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Honestly, I think this is the answer. Even though inflation rate is the same for everyone, if you were to manage billions of dollars, then indeed inflation would eat away at millions of dollars rather quickly. If, however, you're not a millionaire/billionaire, the absolute amount lost is quite small over the short/medium term.
not included in the inflation erosion figure is the value of the embedded optionality of having liquidity, keeping some money out protected from decline while also able to capitalize on crashes and realize the theoretical returns that other investors cannot obtain from the bottom. It is a real option although difficult to value.
@@aliasgharkhoyee8911 thing is no body can predict the market and when holding cash is safer than equities or bonds. So it's better to plan long term than short term
Dalio is referring to the longer outlook. If asset prices rise, and they will, then you dont loose much on cash in buying power. But in relation to assets.
To be fair to Dalio, you should look at the corrections that happened after the heavy money printing. SnP 500 saw a correction of 9% during September and another correction of 7% during October and during both of those corrections long-bond yields did not move much. So, it is not only Dalio, I am hearing many professional investors be worried about the level of equity hedge that treasury bonds can provide from here onwards. Anyway, thanks for the video and your honest views. That is what I value the most.
Hi Garry, yields not moving much is a hedge. Ideally you'd like yield to fall. But the point is that bonds held their value as equity fell, and it's a hedge you are paid (not much!) to hold rather than a hedge you pay for, which is what a put option would be. Just plot TLT vs SPY daily returns and you'll see whether bonds are truly acting as a hedge or not. Thanks, Ramin.
With all this "printing' I've been quite worried. However now that I've considered the points made in this video, I'm confidence in the dollar again! Very well done. Thank you!
As usual , a great video backed by data and a good sense of rationality. always enjoying your videos and must say that unfortunately I learn from them much more about macro economics than I get to learn in my university bachelor studies of economics
I bought an old house 15 years ago cost me 50 thousand dollars I am selling the same house now for 240 thousand dollars and I got very good offer Your dollars value is becoming worthless very fast
I've heard Dalio talk about this many times. He actually does refer to the significant effects of inflation on cash. Dalio also said that are risky in an M3 environment. I would not be surprised if he was a bit early when it comes to the dollar losing its status as a reserve currency.
I agree, I think Ray Dalio likely referred to a long term. But, if you think that Ray Dalio is 71, doesn't look that wise to refer at a very long investment horizon.
@@FaLecWorld what he means is that you don't get any return nowadays from cash. And he is right. The guy speaking in this video is wrong. Taking inflation into mind you don't earn money by investing in CDs and bonds.
Hi @@kirilmihaylov1934 the point is that you take very little _risk_ when holding cash. The loss from inflation in a whole year is equivalent to a _one day move_ in equity markets. So saying cash is risky is just wrong. Thanks, Ramin
informative and interesting. I would say cash gives you optionality in 'near terms' for say 6/12 months, to deal with loss of jobs or dry power to use for investing - (this is my own custom/evolving belief at my current stage in life).
Dear Ramin, i love your content and i watch every of your UA-cam Videos. I usually wouldn't comment on your videos since i don't think i have any valuable insight to add. But for this topic i would like to maybe give some more perspective. As some other people have already commented, one might want to differentiate between a typical retail investor with a limited investment time frame and predictable consumption behavoir on the one hand, and a multimillion dollar, high net worth individual who has complex payment obligations in different currencies. For example: if i am a typical retail investor without large assets and only one income stream from my employer and my biggest payment obligations might be to pay some inheritance tax in the near future because i will inherit some real estate, then "cash is not trash" since i will only have some payment obligation in my own currency during the next 1-5 years. Any currency devaluation / Inflation will night affect me in any major way, besides that my cost of living might go up a little. So in this case cash is not trash. On the contrary it is still important to be prepared for any event where my income stream decreases and i am depended on my savings. If, on the other hand, i have a business in some emerging markets and i might have to recapitalize the business in the home currency and also i have a very long time horizon since i want to give away a lot of wealth to my children or wife or foundation when i am gone, then cash denominated in US Dollar might very well be "trash". First because of all the Money printing there might be a sudden devaluation of the Dollar against other currencies, in wich i might have to make some sudden payments. And secoundly because there is a chance that a lot of developed markets are going to experience a higher inflation in the future. Probably not hyperinflation. But it might very well be 3 - 4% for a longer period of time. If your time horizon is longer then 1 Generation this money devaluation very well might be called a "trash-asset" even though such a claim might still be a little exaggerated. I am still very thankful for your insights and explanations Ramin. I just wanted to point out that cash might be trash for some people (high net worth individuals) but i might be very useful for the typical investor like you and me. So there is no right or wrong in my opinion. Thanks again. Take Care
Hi Robert thank you for your thoughtful comment. I actually make that precise point at the very beginning of the video and reiterate it nine minutes into the video. Even ultra high net worth individuals have large cash positions. I know because some of them talk to me! But as I say at the very beginning of the video the overwhelming evidence is that over the long term cash underperforms government bonds which underperform equity. Thanks, Ramin
Inflation hasn't been so low since the last recession if we're talking about the US, UK & EU. Not a bad idea to hold cash this year seeing how equity P/E values have gotten out of control recently. This is honestly the year in which you'll lose the least amount of buying power to inflation if you hold cash. The CAPE ratio for US equity is almost nearing pre-dotcom bubble levels. Equity in other markets isn't as expensive, but it's going to take considerably longer for those markets to actually recover, which is probably why everyone's ok with paying a premium for US equity.
Thanks for this - very useful. I reckon that holding cash that loses 1% p.a. in real terms rather than something riskier that breaks even is no different to choosing an investment that returns 4% p.a. over a riskier investment that yields 5% p.a. average. In both cases you're turning down 1% in expected return for less risk.
Hi Tom, I see your point, but I talk to some clients that are retired and don't want or need to take much risk. Others need their money for a known large expense in a few years such as a house purchase so can't take much volatility risk. But if they've heard that cash is risky they might be put off this as a potential choice. Thanks, Ramin.
@@Jay-xr3sb Did you use selective hearing to ignore the part where he says "this is not a recommendation"? Threatening reporting him to the FCA haha! Take a deep breath and calm down.
@@Jay-xr3sb virtually every video is about investing in stocks for the long term. This is a specific video dealing with the subject matter. As you know.
I haven’t seen Ray Dalio’s video but I agree with your points. Cash is a terrible long term investment but worth keeping a SMALL amount in your portfolio as a WEAK hedge and for LIQUIDITY purposes. It’s also worth pointing out that holding cash in your investment platform usually yields a low interest rate - so do check with your platform.
Thanks, and right on target! As the March plunge showed, there are few if any safe heavens other than cash, as commodities and fixed instruments all dropped in tandem with equities. You can't buy groceries with gold bullion, and with savings rates no more than 5% in normal times (in most countries), bulking up on cash is critical for the average working stiff just to survive the next 'Covid' crisis.
