Ray Dalio don't own bonds/cash

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shuresm7b1
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Ray Dalio don't own bonds/cash

Post by shuresm7b1 »

What do you guys think of Ray Dalio's comments on not to own bonds or cash ? It seems pretty extreme but with them making so little is it so wrong ? It seems to me he is talking about years and not just the next few months. Thanks for any ideas.

https://youtu.be/A-noFNHcrlM?t=341
JBTX
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Re: Ray Dalio don't own bonds/cash

Post by JBTX »

There are several other threads in here on Dalio and no cash or bonds stance.

viewtopic.php?f=10&t=328515
Last edited by JBTX on Thu Nov 19, 2020 10:15 am, edited 1 time in total.
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Re: Ray Dalio don't own bonds/cash

Post by Robot Monster »

JBTX wrote: Thu Nov 19, 2020 10:06 am There are several other threads in here on Dahlio and no cash or bonds stance.
Yep. link
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Re: Ray Dalio don't own bonds/cash

Post by livesoft »

Everybody has to decide for themselves and what Ray Dalio says not does factor at all in my decisions
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Re: Ray Dalio don't own bonds/cash

Post by JBTX »

The executive summary is Dalio could be right, but he is not clear on what you should have instead, and whatever the case is he can sometimes make substantial changes on a dime that you can't replicate.
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Re: Ray Dalio don't own bonds/cash

Post by shuresm7b1 »

livesoft wrote: Thu Nov 19, 2020 10:09 am Everybody has to decide for themselves and what Ray Dalio says not does factor at all in my decisions
Why would he not factor in ? Do you think his opinions are baseless and of no value ?
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Re: Ray Dalio don't own bonds/cash

Post by checkyourmath »

CASH IS TRASH unless you need it and there is some liquidity crunch due to leverage, moving, a recession or long term depression.
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Re: Ray Dalio don't own bonds/cash

Post by Brianmcg321 »

Next month: Ray Dalio, Don’t Own Stocks!
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.
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Re: Ray Dalio don't own bonds/cash

Post by Anon9001 »

This is rather Western/Euro centric view as the local cash Equivalents like Public Provident Fund for me is giving me 7.1% interest rate. It's interest rate is set every quarter based on the 10 Year India Government Bond Yield with additional spread of 0.25%. The only draw-back is the limited liquidity which requires you to wait 15 years to withdraw your full money after which the Fund can be extended continuously again and again for 5 years. I thought it was a bad deal before because you had to wait 15 years to take your money out but looking at the negative yielding bonds else-where and the local paltry short term interest rates in India of 3-4% it is a steal and it is actually good protection against inflation unlike Gold as the rates are reset every quarter so if there is significant inflation the PPF will respond quickly with the interest rate going up significantly. I personally think if you are living in high interest rate country it is foolish to buy Gold with 0% interest rates and no guarantee that your principal will be safe.
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Re: Ray Dalio don't own bonds/cash

Post by aristotelian »

What is his opinion on TIPS? If he is worried about inflation that would be the logical choice. Moving into equity is playing a dangerous game.

I find it hilarious that he advocates an "All Weather Portfolio" but constantly advocates changing allocation based on his prognostications.
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Re: Ray Dalio don't own bonds/cash

Post by flaccidsteele »

shuresm7b1 wrote: Thu Nov 19, 2020 9:56 am What do you guys think of Ray Dalio's comments on not to own bonds or cash ? It seems pretty extreme but with them making so little is it so wrong ? It seems to me he is talking about years and not just the next few months. Thanks for any ideas.

https://youtu.be/A-noFNHcrlM?t=341
How do people not own cash? Cash just appears in my bank account from rental property, dividends, interest...?
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Re: Ray Dalio don't own bonds/cash

Post by Marseille07 »

shuresm7b1 wrote: Thu Nov 19, 2020 10:27 am
livesoft wrote: Thu Nov 19, 2020 10:09 am Everybody has to decide for themselves and what Ray Dalio says not does factor at all in my decisions
Why would he not factor in ? Do you think his opinions are baseless and of no value ?
It's just that it's very difficult to achieve portfolio stability w/o bonds / cash. Beyond the reach of average buy-and-hold investors. Those who prefer 50/50, 30/70 kind of AA can't stomach 100/0.
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Re: Ray Dalio don't own bonds/cash

