Don't Worry, It's Only a "Pre-Bubble"

Ray Dalio, who embarrassed himself saying "You’re Going to Feel Pretty Stupid Holding Cash" offers more silliness.

Ray Galio, the head of the world's largest hedge fund says U.S. in a ‘Pre-Bubble Phase’ with a 70% Chance of Recession.

I think we are in a pre-bubble stage that could go into a bubble stage,” the hedge-fund manager said during a Harvard Kennedy School’s Institute of Politics on Wednesday.

Dalio’s recession comments echo remarks he has made over in a LinkedIn post, where he wrote that “the risks of a recession in the next 18-24 months are rising.”

"Stupid to Hold Cash"

Despite his recession call, Dalio is the same person who told the crowd at Davos, ‘If You’re Holding Cash, You’re Going to Feel Pretty Stupid’.

Dalio is also a believer in the sideline cash theory and that we may see a "Minor Correction".

In a LinkedIn article following the VIX-related plunge, Dalio said We’ve Just Had a Taste of What the Tightening Will Be Like.

The headline sounds bearish, but the message sure isn't, as the key paragraph explains.

"Still, these big declines are just minor corrections in the scope of things, there is a lot of cash on the side to buy on the break, and what comes next will be most important."

Inundated With Cash

In the CNBC interview, Dalio also 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

Question of the Day

Previously, I asked the question: Do hedge fund managers really believe this sideline cash nonsense, or are they purposely feeding their clients BS?

Here are the final results.

Pre-Bubble?

The major networks fawn all over Dalio hoping for quotes, and not a one them takes him to task for spouting pure nonsense or even his "stupid to hold cash" call.

Mike "Mish" Shedlock

Comments
No. 1-25
Rayner-Hilles
Rayner-Hilles

The above spam is what you get when you don't automatically put rel=nofollow on comment links.

jlsv
jlsv

Mish, how can you say the value doesn't change when it equates to a different amount of stock or bonds? the purchasing power changes. in my example, before the purchase, $2b is worthe 2x the stock, after it's worth 1x. that is the change to which i'm referring.

jlsv
jlsv

Mish, nominally, perhaps sideline cash can't flow into or out of the market. however the amount at risk changes and the value of the sideline cash can indeed change. if i own a company that I bought for $1b and you buy it from me for $2b, you can claim that technically no money came into that market, but the amount at risk on that company would have doubled and the value of the $2b in sideline cash in relation to that market would have been cut in half.

Blacklisted
Blacklisted

While the dollar will rise as the sovereign debt crisis spreads (India and other periphery countries cannot sell their debt now to extend old debt), blue chip stocks and other safe havens will increase purchasing power much more than cash. Also, if your cash is held in TBTF banks, then bail-ins will convert your cash (banks liability) to equity in bank, which you may or may not see again. A forced haircut will be the best case. Bail-in is the next bail-out in the west. Here is Canada's description of tyranny - http://www.gazette.gc.ca/rp-pr/p1/2017/2017-06-17/html/reg4-eng.html.

aqualech
aqualech

I meant to say the cash goes for Main to Wall. IOW, Dalio is trying really hard to unload his stocks without crashing their value in the process.

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