Putting money in cash absolutely makes sense right now. Dalio's alternatives are too risky for main street investors. Taking a small loss on cash due to inflation until bond yields become more attractive is a safe and prudent way to protect ones self in an overheated stock market with limited options.
Now I totally agree with you on that one. He and others use the line that cash deflates over time care of irresponsible central governments which it does, but they conveniently skirt round the simple matter of buying power and the opportunity that a crisis might present when cash is king. Nothing is ever said or done without a purpose :).
@@Jay-xr3sb I hear this 'if you can time the market' counter argument so often. It is more a matter of running a balanced strategy and that means holding cash. It really depends on an understanding and knowledge of the markets. The fall in the spring was fairly predictable for several reasons none of which is rocket science. I happen to believe the FTSE could well test the levels seen in March. I could be wrong, I could be right, but I hate to waste a potential opportunity.
@@Jay-xr3sb Yes indeed, but I chose my words carefully by 'running a balanced strategy and that means holding cash'. Not 100% of course, but a stash depending on the strategy. So, perhaps a combined policy of investing and trading opportunities would be a better way of putting it, but certainly not 100% invested :)
The bond rates have slumped, bank interest rates aren't keeping up with inflation so in order for people to gain a return on their investments they have poured into the stock market. In years past you could earn 5% interest on $1 million in bonds, giving you $50,000 per year. Today you would have to invest $5 million to make that $50,000. People in the US are forced into this situation to try and return as much as they can to cover their retirement.
Ray Dalio is absolutely correct, cash is not safe in this credit dominant economy...you can't look at the historic data to foresee what's to come in the future. That's like looking at the lagging indicators and saying, look we were safe in the past, so we should be safe in the future.
I do not know in which context he was saying that. But many smart investors prepare the cash so they could buy when there is “blood on the street”. Not to be keep into saving where your cash will be eaen by inflation day by day.
Hi Adi, in the video I say that cash is not a place to put money over the long term. But with inflation at current levels the loss you make from inflation in one year on cash is equivalent to a typical one-day move in equity markets. Thanks, Ramin.
I respect Dalio’s perspective, but I always remember that he blew up his first hedge fund predicting a depression after the Volcker hikes. You can be a smart guy, read the tape properly, but still get ruined by outside factors you didn’t account for (computerization and internet in his case).
That's why active managers underperform passive funds. Only the ones that do well hit the headlines you don't hear about the the other million that crashed and burned.
Apologies if you have already covered this, I have only recently discovered your channel. My query is how does Ray Dalio's current negative view on bonds tie in with the Bridgewater risk parity theory, the so called All Weather Portfolio? 'All Weather' is well known for holding a large percentage of bonds in proportion to equities in an attempt to reduce volatility and 'weather' all environments. The four economic seasons as I have heard it described. Would be interested in your thoughts on this.
Appreciate the sober analysis. Whether a person agrees or not, they can value that your not exaggerating your case. Follow the data, I agree with that approach.
Thank you for interesting overview of subject. The only thing I've found strange is this velocity of money argument. Chart Y-Axis (15:00 time) is defined as Velocity=Nominal GDP/M2 and its obviously sharply decreasing in the nearest past because of heavy money printing. Although arguments about reduction of spedning in 2020 covid era is probably valid chart doesnt anyhow support or prove this idea, this effect is totaly unseen because of sharp M2 increase.
Please do the same for Harry Dent and Peter Shiff..They see opposite...deflation by Dent vs Inflation by Shiff. Dent claims huge adjustment in stocks up to 40% plus real estate...within 2021 or close to that year.. Jerzy
Dear Ramin, Great video. Appreciated. You are quite right. Cash is the only vehicle to enable access to buy assets. The unsafe parts of cash are inflation and the security of the bank it is in. The bank could be robbed or could go bust. This bank risk is increasingly significant now and could be, and probably is, more risky than a government bond. Remember Northern Rock? Lemans? I am sure subscribers would welcome a comment from Pension Craft on bank risk of holding cash.
In the UK, £85k of your bank deposits is protected per bank. The exception is the NS&I government run bank which I believe provides £1 million in protection.
@@stevo728822 valuable feedback. I wonder how much funding the FSCS has in it, to cover insuring larger or numerous bank failures. Perhaps Pension Craft has a view on the value of FSCS protection risk.
Banks don't keep much physical cash on premises. That's why you have to give notice if you require to take a large amount of cash out. If there physical cash on premises gets low they have the central bank deliver more. Most money is digital now so banks don't need to hold alot of cash on sight.
Does it make sense to treat the dollar (that pays wages) generated by the government and the dollar (repo and bank assets) generated by banks as 2 different currencies? And if so how would you define the exchange rate (what is the resistance to convert one into another)?
I agree with Dalio. But I don't think we have seen the monetary inflation yet. Price hikes caused by supply shocks yes. But we are entering a liquidity credit crisis. It's best not to have debt, but cash to allocate after the crash-- and good cyber security to protect your identity and assets.
In a recession/depression Cash is king!That’s when all the good deals comes out for ordinary people. If you don’t have access to cash you won’t be able to take advantage of the situation. I guess that’s what he wants so he doesn’t any get competition in buying cheap assets^^ When everything is great and inflation keeps cash worthless it’s better to let the asset inflation help you grow your wealth but in a recession (war), dry powder is the best.
I agree with you, and US government bonds or highly rated corporate bonds would be my choice. I would avoid European Union bonds. I like cash. It's another asset class, and I keep gold in lieu of cash because it can be converted to dollars at a coin shop or online. There is a large demand for dollars throughout the world because local currencies are usually not stable, or can be cancelled. So we may be confronting deflation in our future rather than inflation. Thanks.
He's probably referring to the bank bail-in laws being pushed by the IMF. This is where banks can seize the money in your savings account and convert it into bank shares during a financial crisis (the Bank of Cyprus did this in 2013). The idea is to get the consumer to take the hit instead of the government. A lot of banks have bail-in provisions now. It pays the read the fine print.
Hi David the idea from the IMF is that depositors should be protected by first hitting equity holders, the subordinated bond holders, then other bond holders and depositors last. That way depositors would likely recover a large proportion of their capital in the event of bank failure. "Bail-in must respect the order of priorities of claims established in a given jurisdiction for bank liquidation, meaning that typically, equity must bear losses first, followed by subordinated debt, with deposits being the last to absorb losses in jurisdictions that provide for depositor preference" on page 29 here www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2018/02/09/Trade-offs-in-Bank-Resolution-45127 Thanks, Ramin.
The return from cash is negative in the long term. Central banks are squeezing risk taking, return capital into equities and this will likely continue to be the dominant trend with the path of least resistance.
Now we see that inflation has in fact increased significantly, so does that mean money printing - and other factors - had a delayed effect? on inflation
Dalio is focused on USD reference currency status wrt historical hegemonic currency crashes. The USD is rhyming with history IMHO. The currency counterfeiting QE has delayed what is likely to happen near-term. My money is with Dalio and my cash is transforming into "other than USD". LIKED the video as a great debate-starter!