Post by Explorer »

shuresm7b1 wrote: Thu Nov 19, 2020 9:56 am What do you guys think of Ray Dalio's comments on not to own bonds or cash ? It seems pretty extreme but with them making so little is it so wrong ? It seems to me he is talking about years and not just the next few months. Thanks for any ideas.

https://youtu.be/A-noFNHcrlM?t=341
Hedge Fund managers (like Dalio) may be right OR may be wrong. He probably has a large stash of cash to live on if his bets go south.

If we the ordinary peeps are in a similar situation, we can consider not having bonds or cash.

Here is my 2 cents: if you own stocks (any %), you need a shock absorber to blunt the blow when stocks go down. The shock absorber could be bonds or cash. I know of nothing else that works well as shock absorber.
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Re: Ray Dalio don't own bonds/cash

Post by columbia »

re:anyone who takes his advice

I hope they're not planning on Dalio paying their bills, if stocks go down and don't come back for half a decade or more.
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Re: Ray Dalio don't own bonds/cash

Post by livesoft »

shuresm7b1 wrote: Thu Nov 19, 2020 10:27 am
livesoft wrote: Thu Nov 19, 2020 10:09 am Everybody has to decide for themselves and what Ray Dalio says not does factor at all in my decisions
Why would he not factor in ? Do you think his opinions are baseless and of no value ?
Yes.
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Re: Ray Dalio don't own bonds/cash

Post by DesertDiva »

livesoft wrote: Thu Nov 19, 2020 10:55 am
shuresm7b1 wrote: Thu Nov 19, 2020 10:27 am
livesoft wrote: Thu Nov 19, 2020 10:09 am Everybody has to decide for themselves and what Ray Dalio says not does factor at all in my decisions
Why would he not factor in ? Do you think his opinions are baseless and of no value ?
Yes.
Maybe that's why we aren't on the Dalioheads forum :beer
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Re: Ray Dalio don't own bonds/cash

Post by garlandwhizzer »

I think Mr. Dalio makes a good point--that bonds/cash aren't what they have been historically--but to say don't own any of them is pushing it too far. Nothing diversifies equity bear markets better than quality fixed income which is the only really safe port in a severe equity storm. On the other hand the expected return of all quality fixed income now is zero or less in real inflation adjusted terms. Unlike in the past, you pay a significant opportunity cost for this safety because equity of all stripes has significantly positive expected long term returns. It is up to each of us to set that portfolio balance between risk assets for positive returns and safe assets to reduce volatility when equity takes a big hit.

Personally since the March 23 lows I have reduced my fixed income allocation from 40% to 28%. I picked that 28% figure because it provides many years of anticipated living expenses along with my RMDs which always come from selling equity in my IRA and moving it into fixed income in my personal account. In case the bottom falls out of equity for a decade or more I'll survive which is all the assurance I need. There is too much money concentrated in the investing class now to stocks to totally collapse IMO. We'll never return to the historical average PE of 16, more likely we'll hover at twice that or more, which will still produce much better expected returns than bonds.

The entire bond market now is at the most overpriced levels, that is to say under yielding levels, in history. I think the old numbers 60/40 or 50/50 are probably not appropriate now for investors who actually need significant positive real returns to meet their long term financial goals. Bonds will produce zero real, stocks will likely produce well less than historical average returns. Robust portfolio returns are likely to be hard to come by going forward relative to the wonderful past which was dominated by bull markets in bonds and stocks for 4 decades.

We're in a situation now where we've never been before in terms of total global debt load, aging demographics, zero interest rates, and stagnant economic growth. I believe it may be unwise to expect historical rates of return in both bonds and stocks going forward. Backtesting stock and bond returns in a portfolio should not be counted on with a high degree of certainty for future returns. I think the best thing to do is the same as always develop a good plan taking full account of the way things are at present, and to continually invest in it. That plan, if realistic, may not be 60/40 or 50/50.

