(Investor Place) “Cash is trash.” That’s from billionaire hedge fund investor, Ray Dalio, speaking at Davos yesterday.
You may recognize Dalio’s name, as he famously predicted the Global Financial Crisis in 2017. Beyond that, Dalio has a history of nailing market calls, which, in part, is why he now has $150 billion of assets under management.
Dalio now believes that we’re nearing a “paradigm shift” in the markets. According to him, we’re in the late stages of our current paradigm — marked by this epic bull we’ve been enjoying. What he believes comes next won’t be quite as rosy.
I think that it is highly likely that sometime in the next few years, 1) central banks will run out of stimulant to boost the markets and the economy when the economy is weak, and 2) there will be an enormous amount of debt and non-debt liabilities (e.g., pension and healthcare) that will increasingly be coming due and won’t be able to be funded with assets.
Many times, the major market changes take far longer to play out than anticipated.
Is this bull market going to end? Yes, one day it will. And will whatever comes next probably be painful for investors who aren’t prepared? Most likely, yes.
But based upon the economic and market data we have today, that market shift is not imminent.
Here’s Dalio’s blunt summation of this point:
Cash is trash … Get out of cash … What you have to do is have a well-diversified portfolio. You have to be global, and you have to have balance …
Now, Dalio isn’t the only headline-name investor who believes it’s not time to get out of stocks.
Yesterday, billionaire investor Paul Tudor Jones said that our current stock market is reminiscent of the late-stage bull market of 1999.
When asked if that meant he believes investors should step aside to avoid a blow-up like what happened in March of 2000, Jones said:
Not really. The train has got a long, long way to go if you think about it.