One quarter of the USD in existence were created in 2020 - so our purchasing power has gone down by 1/4 unless you had investments that made 25pc plus taxes right? Is comparing cash to CPI inflation valid when you look at what's happening to other asset prices - tech stocks, property etc as a consequence of QE?
Great video as usual Ramin. On a linked topic isn’t the case that if you have cash now there is no alternative but the stock market? Bond prices have risen since interest rates are near zero. Hence the upside on Bonds is gone as rates can not go any lower. So if you allocate from cash to Bonds today specially on those long term maturities Bond prices are bound to fall if/when interest rises again. So at the place we encounter ourselves today Bonds cannot work as a hedge for the stock market. Hence TINA!
If I am not mistaken Ramin is suggesting that cash might be an asset class that is not necessarily bad for the short term. That implies stock market opportunities. Now I am not sure if that is for the whole market or market misallocation of individual shares. Any thoughts? One question. Are stocks expensive? The buffet indicator and PE or CAPE ratio say yes. In the contrary, the interest rates say no. Even in 2013 or 2018 we had low interest rates.... so good times and bad times share the same interest rates (small difference). Finally, is a gold miner share a viable option now? Sorry the more I read books and watch UA-cam .... the more open questions I get.
I really appreciate the quality of information provided on this series of videos....One question relates to a fairly rapid devaluation of cash! You seem to assume in this video that Government has the ability to actually control inflation in the shorter term...Market forces are strong maybe too strong for gov't tools?? and risks to Govs efforts are to drive economy into a deep recession....Please comment on the Gov'ts actual ability to control inflation?
100% The video is missing the "extremistant" component Taleb talks about. The point here is that: ok, hiperinflation may be not very likely and in 99.9% (of course, I have no clue of the real probability) of the cases cash will be safe; however, if hiperinflation takes place (and it may totally happen) then cash is worth nothing in matter of seconds. All graph that look super-stable you should suspect there is something hidden; perhaps risk is just being accumulating and accumulating in non-visible manner until it blows up. For instance, the Swiss monetary policy was clear in having a quite stable exchange rate with euro, and they were managing that quite successfully (apparently) until they were unable to do so, and all of a sudden, in Jan2015, the extremely stable exchange rate raised dramatically by more than 20% in minutes (in fact, there are plenty of examples in monetary exchange rates). Every time I see a superstable graph based on historical data, I get scared hidden risks may blow up that stability in an unimaginable magnitude in a matter of seconds. Final note: I obviously have no clue what will happen, but at least I know I don't know xD
Great video Ramin, I agree. Although my USDs are losing value as Inflation hits (for the goods I buy), I'm betting that the USD rises upon our next correction and asset bubbles will pop in early 2022 triggered by the Chinese real estate market collapse due to bond defaults. I'm also betting that our next global recession will have other countries buy USDs as a safe haven as assets lose value. After a correction I would go back to a portfolio approach. I'm not a believer in Bitcoin and cryptos, it's 'decentralized transaction' efficiency, or it's future. We might see ESG lawsuits, Carbon taxes, and Miner/Wallet Hackers spoil that pudding soon.
It's amazing how many of the commentors below simply didn't understand Ramin's point: cash is a safe haven over a short period - eg a year or so. But he clearly states 'as long as you don't leave it there for long'. If you'd moved into cash at the end of 2007 and stayed there for just over a year, you'd have lost only 1% of its convertible value when you decided to move back into equities in early 2009. Sounds pretty damned safe to me! Instead we get a bunch of cowboys below baying about cash is trash, Ramin is stupid etc. The problem with all of them is: they don't have even 1 or 2% of the knowledge of finance, investment and data analysis that Ramin has - and don't realise it. It's called Dunning Kruger.
Liked your graphs on the dollar , euro, and yen on tradings. really puts things in perspective. I can't believe china is so weak there with all the ccp backed shipping they do. so this video really seems to show why the sky is not falling for the dollar. but also shows why some whales are going into bitcoin instead of sitting on cash or bonds (long term). you do a good job at explaining things.
Hi @@kirilmihaylov1934 Dalio is wrong about the risk of cash. It is very, very low. The loss due to inflation _in one year_ is smaller than a typical _one-day_ move in the equity market. Thanks, Ramin.
I would argue that CPI does not effectively address the deflationary effects of technology, globalisation. If you look at the CPI graph, its no surprise inflation became very stable after the 1990s when the world started taking advantage of the internet to digitify and producing goods in lower wage countries.
Buying power of currencies should be going up. If without money printing a dollar should be able to buy goods worth 105 after one year, but it can only buy 99 cents of goods, the inflation is 6%, not 1%, because fixed assets or gold will go up by about 6% in dollar terms
I think you are missing cicles. What are the conditions for the change in cicle? what are the currency cicle? what are the limits of debt? data is the limit? or something directly related to human nature?
Hi @linus b the Fed's goal is to aim for a long-run average inflation rate of 2% i.e. small, positive inflation. If you plot the average P/E vs inflation that also results in the best outcome for equity. Thanks, Ramin.
I’m not convinced the CPI is an accurate indicator of inflation. Sure, everyone should have some cash / government bonds for a rainy day or to buy the dip, but things that you really want to buy are getting much more expensive e.g. housing, health insurance, education, high quality stocks, etc. I think Dalio’s point is that the traditional 60-40 portfolio needs a rethink.
10:55: Best inflation hedge is stocks 11:50: No hyperinflation yet 12:50: Amount of wealth lost due to CPI rise = 1 day move in stock market 14:01 chart shows how QE money ends up in stocks and real estate Massive QE has still not produce Inflation DUE cuz velocity of money has been falling since 2000 A better pre-warning indictor to Hyperinflation is rising employment after massive QE Centralbank shd be politically independent of politics and do what's right not what's politically expedient Tarrifs are inflationary 20:30: Alternatives to Govt bonds as a safe haven: EM bonds, Bond-like-equity ( high div stocks) , Gold Au fall when interest rates rise Cash is safe, but dont park it there too long
I’m glad I found your channel sir. You are sensible and knowledgeable. The kind of guy I like to listen too. Thanks for the schooling. Subscribed. Oh, what’s your take on crypto currency’s? Particularly bitcoin. Thanks.
Hi @Jim Wells thank you for subscribing. I don't invest in bitcoin myself but I've made a few videos about it and I have interviewed a couple of different people to try and represent some alternative views on my channel. The last non interview video I did is here ua-cam.com/video/Rq25M3Z_9jI/v-deo.html
Dalio is big on gold. Emerging markets and is interested in small allocation in digital assets. Bonds are probably not the best like they used to be. Gold is slightly better now. Thinking about compounding interest it’s gone from bonds. Gold has more upside to keep up with infation long term. Perhaps bitcoin will soon
Who to believe, billionaire Ray Dalio or this obscure author? I'm posting on this author's UA-cam channel so my money is on this guy! Just to point out something a bit unclear: the correlation between stocks and bonds is not fixed, but varies. It varies by 'regime'. (internet) "Some periods of history might point to the conclusion that the correlation between the returns on stocks and bonds is positive, others that it is negative. These variations can be a signal of fundamental change in the broader market environment." For example, correlation between US bonds and stocks was negative in the 1960s, positive from 1980-1998, then negative between 1998 to about the present. Caveat emptor and good luck in your efficient portfolio!