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Re: Ray Dalio don't own bonds/cash

Post by checkyourmath »

Brianmcg321 wrote: Thu Nov 19, 2020 10:38 am Next month: Ray Dalio, Don’t Own Stocks!
Stocks are trash is Ray Dalios next comment. He is going all in on Bitcoin and Uranium. Ray is probably a nice guy just like Bill Ackman. They are really just looking out for the overall population. It makes sense to have no cash right now and put everything into Nasdaq 100.
Last edited by checkyourmath on Thu Nov 19, 2020 12:28 pm, edited 1 time in total.
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Re: Ray Dalio don't own bonds/cash

Post by anon_investor »

livesoft wrote: Thu Nov 19, 2020 10:55 am
shuresm7b1 wrote: Thu Nov 19, 2020 10:27 am
livesoft wrote: Thu Nov 19, 2020 10:09 am Everybody has to decide for themselves and what Ray Dalio says not does factor at all in my decisions
Why would he not factor in ? Do you think his opinions are baseless and of no value ?
Yes.
+1.
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Re: Ray Dalio don't own bonds/cash

Post by Godot »

aristotelian wrote: Thu Nov 19, 2020 10:39 am What is his opinion on TIPS? If he is worried about inflation that would be the logical choice. Moving into equity is playing a dangerous game.

I find it hilarious that he advocates an "All Weather Portfolio" but constantly advocates changing allocation based on his prognostications.
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To know which way the wind blows
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Re: Ray Dalio don't own bonds/cash

Post by aristotelian »

anon_investor wrote: Thu Nov 19, 2020 12:23 pm
livesoft wrote: Thu Nov 19, 2020 10:55 am
shuresm7b1 wrote: Thu Nov 19, 2020 10:27 am
livesoft wrote: Thu Nov 19, 2020 10:09 am Everybody has to decide for themselves and what Ray Dalio says not does factor at all in my decisions
Why would he not factor in ? Do you think his opinions are baseless and of no value ?
Yes.
+1.
To take a slightly more nuanced position, I would say that anything Dalio says is based on information that the market has so already priced in, so whether it is sound or not I don't care.
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Re: Ray Dalio don't own bonds/cash

Post by paul_d_andersen »

There are no absolutes but I tend to agree with the sentiment. Cash is a guaranteed ~2% loss per year. Compound that for a number of years and it's a wealth killer. Especially with the Fed printing like crazy, it seems investors will be best served holding assets and not cash.

Of course cash is not trash when you need to make a down payment, have liquidity for any sort of life event, have a buoy from volatility, etc.

It's a balancing act of having enough cash to meet needs and be a ballast in ones portfolio with getting it deployed into appreciating assets.
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Re: Ray Dalio don't own bonds/cash

Post by MarkRoulo »

Anon9001 wrote: Thu Nov 19, 2020 10:39 am This is rather Western/Euro centric view as the local cash Equivalents like Public Provident Fund for me is giving me 7.1% interest rate. It's interest rate is set every quarter based on the 10 Year India Government Bond Yield with additional spread of 0.25%. The only draw-back is the limited liquidity which requires you to wait 15 years to withdraw your full money ...
Not just a Wester/Euro centric view of cash. The folks in the finance community do not consider an investment where you have to wait 15 years to withdraw your full money to be "cash." So Ray isn't talking about these in the "cash" bucket because NOTHING that behaves like this will be considered cash by the finance folks.

Note also that the 7.1% interest rate is in the context of an Indian inflation rate of 7.66% in 2019. This makes for a negative REAL yield, which is what Ray is probably mostly concerned with. He knows that you can get more than 0% nominal in lots of places (Lebanon, Venezuela, ...)
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Re: Ray Dalio don't own bonds/cash

Post by vineviz »

shuresm7b1 wrote: Thu Nov 19, 2020 10:27 am
livesoft wrote: Thu Nov 19, 2020 10:09 am Everybody has to decide for themselves and what Ray Dalio says not does factor at all in my decisions
Why would he not factor in ? Do you think his opinions are baseless and of no value ?
I think so, FWIW.
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Re: Ray Dalio don't own bonds/cash

