Bid Declines Minor Corrections

In a LinkedIn article, Ray Dalio at Bridgewater Associates says 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 (see charts of stocks and bonds below), there is a lot of cash on the side to buy on the break, and what comes next will be most important.

Note the irony: "Big declines are minor corrections." We have not had big declines.

Note the complete silliness: "There is a lot of cash on the side to buy on the break."

Unless Dalio is purposely spouting nonsense to get his investors to stay in the markets, the world's largest hedge fund founder has no idea how markets work.

It is mathematically impossible for cash to come into the markets for the simple reason, as discussed ad nauseam, that for every buyer there is a seller. Sideline cash does not change when someone buys stocks or bonds.

Cash on the Sidelines

In the CNBC interview, Dalio also spoke of sideline cash.

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"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

Do hedge fund managers really believe this sideline cash nonsense or are they purposely feeding their clients BS?

Either way, Dalio's message appears to be "HODL equities".

Note to listeners: Despite Soaring Earnings Estimates, This Market is Extremely Expensive.

By the way, on January 23 Ray Dalio taunted everyone at Davos: "Stupid to Hold Cash"

Mike "Mish" Shedlock