I think what Dalio was trying to say is because of this specific financial crisis $ are a bad investment. I agree. This not a recession or a depression this time it is a structural crisis. Because we have refused to pay the cost and feel the pain of repairing financial disasters and mismanagement of the past. We have neglected the up keep our financial house so long the foundation is brittle and cracked. Every support beam is rotted. 💵 being the bricks of our financial house. The bricks are coming down soon there is beams left to support the weight. No foundation to affix them to. When a strong storm wind comes and they always come. The bricks come down.
Dalio seems to take some things for granted. In some ways, he seems to believe that the US will collapse. The UK stock market is up, after it stopped being the world reserve 75 years later.
The UK market has recovered slightly but nowhere near to levels pre-March 2020. I'm in and out of some defensive stocks, for opportunist profits, but I can only see a rocky road ahead for the FTSE - with all the Brexit uncertainty. It would be fair to say that now is the time to sit on some cash and follow the UK market up and down.
Hi @Johny JSL if inflation is greater, on average, than the breakeven rate over the life of an inflation-linked bond then it will do better than a nominal government bond. At the moment inflation is well below the breakeven rate in the US and the UK (for e.g. ten year inflation linked bonds). So inflation would have to be well above the breakeven to come out on top. Nobody knows what's going to happen to inflation but that's what it would take for inflation-linked bonds to be a better investment. Thanks, Ramin.
Hi Tom that's going to be a long way off so a lot can happen in the decades ahead before the dollar is replaced. My guess would be that there'll be a gradual shift to the renminbi, particularly in Asian countries and APAC countries with the strongest China trade links. The Americas might stick with the US dollar even while this transition is happening in the East. The euro probably makes sense for a lot of Europe and parts of Africa. But I suspect that trade will play a part too. Thanks, Ramin.
You can also lose 20-30% value of stocks when a crash happens. My Exxon shares dropped 40% this year. That is a bad example maybe, but this kind of drop is not likely with Dollar or Euro
embedded optionality is the biggest argument for cash. It's a real option that doesn't show up in the yield. That's one place where CAPM or other theories gets it wrong.
@@oaciftci when you compare two evils, the lesser would be preferable of course, however when you diversify you need assets that will go up to cover for losses, cash does not go up in value, in the past bonds provided little grow, but those days are gone
Hi @Václav Pekař Everyone's experience of inflation will be different as our consumption baskets are different. CPI is a typical consumption basket. That'll never be perfect, but it's a good way to get a handle on increases in the cost of living. Thanks, Ramin.
Hi @Max Soi you'll notice I mention some of those examples in my video on hyperinflation twitter.com/PensionCraft/status/1353641967423528966 In developed markets cash is extremely unlikely to crash. Thanks, Ramin.
Well of course Dalio's "cash is trash" statement did not mean that everyone should take every fiat currency they own and put it into a investment vehicle. But for an average joe or jane who thinks they are being financially responsible simply by saving their income in a bank needs to know that that strategy just isn't going to work out for them in the long run. Cash is a medium of exchange but not a store of value, most people who aren't financially educated do not know this concept.
I saw the thing!!!! Let’s say you lose 2% a year in cash for sure (I think the number he and others use).... hmmmm if that 2% is correct and certain- that means RISK IS ZERO- the SD of returns is risk!!! Depending on expected returns of other assets AND THEIR SDs, it may actually be the best option! If this is a bubble and it bursts a certain 2% loss looks great!!! I’m sure if Dalio was confronted with this simple financial fact he would say he misspoke ... or that it was a long run comment.
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Antonmursid✌🙏🙏🙏🙏🙏💞🙏
Cash is Trash if you are a millionaire, but if you are poor Cash Is King.
Honestly, I think this is the answer. Even though inflation rate is the same for everyone, if you were to manage billions of dollars, then indeed inflation would eat away at millions of dollars rather quickly. If, however, you're not a millionaire/billionaire, the absolute amount lost is quite small over the short/medium term.
true
@@supernumex yes and he is right.
Good point, the liquidity that cash provides is so helpful if you aren't wealthly
Meh i would think the % would be the same in either case so it is still a problem for the poor
Holding cash is not risky at all, you are 100% guaranteed to lose purchasing power over time. No risk involved.
lol!
not included in the inflation erosion figure is the value of the embedded optionality of having liquidity, keeping some money out protected from decline while also able to capitalize on crashes and realize the theoretical returns that other investors cannot obtain from the bottom. It is a real option although difficult to value.
In the long run, yes. Short-term, you're safer with cash.
It’s an equity hedge. You keep cash, equivalents, & bonds around for when it hits the fan.
@@aliasgharkhoyee8911 thing is no body can predict the market and when holding cash is safer than equities or bonds. So it's better to plan long term than short term
Dalio is referring to the longer outlook. If asset prices rise, and they will, then you dont loose much on cash in buying power. But in relation to assets.
To be fair to Dalio, you should look at the corrections that happened after the heavy money printing. SnP 500 saw a correction of 9% during September and another correction of 7% during October and during both of those corrections long-bond yields did not move much. So, it is not only Dalio, I am hearing many professional investors be worried about the level of equity hedge that treasury bonds can provide from here onwards.
Anyway, thanks for the video and your honest views. That is what I value the most.
Hi Garry, yields not moving much is a hedge. Ideally you'd like yield to fall. But the point is that bonds held their value as equity fell, and it's a hedge you are paid (not much!) to hold rather than a hedge you pay for, which is what a put option would be. Just plot TLT vs SPY daily returns and you'll see whether bonds are truly acting as a hedge or not. Thanks, Ramin.
I think ray Dailo is a visionary and might be looking ahead 2-5 years where most of us think 2-3 weeks or maybe a few months
I believe both Ray Dalio and Roger Hamilton stated it’s a 2-5 year timeline
Yea short term dollar bull to 95-100 on dxy long term 30% drop just like Britain when they were losing world reserve status
its happening now, you don't need to wait, I can see that trading crypto, almost every crypto gains over dollar and euro everyday.
This video is full of misconceptions and naivety from a boomer who didn’t have his own 401k
@@sparcx86channel42 Pure Dunning Kruger......
With all this "printing' I've been quite worried. However now that I've considered the points made in this video, I'm confidence in the dollar again! Very well done. Thank you!
Hi @Ponziano Manning I'm Glad it was helpful!.Thanks for watching! Ramin
As usual , a great video backed by data and a good sense of rationality. always enjoying your videos and must say that unfortunately I learn from them much more about macro economics than I get to learn in my university bachelor studies of economics
Hi @daniel fallon thank you. I guess that's good from my point of view - not so much from your Uni. Thanks, Ramin.
i wonder if you compound past inflation in comparison to dollar adjustments
I bought an old house 15 years ago cost me 50 thousand dollars
I am selling the same house now for 240 thousand dollars and I got very good offer
Your dollars value is becoming worthless very fast
this old man must be insane, nobody can really defend fiat currency now.