Post by Ocean77 »

For one thing, what Dalio means with with his brief comment "Don't own cash, don't own bonds" is not that one should eliminate all emergency accounts and bond holdings etc. He just advises not to massively shift out of other assets and into bonds and short term treasuries (cash). Which makes sense.
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Re: Ray Dalio don't own bonds/cash

Post by Anon9001 »

MarkRoulo wrote: Thu Nov 19, 2020 12:53 pm
Anon9001 wrote: Thu Nov 19, 2020 10:39 am This is rather Western/Euro centric view as the local cash Equivalents like Public Provident Fund for me is giving me 7.1% interest rate. It's interest rate is set every quarter based on the 10 Year India Government Bond Yield with additional spread of 0.25%. The only draw-back is the limited liquidity which requires you to wait 15 years to withdraw your full money ...
Not just a Wester/Euro centric view of cash. The folks in the finance community do not consider an investment where you have to wait 15 years to withdraw your full money to be "cash." So Ray isn't talking about these in the "cash" bucket because NOTHING that behaves like this will be considered cash by the finance folks.

Note also that the 7.1% interest rate is in the context of an Indian inflation rate of 7.66% in 2019. This makes for a negative REAL yield, which is what Ray is probably mostly concerned with. He knows that you can get more than 0% nominal in lots of places (Lebanon, Venezuela, ...)
This is zero volatility asset that has beaten inflation in the past. You are quoting a specific instance in 2019 when the interest rate was 7.9% so if we are looking in that year it did beat inflation slightly:https://en.wikipedia.org/wiki/Public_Pr ... rest_rates

I would look it as cash as the Modified Duration is near 0 with the only issue being liquidity but they are quite lenient if you have a medical emergency.
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Re: Ray Dalio don't own bonds/cash

Post by UpperNwGuy »

shuresm7b1 wrote: Thu Nov 19, 2020 10:27 am
livesoft wrote: Thu Nov 19, 2020 10:09 am Everybody has to decide for themselves and what Ray Dalio says not does factor at all in my decisions
Why would he not factor in ? Do you think his opinions are baseless and of no value ?
Why would he not factor in? I don't pay attention to the professional financial gurus, so none of them factor into my choices.

Do I think his opinions are baseless and of no value? I don't usually read Dalio's stuff so I can't give you a general assessment. I do think this particular opinion is baseless and of no value.
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Re: Ray Dalio don't own bonds/cash

Post by shuresm7b1 »

Brianmcg321 wrote: Thu Nov 19, 2020 10:38 am Next month: Ray Dalio, Don’t Own Stocks!
I don't think Ray is known for waffling back and forth on positions is he? It seems like a pretty solid track record.
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Re: Ray Dalio don't own bonds/cash

Post by shuresm7b1 »

Marseille07 wrote: Thu Nov 19, 2020 10:44 am
shuresm7b1 wrote: Thu Nov 19, 2020 10:27 am
livesoft wrote: Thu Nov 19, 2020 10:09 am Everybody has to decide for themselves and what Ray Dalio says not does factor at all in my decisions
Why would he not factor in ? Do you think his opinions are baseless and of no value ?
It's just that it's very difficult to achieve portfolio stability w/o bonds / cash. Beyond the reach of average buy-and-hold investors. Those who prefer 50/50, 30/70 kind of AA can't stomach 100/0.
Exactly I'm in that group. I'm 50-50 at the moment total stock market fund and Total Bond market fund. An almost ideal boglehead you might say.
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Re: Ray Dalio don't own bonds/cash

Post by Grt2bOutdoors »

shuresm7b1 wrote: Thu Nov 19, 2020 9:56 am What do you guys think of Ray Dalio's comments on not to own bonds or cash ? It seems pretty extreme but with them making so little is it so wrong ? It seems to me he is talking about years and not just the next few months. Thanks for any ideas.

https://youtu.be/A-noFNHcrlM?t=341
If you had a 30 year lifespan, held 100x plus spending in equities which yielded 1 percent, do you need to hold bonds or cash? That’s Ray Dalio.
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Re: Ray Dalio don't own bonds/cash

