Billionaire Ray Dalio Calls For "Minor Correction": HODL Equities?

Mish

Billionaire Ray Dalio, who founded the world’s largest hedge fund at Bridgewater Associates, sees a "minor correction."

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.

"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

Comments (17)
No. 1-17
Jesse Liversore
Jesse Liversore

Didn't he just tell us 2 wks ago in Davos that it was stupid to HODL cash. I don't feel that stupid--what are you going to buy the break with anyway.

killben
killben

May be he is implying that the central banksters are going to come out of the woodwork soon. After all why worry when the saviours of this world are there hovering around.

Bam_Man
Bam_Man

"Paging Mr. Bullard. Mr. Bullard, please pick up the white courtesy phone!"

Carl_R
Carl_R

Regarding the "sideline cash" question, keep in mind that not all money is prepared to re-enter the market. The market rises when the money interested in entering the market is more "eager" than the money interested in exiting, and falls when the reverse is true. To me, then, the term "sideline cash" refers not to total cash in the economy, but solely the portion interested in re-entering the market in the near future. Yes, when some sells, someone else buys, and the total of all cash not in the market remains the same, however, that cash from selling might or might not be interested in re-entering the market.

xil
xil

why do i feel like regardless of what i do, i'm going to be left hodling the bag?

Mike Mish Shedlock
Mike Mish Shedlock

Editor

(deleted message)

The comment is nonsense. It is mathematically impossible for cash to come into the market. Disputing the math is absurd. Moreover, sideline cash is a function of printing and fractional reserve lending. It's always rising over the long haul. We have crashes anyway.

jaykey
jaykey

"for every buyer there is a seller. Sideline cash does not change" - sorry, but this is not correct. The number of POTENTIAL buyers and sellers is not the same, and because of this the SETTLED price may go higher (if number of buyers greater than number of sellers) or lower (otherwise). Think about it as an auction - if there are many wanna-be buyers ("sitting on a side" with cash) and just a few sellers - the price will go higher and higher until only one buyer left (for each seller). Then the cash changes hands, and indeed the mathematical amount of cash is not changed DURING THE TRANSACTION. However, the SETTLED PRICE depends on a ratio between wanna-be buyers and sellers. In a bull market the number of potential buyers exceeds the number of sellers, and the stock prices go up. So, instead of saying about "sideline cash" one should say about "sideline buyers", or that the number of potential buyers exceeds the number of potential sellers.

CzarChasm-Reigns
CzarChasm-Reigns

So no trading halts for this "minor correction"?

Blacklisted
Blacklisted

Billionaire hedge fund managers will say almost as much as gold miners/bugs to keep clients and their beliefs in tact.

A 15-20% pullback may seem minor in the crypto world, but it will be more than adequate to scare many stock speculators out at just the wrong time.

Even though most retail investors have been on the sidelines since 2008, this misses the point behind the bull market in stocks. The bull market in stocks, which will resume by mid-March, is all about the transition from public to private, and from the periphery to the core. This trend will continue for the simple fact govt's never proactively reform, interest rates will rise with increased govt default risk, and the periphery suffers before the core. This is also why cryptos will continue their rise and adoption.

AV1
AV1

I find it very entertaining, that this entire blog is just one BIG financial troll 😂

ElPoquitoGrande
ElPoquitoGrande

"Sideline cash does not change when someone buys stocks or bonds." Woudn't that mean market cap never changes?

jlsv
jlsv

to say that money never comes "into" the market is mostly just semantics. if I have $1b in stocks and Mish buys them from me for $2b, sure, he can say that money never came "into" the market b/c as his $2b came in, I took it out. But a lot would have changed. First, there would be $2b at risk, where there used to be $1b. Second, although there would still be $2b on the "sidelines," it would only be hald as much as it used to be relative to the portfolio just bought. It used to be 2x, now it's only 1x. So you can say money on net didn't some into the market, but a lot can change.

jlsv
jlsv

"hald" should have been "half"

bIlluminati
bIlluminati

Bitcoin is down by 58.1% from its peak, so there certainly is a miner correction. Wait ... minor? Never mind.


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