I've heard Dalio talk about this many times. He actually does refer to the significant effects of inflation on cash. Dalio also said that are risky in an M3 environment. I would not be surprised if he was a bit early when it comes to the dollar losing its status as a reserve currency.
I think dalio is more referring to the large scale long term investment portfolio.....
Agree.
@@DA-eo8ps I would be really concerned for someone unsubscribing my channel. Probably one of the worse things that can happen in life. LoL
I agree, I think Ray Dalio likely referred to a long term. But, if you think that Ray Dalio is 71, doesn't look that wise to refer at a very long investment horizon.
@@FaLecWorld what he means is that you don't get any return nowadays from cash. And he is right. The guy speaking in this video is wrong. Taking inflation into mind you don't earn money by investing in CDs and bonds.
Hi @@kirilmihaylov1934 the point is that you take very little _risk_ when holding cash. The loss from inflation in a whole year is equivalent to a _one day move_ in equity markets. So saying cash is risky is just wrong. Thanks, Ramin
informative and interesting. I would say cash gives you optionality in 'near terms' for say 6/12 months, to deal with loss of jobs or dry power to use for investing - (this is my own custom/evolving belief at my current stage in life).
Your content is some of the best. Thanks
Hi @Terrill Melvill thank you! Ramin.
Dear Ramin,
i love your content and i watch every of your UA-cam Videos. I usually wouldn't comment on your videos since i don't think i have any valuable insight to add. But for this topic i would like to maybe give some more perspective.
As some other people have already commented, one might want to differentiate between a typical retail investor with a limited investment time frame and predictable consumption behavoir on the one hand, and a multimillion dollar, high net worth individual who has complex payment obligations in different currencies.
For example: if i am a typical retail investor without large assets and only one income stream from my employer and my biggest payment obligations might be to pay some inheritance tax in the near future because i will inherit some real estate, then "cash is not trash" since i will only have some payment obligation in my own currency during the next 1-5 years. Any currency devaluation / Inflation will night affect me in any major way, besides that my cost of living might go up a little. So in this case cash is not trash. On the contrary it is still important to be prepared for any event where my income stream decreases and i am depended on my savings.
If, on the other hand, i have a business in some emerging markets and i might have to recapitalize the business in the home currency and also i have a very long time horizon since i want to give away a lot of wealth to my children or wife or foundation when i am gone, then cash denominated in US Dollar might very well be "trash". First because of all the Money printing there might be a sudden devaluation of the Dollar against other currencies, in wich i might have to make some sudden payments. And secoundly because there is a chance that a lot of developed markets are going to experience a higher inflation in the future. Probably not hyperinflation. But it might very well be 3 - 4% for a longer period of time. If your time horizon is longer then 1 Generation this money devaluation very well might be called a "trash-asset" even though such a claim might still be a little exaggerated.
I am still very thankful for your insights and explanations Ramin. I just wanted to point out that cash might be trash for some people (high net worth individuals) but i might be very useful for the typical investor like you and me. So there is no right or wrong in my opinion.
Thanks again. Take Care
Hi Robert thank you for your thoughtful comment. I actually make that precise point at the very beginning of the video and reiterate it nine minutes into the video. Even ultra high net worth individuals have large cash positions. I know because some of them talk to me! But as I say at the very beginning of the video the overwhelming evidence is that over the long term cash underperforms government bonds which underperform equity. Thanks, Ramin
When you talk about “cash” do you mean USD like what I have in my bank account or physical tangible cash? I get very confused
Inflation hasn't been so low since the last recession if we're talking about the US, UK & EU. Not a bad idea to hold cash this year seeing how equity P/E values have gotten out of control recently. This is honestly the year in which you'll lose the least amount of buying power to inflation if you hold cash. The CAPE ratio for US equity is almost nearing pre-dotcom bubble levels. Equity in other markets isn't as expensive, but it's going to take considerably longer for those markets to actually recover, which is probably why everyone's ok with paying a premium for US equity.
Thanks for this - very useful.
I reckon that holding cash that loses 1% p.a. in real terms rather than something riskier that breaks even is no different to choosing an investment that returns 4% p.a. over a riskier investment that yields 5% p.a. average. In both cases you're turning down 1% in expected return for less risk.
Hi Tom, I see your point, but I talk to some clients that are retired and don't want or need to take much risk. Others need their money for a known large expense in a few years such as a house purchase so can't take much volatility risk. But if they've heard that cash is risky they might be put off this as a potential choice. Thanks, Ramin.
@@Jay-xr3sb Did you use selective hearing to ignore the part where he says "this is not a recommendation"? Threatening reporting him to the FCA haha! Take a deep breath and calm down.
@@Jay-xr3sb virtually every video is about investing in stocks for the long term. This is a specific video dealing with the subject matter. As you know.
I haven’t seen Ray Dalio’s video but I agree with your points. Cash is a terrible long term investment but worth keeping a SMALL amount in your portfolio as a WEAK hedge and for LIQUIDITY purposes. It’s also worth pointing out that holding cash in your investment platform usually yields a low interest rate - so do check with your platform.
Thanks, and right on target! As the March plunge showed, there are few if any safe heavens other than cash, as commodities and fixed instruments all dropped in tandem with equities. You can't buy groceries with gold bullion, and with savings rates no more than 5% in normal times (in most countries), bulking up on cash is critical for the average working stiff just to survive the next 'Covid' crisis.
Putting money in cash absolutely makes sense right now. Dalio's alternatives are too risky for main street investors. Taking a small loss on cash due to inflation until bond yields become more attractive is a safe and prudent way to protect ones self in an overheated stock market with limited options.
Now I totally agree with you on that one. He and others use the line that cash deflates over time care of irresponsible central governments which it does, but they conveniently skirt round the simple matter of buying power and the opportunity that a crisis might present when cash is king. Nothing is ever said or done without a purpose :).
@@Jay-xr3sb I hear this 'if you can time the market' counter argument so often. It is more a matter of running a balanced strategy and that means holding cash. It really depends on an understanding and knowledge of the markets. The fall in the spring was fairly predictable for several reasons none of which is rocket science. I happen to believe the FTSE could well test the levels seen in March. I could be wrong, I could be right, but I hate to waste a potential opportunity.
@@Jay-xr3sb Yes indeed, but I chose my words carefully by 'running a balanced strategy and that means holding cash'. Not 100% of course, but a stash depending on the strategy. So, perhaps a combined policy of investing and trading opportunities would be a better way of putting it, but certainly not 100% invested :)
Thanks for your very informative videos Ramin. Each word is backed with data. I love it.
Hi @Edoardo Pennesi My pleasure and thank you for watching. Ramin
The bond rates have slumped, bank interest rates aren't keeping up with inflation so in order for people to gain a return on their investments they have poured into the stock market. In years past you could earn 5% interest on $1 million in bonds, giving you $50,000 per year. Today you would have to invest $5 million to make that $50,000. People in the US are forced into this situation to try and return as much as they can to cover their retirement.
