Cash is not trash – Ray Dalio

US billionaire Ray Dalio has changed his mind about cash as an asset, saying, “I no longer think cash is trash”.

Ray Dalio is one of the best-known investors and manages the biggest hedge fund in the world – Bridgewater Associates – with a value of $23.6 billion.

Earlier this year, Dalio said the high interest rate environment means that “cash is trash” because people holding cash are losing buying power.

He further warned that investors would not be better off holding stocks and bonds as “equities are trashier”.

Instead of holding cash or equities, Dalio advised investors to put their money into “Real” assets like real estate.

However, Dalio has now made a U-turn from his previous view on cash, saying the facts have changed.

“The facts have changed, and I’ve changed my mind about cash as an asset: I no longer think cash is trash,” Dalio said.

He explained that due to the levels of existing interest rates and the Fed’s shrinking of the balance sheet, cash “is now about neutral” and “neither a very good nor very bad deal”.

Dalio’s statement came after the US Federal Reserve aggressively increased interest rates to fight inflation.

The higher interest rates resulted in better yields on short-term treasury bills, which currently trend close to 3.9%.

In comparison, stocks, commodities, and bonds are under severe pressure. It makes keeping cash in risk-free treasury bills more attractive.