Post by shuresm7b1 »

garlandwhizzer wrote: Thu Nov 19, 2020 11:55 am I think Mr. Dalio makes a good point--that bonds/cash aren't what they have been historically--but to say don't own any of them is pushing it too far. Nothing diversifies equity bear markets better than quality fixed income which is the only really safe port in a severe equity storm. On the other hand the expected return of all quality fixed income now is zero or less in real inflation adjusted terms. Unlike in the past, you pay a significant opportunity cost for this safety because equity of all stripes has significantly positive expected long term returns. It is up to each of us to set that portfolio balance between risk assets for positive returns and safe assets to reduce volatility when equity takes a big hit.

Personally since the March 23 lows I have reduced my fixed income allocation from 40% to 28%. I picked that 28% figure because it provides many years of anticipated living expenses along with my RMDs which always come from selling equity in my IRA and moving it into fixed income in my personal account. In case the bottom falls out of equity for a decade or more I'll survive which is all the assurance I need. There is too much money concentrated in the investing class now to stocks to totally collapse IMO. We'll never return to the historical average PE of 16, more likely we'll hover at twice that or more, which will still produce much better expected returns than bonds.

The entire bond market now is at the most overpriced levels, that is to say under yielding levels, in history. I think the old numbers 60/40 or 50/50 are probably not appropriate now for investors who actually need significant positive real returns to meet their long term financial goals. Bonds will produce zero real, stocks will likely produce well less than historical average returns. Robust portfolio returns are likely to be hard to come by going forward relative to the wonderful past which was dominated by bull markets in bonds and stocks for 4 decades.

We're in a situation now where we've never been before in terms of total global debt load, aging demographics, zero interest rates, and stagnant economic growth. I believe it may be unwise to expect historical rates of return in both bonds and stocks going forward. Backtesting stock and bond returns in a portfolio should not be counted on with a high degree of certainty for future returns. I think the best thing to do is the same as always develop a good plan taking full account of the way things are at present, and to continually invest in it. That plan, if realistic, may not be 60/40 or 50/50.

Garland Whizzer
Really good post. Yeah this is forcing people to either chase returns and take more risk or work more or spend less. There are not many other choices
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Re: Ray Dalio don't own bonds/cash

Post by Seasonal »

shuresm7b1 wrote: Thu Nov 19, 2020 10:27 am
livesoft wrote: Thu Nov 19, 2020 10:09 am Everybody has to decide for themselves and what Ray Dalio says not does factor at all in my decisions
Why would he not factor in ? Do you think his opinions are baseless and of no value ?
I'll go against the grain. I have little doubt there is a basis for his opinion. I also have little doubt there's a basis for the opposite of his opinion.

I agree with all of the others on the value of his opinions.
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Re: Ray Dalio don't own bonds/cash

Post by Robot Monster »

shuresm7b1 wrote: Thu Nov 19, 2020 1:41 pm
Brianmcg321 wrote: Thu Nov 19, 2020 10:38 am Next month: Ray Dalio, Don’t Own Stocks!
I don't think Ray is known for waffling back and forth on positions is he? It seems like a pretty solid track record.
Except his All Seasons Portfolio turned out to be a Fair Weather Portfolio, since it includes 40% long term treasuries.

Edit: Corrected "Seasons" from "Weather"
Last edited by Robot Monster on Thu Nov 19, 2020 4:09 pm, edited 1 time in total.
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Re: Ray Dalio don't own bonds/cash

Post by nisiprius »

shuresm7b1 wrote: Thu Nov 19, 2020 1:41 pm...I don't think Ray is known for waffling back and forth on positions is he? It seems like a pretty solid track record...
1) This is the Bogleheads forum, not the Dalioheads forum. To the extent that we give special credence to any guru, it is not Ray Dalio.

2) With regard to waffling, in 2014, Ray Dalio let Tony Robbins interview him for a chapter of a book entitled Money: Master the Game. If Robbins misrepresented anything Dalio said, Dalio has had six years to object, and he hasn't. Robbins presented a portfolio that any small investor could implement easily using ETFs, one that he said had Dalio had stated, one according to Dalio's experience "will give you and me the increased probability of the highest return in any market environment, as long as we live, with the least amount of risk."

