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.


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 (25)
No. 1-25

"The major networks fawn all over Dalio hoping for quotes," That is because they do not see Dalio, they see dollars. You can talk sense only if you make billions...


He's shorting Italian banks. His timing might be out but his idea sound. Not sure about his other actions and words. Watch what Bridgewater does, not what Dalio says.


An important prerequisite for the survival of any totalitarian state, is to arrange things such, that as large a share of total resources as possible, is transferred to those who unquestioningly parrot the Party Line. That way, opposition has less resources with which to oppose.

Another, equally important prerequisite, is to manufacture some form of legitimacy. For the regime itself, and for its institutions,, which the regime depend on to enrich and empower themselves.

Dalio, whatever (positive or negative) else he may be doing, represents the apex of both above regime survival strategies. He’ll reliably, and unquestioningly, parrot the silly party line that finance, even in the current fiat backstopped and empowered degenerate incarnation, is some sort of important and enabling institution for the wellbeing of anyone not directly in on the virtually unlimited graft-for-the-connected it enables. As well as the fantasy that current day “Wall Street” is somehow closer related to “free markets,” than a Soviet five-year plan was. No better way to ensure the continued survival of that nonsensical world view, than to publicly enrich those most vocally professing it, beyond the wildest dreams of onlookers.

And, since the indoctrinati can be reliably counted on to fall for the sham that those receiving their welfare check from the Fed are somehow “smarter” and “knows more about business” and “the economy,” than those receiving them from Social Services; and that picking the winning one from a box of randomly moving stocks, is somehow meaningfully different than ditto from a box of lottery numbers; he also serves as a convenient regime legitimizer. After all, he won the lottery, and collected a lot of welfare checks; so if he cheerleads for whatever financialization nonsense is currently propping up the regime and its closest supporters, financialization nonsense must be the “smart” thing to cheer for. And if I want to appear like I am “smart” too, I should also mindlessly parrot whatever drivel he is regurgitating, and uncritically cheer for the regime and its institutions. Just like he is doing.


Mish, your treatment of the "sideline cash" idea is a bit misguided for a couple reasons. First, while the nominal amount of sideline cash doesn't change when money comes "into the market," it's value in relation to the market does. Second, with fractional reserve banking and central bank fiat money, the supply of cash is constantly changing.


If I own the "market" that i bought for $1b, and Mish pays me $2b for it, sure as $2b came in, $2b went out. But now there is $2b at risk, whereas before there was only $1b. And more importantly, that $2b is now worth 1/2 as much as is was before, at least in terms of stocks.