Peak Hubris? Ray Dalio Mocks "Stupidity Of Holding Cash"

Authored by Mike Shedlock via MishTalk,

Bridgewater’s Ray Dalio says investors in cash are going to feel pretty stupid.

Speaking at Davos, the head of world’s largest hedge fund says ‘If You’re Holding Cash, You’re Going to Feel Pretty Stupid’.

“We are in this Goldilocks period right now. Inflation isn’t a problem. Growth is good, everything is pretty good with a big jolt of stimulation coming from changes in tax laws,” Dalio said, referring to the health of the U.S. market as well as what he sees as an improving global economic climate.

The prominent investor, who runs the largest hedge fund in the world with about $150 billion in assets, says a “blowoff rally”, or melt-up as some refer to it, in which investors begin to rush into equities for fear of missing out on gains, will take the Dow Jones Industrial Average DJIA, the S&P 500 index SPX, and the Nasdaq Composite Index to ever-new height.

Apparently, the blow-off top has not even started.

Worried about rising interest rates? The Fed will need to figure it out says Dalio.

Trigger Not Needed

Meanwhile, economist Robert Shiller says Stock Markets Don’t Need a ‘Trigger’ to Correct.

A pullback for this Teflon stock market could come like a thief in the night.

That’s the view of Nobel Prize-winning Yale University economics professor, Robert Shiller, who was interviewed in snowy Davos, Switzerland, on Tuesday as the World Economic Forum got underway. He was asked by CNBC if he thought any specific trigger could finally break the winning run for stocks.

Shiller vs. Dalio

It's possible that Dalio is correct. It is certain that Shiller is correct. No trigger is needed. Sentiment can change at any time without there being a trigger you can put your finger on.

Think back to the summer of 2006. People were standing in line, overnight, for the right to buy a Florida condo. A month later, the lines were gone. The trigger? There was none that anyone can point.

Sentiment changed. If you prefer to think of this way, the trigger was a change in sentiment. But there was no trigger for the sentiment change.

Dalio Arrogance

Unlike Shiller, Dalio comes across as a pompous know-it-all.

Shiller does not pretend to know the unknowable. Dalio does.

"You are going to feel stupid", is quite the arrogant thing to say.

Cash on the Sidelines

In the CNBC interview, Dalio spoke of sideline cash.

"There is a lot of cash on the sidelines. I don't mean just investor cash. I think banks have a lot of cash. Corporations have a lot of cash. So we are going to be inundated with cash."

Sideline Cash Rebuttal

Sideline Cash Reality

  1. For every equity buyer, there is a seller.

  2. Someone must hold every dollar printed 100% of the time.

  3. It is impossible for everyone to deploy their cash or for cash to flow into the market as a result of statements one and two above.

By the way...

"If you're asking whether markets are at a high end of the cycle, it certainly feels like this, bull market is long in the both of our[retail and institutional] businesses, we're seeing historically low levels of cash to assets under management."

- TD Ameritrade CEO

Dalio is clueless about how markets even work, and he is lecturing people about feeling stupid.


NuYawkFrankie Tue, 01/23/2018 - 15:56 Permalink

Dalio must be desperate to divest... and can't find any suckers

Beware of Quants & 'Masters Of The Known Universe' jumping from windows... not to mention an incoherent tub of lard running around with his hair on fire - should you be out for a late-afternoon/early-evening stroll in the vicinity of Greenwich CT

NoWayJose Tue, 01/23/2018 - 15:58 Permalink

I am all cash (and multiple stacks of phyzz).  There is nothing ‘cheap’ at the moment - at least nothing where I see more ‘upside’ than ‘downside’ risk.  Energy was cheap but not any more.  Forget stocks, bonds, utilities, etc.  CDs still pay nothing.  Foreign stocks are outrageous.  PMs are fairly priced.  It feels like 2007!

I am adding long positions in toilet paper and other non-perishable household goods.  With shrinkflation, I see a 10% upside within 12 months with little risk of downside.

NonExistentFun… Tue, 01/23/2018 - 16:10 Permalink

Really they are both correct. Dalio may be arrogant, but I know I personally sure as fuck feel stupid for having been all in cash or bearish securities for the past number of years. As much as I would like to, you always lose fighting the FED. The opportunity cost at this point that I've experienced is probably equal to any downside risk. That said, no way I will be fully invested long... Schiller has a point and still need to be ready to buy whenever sentiment does capitulate to the downside.

Snaffew Tue, 01/23/2018 - 16:21 Permalink

hey RayRay...the market has been in melt up mode since trump got elected.  they have been overpricing these tax cuts for 13 months now. cuts into another trillion dollar deficit year and rising interest rates is not a good thing, but you sure want the lemmings to think so.  I'd like to see all your trades these days---I bet they aren't buys.

NuYawkFrankie Tue, 01/23/2018 - 16:22 Permalink


Maria agrees with Ray, and says it's ALWAYS a good time to buy "shtawks"... NOW more than EVER!

Maria also says that a good diet-plan for 2018 would be to work down to no more than 20lbs of pasta a week (not including sauces add-ons etc) and then start cutting back on those breakfast desserts.

khakuda Tue, 01/23/2018 - 16:41 Permalink

Are going to feel stupid?  I think they already do.

How he can say we have had a beautiful deleveraging is beyond me.  It looks delevered because assets are inflated.  But, when asset go down, the debt stays and there is more debt than ever.

J J Pettigrew Tue, 01/23/2018 - 16:58 Permalink

Getting calls now .... young stock brokers suggesting buying the market....

young as in they have NEVER seen a down market...

This stock market couldnt stand just going to back to last years levels....

The Fed would be prompted to move to "emergency" a 20K Dow.....

We still have negative real rates.....even with the flawed CPI calculations...

Short rates still below the misleading metric that is the CPI....


Davidduke2000 Tue, 01/23/2018 - 17:16 Permalink

in a year he would send a letter to his clients begging for forgiveness for losing their money, we are seeing fund after fund closing, his would not be different.

Only idiots buy stocks at their highest level ever.