This was really reasurring. There is a lot of finance panic out there these days.
Ray Dalio is absolutely correct, cash is not safe in this credit dominant economy...you can't look at the historic data to foresee what's to come in the future. That's like looking at the lagging indicators and saying, look we were safe in the past, so we should be safe in the future.
I do not know in which context he was saying that. But many smart investors prepare the cash so they could buy when there is “blood on the street”. Not to be keep into saving where your cash will be eaen by inflation day by day.
Hi Adi, in the video I say that cash is not a place to put money over the long term. But with inflation at current levels the loss you make from inflation in one year on cash is equivalent to a typical one-day move in equity markets. Thanks, Ramin.
I respect Dalio’s perspective, but I always remember that he blew up his first hedge fund predicting a depression after the Volcker hikes. You can be a smart guy, read the tape properly, but still get ruined by outside factors you didn’t account for (computerization and internet in his case).
That's why active managers underperform passive funds. Only the ones that do well hit the headlines you don't hear about the the other million that crashed and burned.
the saying goes that markets can remain irrational longer than you can remain solvent
@@Dr.Stacker I’m stealing this.
I would love to hear an update on this video, love your content.
Apologies if you have already covered this, I have only recently discovered your channel.
My query is how does Ray Dalio's current negative view on bonds tie in with the Bridgewater risk parity theory, the so called All Weather Portfolio?
'All Weather' is well known for holding a large percentage of bonds in proportion to equities in an attempt to reduce volatility and 'weather' all environments. The four economic seasons as I have heard it described.
Would be interested in your thoughts on this.
Hi @Andy's Adventures I did a video about All Weather a while ago ua-cam.com/video/5T-rc90MGBE/v-deo.html Thanks, Ramin.
@@Pensioncraft Thank you for such a swift reply and your All Weather link. Regards, Andy
Appreciate the sober analysis. Whether a person agrees or not, they can value that your not exaggerating your case. Follow the data, I agree with that approach.
Thank you for interesting overview of subject. The only thing I've found strange is this velocity of money argument. Chart Y-Axis (15:00 time) is defined as Velocity=Nominal GDP/M2 and its obviously sharply decreasing in the nearest past because of heavy money printing. Although arguments about reduction of spedning in 2020 covid era is probably valid chart doesnt anyhow support or prove this idea, this effect is totaly unseen because of sharp M2 increase.
Do you think cpi really captures inflation? Especially asset inflation.
you are a great man sir - I am in the US and seldom to I come across such an intelligent fellow!
Hi @Ray OK thank you! Ramin.
Please do the same for Harry Dent and Peter Shiff..They see opposite...deflation by Dent vs Inflation by Shiff.
Dent claims huge adjustment in stocks up to 40% plus real estate...within 2021 or close to that year..
Jerzy
Dear Ramin,
Great video. Appreciated.
You are quite right. Cash is the only vehicle to enable access to buy assets. The unsafe parts of cash are inflation and the security of the bank it is in. The bank could be robbed or could go bust. This bank risk is increasingly significant now and could be, and probably is, more risky than a government bond. Remember Northern Rock? Lemans? I am sure subscribers would welcome a comment from Pension Craft on bank risk of holding cash.
In the UK, £85k of your bank deposits is protected per bank. The exception is the NS&I government run bank which I believe provides £1 million in protection.
@@stevo728822 valuable feedback. I wonder how much funding the FSCS has in it, to cover insuring larger or numerous bank failures. Perhaps Pension Craft has a view on the value of FSCS protection risk.
Banks don't keep much physical cash on premises. That's why you have to give notice if you require to take a large amount of cash out. If there physical cash on premises gets low they have the central bank deliver more. Most money is digital now so banks don't need to hold alot of cash on sight.
Does it make sense to treat the dollar (that pays wages) generated by the government and the dollar (repo and bank assets) generated by banks as 2 different currencies? And if so how would you define the exchange rate (what is the resistance to convert one into another)?
I agree with Dalio. But I don't think we have seen the monetary inflation yet. Price hikes caused by supply shocks yes. But we are entering a liquidity credit crisis. It's best not to have debt, but cash to allocate after the crash-- and good cyber security to protect your identity and assets.
In a recession/depression Cash is king!That’s when all the good deals comes out for ordinary people. If you don’t have access to cash you won’t be able to take advantage of the situation. I guess that’s what he wants so he doesn’t any get competition in buying cheap assets^^ When everything is great and inflation keeps cash worthless it’s better to let the asset inflation help you grow your wealth but in a recession (war), dry powder is the best.
I agree with you, and US government bonds or highly rated corporate bonds would be my choice. I would avoid European Union bonds. I like cash. It's another asset class, and I keep gold in lieu of cash because it can be converted to dollars at a coin shop or online. There is a large demand for dollars throughout the world because local currencies are usually not stable, or can be cancelled. So we may be confronting deflation in our future rather than inflation. Thanks.
He's probably referring to the bank bail-in laws being pushed by the IMF. This is where banks can seize the money in your savings account and convert it into bank shares during a financial crisis (the Bank of Cyprus did this in 2013). The idea is to get the consumer to take the hit instead of the government. A lot of banks have bail-in provisions now. It pays the read the fine print.
Hi David the idea from the IMF is that depositors should be protected by first hitting equity holders, the subordinated bond holders, then other bond holders and depositors last. That way depositors would likely recover a large proportion of their capital in the event of bank failure. "Bail-in must respect the order of priorities of claims established in a given jurisdiction for bank liquidation, meaning that typically, equity must bear losses first, followed by subordinated debt, with deposits being the last to absorb losses in jurisdictions that provide for depositor preference" on page 29 here www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2018/02/09/Trade-offs-in-Bank-Resolution-45127 Thanks, Ramin.
The return from cash is negative in the long term. Central banks are squeezing risk taking, return capital into equities and this will likely continue to be the dominant trend with the path of least resistance.
So informative and so clear, thank you!
Hi @olivier klompkes thank you! Ramin.
Now we see that inflation has in fact increased significantly, so does that mean money printing - and other factors - had a delayed effect? on inflation
Love your perspective and thanks for the insight. Why did the velocity of money in the US drop so much since 2000?
Dalio is focused on USD reference currency status wrt historical hegemonic currency crashes. The USD is rhyming with history IMHO.
The currency counterfeiting QE has delayed what is likely to happen near-term.
My money is with Dalio and my cash is transforming into "other than USD".
LIKED the video as a great debate-starter!
Totally agree with your comment.
One quarter of the USD in existence were created in 2020 - so our purchasing power has gone down by 1/4 unless you had investments that made 25pc plus taxes right? Is comparing cash to CPI inflation valid when you look at what's happening to other asset prices - tech stocks, property etc as a consequence of QE?
Do you have any strong opinions on holding cash in the bank, vs cash in short-term bonds?
