
Bitcoin is considered a gold-like value store. By 2020, many believed that BTC would evolve from a risky speculative asset to a version of gold in the crypto market. Previously, Bitcoin’s correlation to gold had risen to a record high.
However, this argument may have faltered with the massive decline in the crypto markets this year. Bloomberg data show that the correlation between BTC and gold fell to almost zero earlier in the year. As bitcoin prices fell over the following months, the price of gold continued to rise.
In April, the 50-day correlation coefficient for BTC and gold was minus 0.4. According to Bloomberg, this is the lowest reading since 2018. A reading of 1 means that the assets move in locking steps. Minus 1 means exactly the opposite.
The crypto markets are increasingly correlated with the stock market, especially in top-tier tech stocks like Apple, Amazon and Microsoft. More than $ 1.5 trillion has already disappeared from the crypto markets this year.
Dalio predicts “demand pressure”
On bonds, Dalio said: “The Federal Reserve will sell, individuals will sell, foreigners will sell, and the US government will sell because it has to finance its deficit. So there will be a supply / demand problem. That means there will be shortages. ”
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