It's described and shown on p. 392. Robbins called it the All-Seasons portfolio, but it is so identified with Dalio that many people call it "the All-Weather portfolio" (the name of one of Dalio's hedge funds).

It is 40% 20-to-25-year Treasuries; 15% 7-to-10-year Treasuries; 30% stocks; 7.5% commodities; 7.5% gold.

It is 55% bonds, and it was supposed to be good for "any market environment, as long as we live."

So I think that is one major waffle, and I think it is cowardly of Dalio not to specifically address the thousands of small investors who are holding this portfolio, think they have been following Dalio's advice, and give them specific directions on what they ought to do. Or clearly disavow Robbins and say "I never said any of that."
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Re: Ray Dalio don't own bonds/cash

Post by JBTX »

shuresm7b1 wrote: Thu Nov 19, 2020 1:47 pm
garlandwhizzer wrote: Thu Nov 19, 2020 11:55 am I think Mr. Dalio makes a good point--that bonds/cash aren't what they have been historically--but to say don't own any of them is pushing it too far. Nothing diversifies equity bear markets better than quality fixed income which is the only really safe port in a severe equity storm. On the other hand the expected return of all quality fixed income now is zero or less in real inflation adjusted terms. Unlike in the past, you pay a significant opportunity cost for this safety because equity of all stripes has significantly positive expected long term returns. It is up to each of us to set that portfolio balance between risk assets for positive returns and safe assets to reduce volatility when equity takes a big hit.

Personally since the March 23 lows I have reduced my fixed income allocation from 40% to 28%. I picked that 28% figure because it provides many years of anticipated living expenses along with my RMDs which always come from selling equity in my IRA and moving it into fixed income in my personal account. In case the bottom falls out of equity for a decade or more I'll survive which is all the assurance I need. There is too much money concentrated in the investing class now to stocks to totally collapse IMO. We'll never return to the historical average PE of 16, more likely we'll hover at twice that or more, which will still produce much better expected returns than bonds.

The entire bond market now is at the most overpriced levels, that is to say under yielding levels, in history. I think the old numbers 60/40 or 50/50 are probably not appropriate now for investors who actually need significant positive real returns to meet their long term financial goals. Bonds will produce zero real, stocks will likely produce well less than historical average returns. Robust portfolio returns are likely to be hard to come by going forward relative to the wonderful past which was dominated by bull markets in bonds and stocks for 4 decades.

We're in a situation now where we've never been before in terms of total global debt load, aging demographics, zero interest rates, and stagnant economic growth. I believe it may be unwise to expect historical rates of return in both bonds and stocks going forward. Backtesting stock and bond returns in a portfolio should not be counted on with a high degree of certainty for future returns. I think the best thing to do is the same as always develop a good plan taking full account of the way things are at present, and to continually invest in it. That plan, if realistic, may not be 60/40 or 50/50.

Garland Whizzer
Really good post. Yeah this is forcing people to either chase returns and take more risk or work more or spend less. There are not many other choices
Yes, it is a very good take on the current situation.

I like listening to Dalio, he is an excellent explainer and is well versed on macroeconomic views and trends. But making actionable moves based on his discussions is difficult. I recently listened to an entire podcast where he was being interviewed and asked where money should be instead of cash or bonds he didn't give a straight forward answer.

I would interpret his response as not specifically to not have cash or bonds, but that right now they really don't benefit an investment portfolio much as they lose money in real terms, and don't provide nearly the protection against stock swings as they used to. Cash or bonds still have a purpose for liquidity needs.
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Re: Ray Dalio don't own bonds/cash

Post by invest4 »

JBTX wrote: Thu Nov 19, 2020 10:13 am The executive summary is Dalio could be right, but he is not clear on what you should have instead, and whatever the case is he can sometimes make substantial changes on a dime that you can't replicate.
Broadly, this is the conundrum we face and why see so many posts asking about alternatives.