Great video as usual Ramin. On a linked topic isn’t the case that if you have cash now there is no alternative but the stock market? Bond prices have risen since interest rates are near zero. Hence the upside on Bonds is gone as rates can not go any lower. So if you allocate from cash to Bonds today specially on those long term maturities Bond prices are bound to fall if/when interest rises again. So at the place we encounter ourselves today Bonds cannot work as a hedge for the stock market. Hence TINA!
If I am not mistaken Ramin is suggesting that cash might be an asset class that is not necessarily bad for the short term. That implies stock market opportunities.
Now I am not sure if that is for the whole market or market misallocation of individual shares.
Any thoughts?
One question.
Are stocks expensive?
The buffet indicator and PE or CAPE ratio say yes. In the contrary, the interest rates say no. Even in 2013 or 2018 we had low interest rates.... so good times and bad times share the same interest rates (small difference).
Finally, is a gold miner share a viable option now?
Sorry the more I read books and watch UA-cam .... the more open questions I get.
11:08 Don't park in "safe assets" for very long because of inflation
I really appreciate the quality of information provided on this series of videos....One question relates to a fairly rapid devaluation of cash! You seem to assume in this video that Government has the ability to actually control inflation in the shorter term...Market forces are strong maybe too strong for gov't tools?? and risks to Govs efforts are to drive economy into a deep recession....Please comment on the Gov'ts actual ability to control inflation?
Well argued points you raise.
Hi @John T thanks, Ramin.
I feel like this is the type of analysis that Nassim Taleb makes fun of.
100% The video is missing the "extremistant" component Taleb talks about. The point here is that: ok, hiperinflation may be not very likely and in 99.9% (of course, I have no clue of the real probability) of the cases cash will be safe; however, if hiperinflation takes place (and it may totally happen) then cash is worth nothing in matter of seconds. All graph that look super-stable you should suspect there is something hidden; perhaps risk is just being accumulating and accumulating in non-visible manner until it blows up. For instance, the Swiss monetary policy was clear in having a quite stable exchange rate with euro, and they were managing that quite successfully (apparently) until they were unable to do so, and all of a sudden, in Jan2015, the extremely stable exchange rate raised dramatically by more than 20% in minutes (in fact, there are plenty of examples in monetary exchange rates). Every time I see a superstable graph based on historical data, I get scared hidden risks may blow up that stability in an unimaginable magnitude in a matter of seconds. Final note: I obviously have no clue what will happen, but at least I know I don't know xD
Great video Ramin, I agree. Although my USDs are losing value as Inflation hits (for the goods I buy), I'm betting that the USD rises upon our next correction and asset bubbles will pop in early 2022 triggered by the Chinese real estate market collapse due to bond defaults. I'm also betting that our next global recession will have other countries buy USDs as a safe haven as assets lose value. After a correction I would go back to a portfolio approach. I'm not a believer in Bitcoin and cryptos, it's 'decentralized transaction' efficiency, or it's future. We might see ESG lawsuits, Carbon taxes, and Miner/Wallet Hackers spoil that pudding soon.
Thanks!
It's amazing how many of the commentors below simply didn't understand Ramin's point: cash is a safe haven over a short period - eg a year or so. But he clearly states 'as long as you don't leave it there for long'. If you'd moved into cash at the end of 2007 and stayed there for just over a year, you'd have lost only 1% of its convertible value when you decided to move back into equities in early 2009. Sounds pretty damned safe to me! Instead we get a bunch of cowboys below baying about cash is trash, Ramin is stupid etc.
The problem with all of them is: they don't have even 1 or 2% of the knowledge of finance, investment and data analysis that Ramin has - and don't realise it. It's called Dunning Kruger.
Liked your graphs on the dollar , euro, and yen on tradings. really puts things in perspective. I can't believe china is so weak there with all the ccp backed shipping they do. so this video really seems to show why the sky is not falling for the dollar. but also shows why some whales are going into bitcoin instead of sitting on cash or bonds (long term). you do a good job at explaining things.
The inflation is in assets, education and Healthcare
And rent
@@charlesgripp343 yes housing. But Dalio is right. You don't earn anything by investing in cash.
Hi @@kirilmihaylov1934 Dalio is wrong about the risk of cash. It is very, very low. The loss due to inflation _in one year_ is smaller than a typical _one-day_ move in the equity market. Thanks, Ramin.
@@Pensioncraft still you don't understand him .cash is trash because it doesn't earn you anything nowadays. You have better alternatives.
I would argue that CPI does not effectively address the deflationary effects of technology, globalisation. If you look at the CPI graph, its no surprise inflation became very stable after the 1990s when the world started taking advantage of the internet to digitify and producing goods in lower wage countries.
Wow! Fantastic video. I learned a lot.
Glad it was helpful JM
Buying power of currencies should be going up. If without money printing a dollar should be able to buy goods worth 105 after one year, but it can only buy 99 cents of goods, the inflation is 6%, not 1%, because fixed assets or gold will go up by about 6% in dollar terms
I think you are missing cicles. What are the conditions for the change in cicle? what are the currency cicle? what are the limits of debt? data is the limit? or something directly related to human nature?
QE's goal is to prevent a deflationary spiral- not produce inflation.
Hi @linus b the Fed's goal is to aim for a long-run average inflation rate of 2% i.e. small, positive inflation. If you plot the average P/E vs inflation that also results in the best outcome for equity. Thanks, Ramin.
I’m not convinced the CPI is an accurate indicator of inflation. Sure, everyone should have some cash / government bonds for a rainy day or to buy the dip, but things that you really want to buy are getting much more expensive e.g. housing, health insurance, education, high quality stocks, etc. I think Dalio’s point is that the traditional 60-40 portfolio needs a rethink.
10:55: Best inflation hedge is stocks
11:50: No hyperinflation yet
12:50: Amount of wealth lost due to CPI rise = 1 day move in stock market
14:01 chart shows how QE money ends up in stocks and real estate
Massive QE has still not produce Inflation DUE cuz velocity of money has been falling since 2000
A better pre-warning indictor to Hyperinflation is rising employment after massive QE
Centralbank shd be politically independent of politics and do what's right not what's politically expedient
Tarrifs are inflationary
20:30: Alternatives to Govt bonds as a safe haven: EM bonds, Bond-like-equity ( high div stocks) , Gold
Au fall when interest rates rise
Cash is safe, but dont park it there too long
I think it’d be interesting to have you interview George Gammon.
Hi @Casey Burns Investing I agree, he has interesting opinions. But I doubt he'd agree to speak to me! Maybe I should ask him... Thanks, Ramin.
@@Pensioncraft I think he might. Would be an interesting conversation for sure.
I’m glad I found your channel sir. You are sensible and knowledgeable. The kind of guy I like to listen too. Thanks for the schooling. Subscribed. Oh, what’s your take on crypto currency’s? Particularly bitcoin. Thanks.
Hi @Jim Wells thank you for subscribing. I don't invest in bitcoin myself but I've made a few videos about it and I have interviewed a couple of different people to try and represent some alternative views on my channel. The last non interview video I did is here ua-cam.com/video/Rq25M3Z_9jI/v-deo.html
@@Pensioncraft thanks. I’ll check it out.
