Ray Dalio, billionaire investor and founder of Bridgewater Associates, has quoted legendary economist John Maynard Keynes to express what he feels about cash as an asset in the current economic environment.
“As John Maynard Keynes is credited with saying: “When the facts change, I change my mind. What do you do, sir?” Along these lines, the facts have changed and I’ve changed my mind about cash as an asset: I no longer think cash is trash,” Dalio said in his tweet.
As John Maynard Keynes is credited with saying: “When the facts change, I change my mind. What do you do, sir?” Along these lines, the facts have changed and I’ve changed my mind about cash as an asset: I no longer think cash is trash. (1/2)— Ray Dalio (@RayDalio) October 3, 2022
At existing interest rates and with the Fed shrinking the balance sheet, it is now about neutral—neither a very good or very bad deal, he explained adding short-term interest rate is “now about right.”
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This is a U-turn from the earlier opinion held by the “Principles” author. In May 2022, Dalio indicated he did not believe in cash. "Of course, cash is still trash," he said. "[Do] you know how fast you're losing buying power?" the investor said in an interview with CNBC at the World Economic Forum, according to a report by Markets Insider.
Benzinga's Take: The U.S. Fed has been aggressively hiking its policy rates this year to counter inflation. Since interest rates are higher, the yields on short-term treasury bills currently trend close to 3.9%. At a time when all assets including stocks, commodities and bonds are getting hammered, holding cash or investing in risk-free treasury bills may not be such a bad idea.
Price Action: The iShares Treasury Floating Rate Bond ETF TFLO has gained 0.32% since the beginning of 2022 while the WisdomTree Floating Rate Treasury Fund USFR has gained 0.22% in the same period.
Photo courtesy: World Economic Forum on Flickr
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