Explorer wrote: Thu Nov 19, 2020 10:46 am Here is my 2 cents: if you own stocks (any %), you need a shock absorber to blunt the blow when stocks go down. The shock absorber could be bonds or cash. I know of nothing else that works well as shock absorber.
Marseille07 wrote: Thu Nov 19, 2020 10:44 am It's just that it's very difficult to achieve portfolio stability w/o bonds / cash. Beyond the reach of average buy-and-hold investors. Those who prefer 50/50, 30/70 kind of AA can't stomach 100/0.
While I don't hold any in my own portfolio for various reasons, I believe quite a few people would argue that gold has worked reasonably well. I also utilize bonds and cash.

garlandwhizzer wrote: Thu Nov 19, 2020 11:55 am There is too much money concentrated in the investing class now to stocks to totally collapse IMO. We'll never return to the historical average PE of 16, more likely we'll hover at twice that or more, which will still produce much better expected returns than bonds.
I don't disagree with the idea we will no longer see the historical average PE of 16. However, for me, 30+ is a high price for admission.

garlandwhizzer wrote: Thu Nov 19, 2020 11:55 am The entire bond market now is at the most overpriced levels, that is to say under yielding levels, in history. I think the old numbers 60/40 or 50/50 are probably not appropriate now for investors who actually need significant positive real returns to meet their long term financial goals. Bonds will produce zero real, stocks will likely produce well less than historical average returns. Robust portfolio returns are likely to be hard to come by going forward relative to the wonderful past which was dominated by bull markets in bonds and stocks for 4 decades.
What you are suggesting is not unreasonable, but I am struggling with the trade-off of increased risk at current stock valuations. CAPE at 30+, etc.
bi0hazard
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Re: Ray Dalio don't own bonds/cash

Post by bi0hazard »

livesoft wrote: Thu Nov 19, 2020 10:55 am
shuresm7b1 wrote: Thu Nov 19, 2020 10:27 am
livesoft wrote: Thu Nov 19, 2020 10:09 am Everybody has to decide for themselves and what Ray Dalio says not does factor at all in my decisions
Why would he not factor in ? Do you think his opinions are baseless and of no value ?
Yes.
Exactly. Maybe we should have daily tips by Dalio and Jim Cramer, so we can rebalance every 24 hrs based on their knowledge.
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shuresm7b1
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Re: Ray Dalio don't own bonds/cash

Post by shuresm7b1 »

nisiprius wrote: Thu Nov 19, 2020 2:15 pm
shuresm7b1 wrote: Thu Nov 19, 2020 1:41 pm...I don't think Ray is known for waffling back and forth on positions is he? It seems like a pretty solid track record...
1) This is the Bogleheads forum, not the Dalioheads forum. To the extent that we give special credence to any guru, it is not Ray Dalio.

2) With regard to waffling, in 2014, Ray Dalio let Tony Robbins interview him for a chapter of a book entitled Money: Master the Game. If Robbins misrepresented anything Dalio said, Dalio has had six years to object, and he hasn't. Robbins presented a portfolio that any small investor could implement easily using ETFs, one that he said had Dalio had stated, one according to Dalio's experience "will give you and me the increased probability of the highest return in any market environment, as long as we live, with the least amount of risk."

It's described and shown on p. 392. Robbins called it the All-Seasons portfolio, but it is so identified with Dalio that many people call it "the All-Weather portfolio" (the name of one of Dalio's hedge funds).

It is 40% 20-to-25-year Treasuries; 15% 7-to-10-year Treasuries; 30% stocks; 7.5% commodities; 7.5% gold.

It is 55% bonds, and it was supposed to be good for "any market environment, as long as we live."

So I think that is one major waffle, and I think it is cowardly of Dalio not to specifically address the thousands of small investors who are holding this portfolio, think they have been following Dalio's advice, and give them specific directions on what they ought to do. Or clearly disavow Robbins and say "I never said any of that."
You do have a valid point there sir
JackoC
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Re: Ray Dalio don't own bonds/cash

Post by JackoC »

nisiprius wrote: Thu Nov 19, 2020 2:15 pm
With regard to waffling, in 2014, Ray Dalio [said] "will give you and me the increased probability of the highest return in any market environment, as long as we live, with the least amount of risk."
It is 40% 20-to-25-year Treasuries; 15% 7-to-10-year Treasuries; 30% stocks; 7.5% commodities; 7.5% gold.
It is 55% bonds, and it was supposed to be good for "any market environment, as long as we live."