Dalio is big on gold. Emerging markets and is interested in small allocation in digital assets.
Bonds are probably not the best like they used to be. Gold is slightly better now. Thinking about compounding interest it’s gone from bonds. Gold has more upside to keep up with infation long term. Perhaps bitcoin will soon
Gold peaked in 2011 and was down for 9 years until now. Pretty aweful tool to save your wealth
Dalio sold half his gold Q4 2020 - maybe before release of this video - latest 13f
I trust him more than a UA-camr.
You shouldn't trust either: they both have an agenda that doesn't factor you in.
Why is not commodity efs shown ??
Who to believe, billionaire Ray Dalio or this obscure author? I'm posting on this author's UA-cam channel so my money is on this guy! Just to point out something a bit unclear: the correlation between stocks and bonds is not fixed, but varies. It varies by 'regime'. (internet) "Some periods of history might point to the conclusion that the correlation between the returns on stocks and bonds is positive, others that it is negative. These variations can be a signal of fundamental change in the broader market environment." For example, correlation between US bonds and stocks was negative in the 1960s, positive from 1980-1998, then negative between 1998 to about the present. Caveat emptor and good luck in your efficient portfolio!
It does if it’s inflated away to pay down debt when paying down debt becomes out of control.
In the long term, yes. In the short term, it's low-risk.
I think what Dalio was trying to say is because of this specific financial crisis $ are a bad investment. I agree. This not a recession or a depression this time it is a structural crisis. Because we have refused to pay the cost and feel the pain of repairing financial disasters and mismanagement of the past. We have neglected the up keep our financial house so long the foundation is brittle and cracked. Every support beam is rotted. 💵 being the bricks of our financial house. The bricks are coming down soon there is beams left to support the weight. No foundation to affix them to. When a strong storm wind comes and they always come. The bricks come down.
Yaaa cash dose crash..It's called hyperinflation..
Makes me feel better about my savings habit. Thanks. Been kicking myself for not being invested the last few years.
True, I rely on Jeff Snider and Dr lacy hunts study. inflation will come, but after the deflationary desaser i suspect.
Thank you for thisbvideo! Really informative
Glad it was helpful Joseph
while there are lots of money printing and not much inflation that is because they were spent in stocks! and giving stocks an inflation! :P
every day I here that cash is trash its going to crash what is it is it good to keep cash in the bank or buy gold our lose it Ido not understand
Fiat always goes to zero, 26T and counting time bomb
I love your videos, great learning! Thank you!
Glad you like them! Thank you for the comments they are much appreciated.
I concur with you.
Hi Amarendra, thanks, Ramin.
Dalio seems to take some things for granted. In some ways, he seems to believe that the US will collapse. The UK stock market is up, after it stopped being the world reserve 75 years later.
The UK market has recovered slightly but nowhere near to levels pre-March 2020.
I'm in and out of some defensive stocks, for opportunist profits, but I can only see a rocky road ahead for the FTSE - with all the Brexit uncertainty.
It would be fair to say that now is the time to sit on some cash and follow the UK market up and down.
This was really reassuring. :) QC
How about QE = Japanification?
What about parking it in I-bonds. ?
Hi @Johny JSL if inflation is greater, on average, than the breakeven rate over the life of an inflation-linked bond then it will do better than a nominal government bond. At the moment inflation is well below the breakeven rate in the US and the UK (for e.g. ten year inflation linked bonds). So inflation would have to be well above the breakeven to come out on top. Nobody knows what's going to happen to inflation but that's what it would take for inflation-linked bonds to be a better investment. Thanks, Ramin.
He is right.
I agree more with Ray Dalio because the Fed is inflating the currency supply and currency used by politicians is typically misspent...
but still a well-researched video
Approaching Aug 2022. Cash is king once again boys. Lovely jubbly
Various Reserve currencies
Great video regarding the reserve currency what currency do you reckon will replace the US dollar?
Hi Tom that's going to be a long way off so a lot can happen in the decades ahead before the dollar is replaced. My guess would be that there'll be a gradual shift to the renminbi, particularly in Asian countries and APAC countries with the strongest China trade links. The Americas might stick with the US dollar even while this transition is happening in the East. The euro probably makes sense for a lot of Europe and parts of Africa. But I suspect that trade will play a part too. Thanks, Ramin.
@@Pensioncraft Thanks for the reply hope you have a great weekend
real return on cash is negative and you call that safe? like you can safely loose your purchasing power over time
You can also lose 20-30% value of stocks when a crash happens.
My Exxon shares dropped 40% this year. That is a bad example maybe, but this kind of drop is not likely with Dollar or Euro
embedded optionality is the biggest argument for cash. It's a real option that doesn't show up in the yield. That's one place where CAPM or other theories gets it wrong.
@@oaciftci when you compare two evils, the lesser would be preferable of course, however when you diversify you need assets that will go up to cover for losses, cash does not go up in value, in the past bonds provided little grow, but those days are gone
Great video. Your arguments are well explained by data and step by step logic. Very much appreciated.
Hi @oaciftci i'm pleased you liked it and thank you for watching. Ramin
More than convinced gold and silver will be the best wealth retention. I can't imagine the day of reckoning for the US dollar
and BTC too?
@@Vangerok not!
Just keep 12 months living costs in cash account ...... rest should be deployed equity, bond, gold, bitcoin in proportion to ur risk profile
What do you think about the accusations that the way we meassure inflation is just wrong?
Hi @Václav Pekař Everyone's experience of inflation will be different as our consumption baskets are different. CPI is a typical consumption basket. That'll never be perfect, but it's a good way to get a handle on increases in the cost of living. Thanks, Ramin.
The countries that have experienced hyper-inflation would disagree
Hi @Max Soi you'll notice I mention some of those examples in my video on hyperinflation twitter.com/PensionCraft/status/1353641967423528966 In developed markets cash is extremely unlikely to crash. Thanks, Ramin.
HOLDING CASH IS STUPIDITY, I AM 65 AND HAVE BEEN SCREWED BY HOLDING CASH MY ENTIRE LIFE.
Well of course Dalio's "cash is trash" statement did not mean that everyone should take every fiat currency they own and put it into a investment vehicle.
But for an average joe or jane who thinks they are being financially responsible simply by saving their income in a bank needs to know that that strategy just isn't going to work out for them in the long run.
Cash is a medium of exchange but not a store of value, most people who aren't financially educated do not know this concept.
I think Ray Dalio is accurate in his point of view on US$ . Holding too much dollars simply means loss of purchasing power over time , no doubt
I saw the thing!!!! Let’s say you lose 2% a year in cash for sure (I think the number he and others use).... hmmmm if that 2% is correct and certain- that means RISK IS ZERO- the SD of returns is risk!!! Depending on expected returns of other assets AND THEIR SDs, it may actually be the best option! If this is a bubble and it bursts a certain 2% loss looks great!!! I’m sure if Dalio was confronted with this simple financial fact he would say he misspoke ... or that it was a long run comment.