Speaking at the World Economic Forum in Davos, Switzerland, billionaire investor Ray Dalio said he thinks the US stock market has more room to grow but encourages investors to keep a diversified portfolio in case of a sudden crash. In terms of diversification, he recommends hard assets, such as gold, but does not advise investments in cryptocurrency assets, like Bitcoin.
The founder and co-chair of the US investment firm Bridgewater Associates believes that the strength of the US stock market at the moment presents an excellent opportunity for investors. Speaking on CNBC’s Squawk Box in Davos, Dalio said that a properly diversified portfolio was a much better idea than allocating capital to cash. This is particularly so given that he thinks there is a “good probability” of an economic downturn following the 2020 election.
Cash is Trash…
Commenting that people still held a lot of value in cash, he added:
“Cash is trash… Get out of cash.”
"Cash is trash," Ray Dalio says. https://t.co/f4lDlyixuZ
— Lisa Abramowicz (@lisaabramowicz1) January 21, 2020
Dalio believes there is money to be made from current stock market conditions, and the Federal Reserve monetary policy makes holding cash a bad idea. For him, the Fed has exhausted its playbook for stimulating the economy:
“You used to push a button and it would go up… We’re going to have larger deficits which we’re going to print money for.”
Although recommending speculation on the market, Dalio advised investors to maintain a balanced portfolio. This includes an amount of gold or, as he put it himself, “something that’s hard.”
But so Is Bitcoin?
Despite advocating for diversification in portfolios, and criticizing central banks printing money, Dalio is not a fan of Bitcoin. He said that it is “too volatile” and a project like Facebook’s Libra stands a better chance of seeing widespread adoption. He added that central banks are unlikely to hold Bitcoin in the way that they hoard gold.
Dalio clearly doesn’t subscribe to the Bitcoin as “digital gold” narrative. BeInCrypto has reported several times previously on growing Bitcoin adoption as a store value thanks to similarities with the precious metal. However, the Bridgewater Associates co-founder said the digital currency fails as both a medium of exchange and a store of wealth. It also lacks the same historical precedence of gold.
Although Dalio is right, for now, Bitcoin is still just 11 years old. It has not yet been collectively acknowledged as a store of value by the global population in the way that gold was thousands of years ago. With every new generation born, however, there exists more people who never knew a world without Bitcoin. Certainly still a highly speculative investment, as each year passes, the digital currency moves closer to being trusted globally. As trust grows, it figures that market capitalization will too. This, in turn, reduces volatility.