So I think that is one major waffle
That's a change, but except for the 'as long as we live part' it wasn't outright bad advice from then to now; not as good as 'be 100% stocks' but that has a tendency to be the best advice looking backward. But again minus the rhetorical flourish, I wonder if Dalio would really think he was 'waffling' rather than saying as per Keynes “When the facts change, I change my mind. What do you do, sir?”

On the merits, as I've said many times, perhaps reflecting my own situation as we are all inclined to do, I see no compelling to reason to increase my allocation to risk assets in a conventional split just because expected asset returns have declined. Between 'stocks and bonds', bond yields are 100% certainly lower than past realized bond returns (correcting for lower inflation, look it up, couple of % points), but IMO stock expected returns are lower than their historical by at least as much, IOW the expected equity risk premium isn't any higher than historical realized, maybe also lower. So since I can afford slightly negative real after tax returns on my safe assets, merely shifting to higher % risky assets to 'not miss out' has no attractiveness to me. But obviously one reason central banks lower rates is to drive investors into riskier assets, so shouldn't be a total shock if it drives some people to take more risk.

If the topic is a more fundamentally different approach like 100% stock allocation with tail risk hedging (stock index puts, VIX calls etc) or possible actual alternative risky assets ('active long volatility' strategies etc.), I find that more interesting. I am not trying to sell anything to anybody, but that's an interesting topic to me. Just upping a conventional 60/40 to 70/30 because 'bond yields are low' not so much. Although back to Dalio, seemed to me his basic point, in that very short segment of the video the link was set to, was to say this is an unprecedented situation in which basic relationships may have changed. So for example, if one would 'shoot down' tail risk hedging with rear view mirror graphs showing how 60/40 was better, with the tailwind of secularly falling yields on the 40%, maybe that's not the best way to look at that. Maybe historical graphing is now a quite bad way to draw conclusions on fixed income topics unless you're pretty careful factoring out the secular yield drop. I tend to think so. But running off right now to put all my bank account, CD and muni money into stocks? (with no safety net) Definitely not, for me.
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Re: Ray Dalio don't own bonds/cash

Post by bigskyguy »

garlandwhizzer wrote: Thu Nov 19, 2020 11:55 am ....There is too much money concentrated in the investing class now to stocks to totally collapse IMO. We'll never return to the historical average PE of 16, more likely we'll hover at twice that or more, which will still produce much better expected returns than bonds.

The entire bond market now is at the most overpriced levels, that is to say under yielding levels, in history. I think the old numbers 60/40 or 50/50 are probably not appropriate now for investors who actually need significant positive real returns to meet their long term financial goals. Bonds will produce zero real, stocks will likely produce well less than historical average returns. Robust portfolio returns are likely to be hard to come by going forward relative to the wonderful past which was dominated by bull markets in bonds and stocks for 4 decades.

We're in a situation now where we've never been before in terms of total global debt load, aging demographics, zero interest rates, and stagnant economic growth. I believe it may be unwise to expect historical rates of return in both bonds and stocks going forward. Backtesting stock and bond returns in a portfolio should not be counted on with a high degree of certainty for future returns. I think the best thing to do is the same as always develop a good plan taking full account of the way things are at present, and to continually invest in it. That plan, if realistic, may not be 60/40 or 50/50.

Garland Whizzer
Succinct, honest, and I suspect accurate. To sum, stocks are expensive relative to historical norms, bonds are expensive relative to historical norms, and cash returns nothing nominally. The equity risk premium has historically fluctuated significantly (-6% in early 1800s, >10% in post-WW2 decade), but has averaged in the 3-5% range, lower when equities are richly valued, higher when equities are poorly valued. Given the present environment, one can realistically estimate realreturns going forward:

Cash -2%
10 Year Treasury -1%
Equities 2-4%

I've been in the markets since the Reagan presidency, and cannot recall such an extreme investing environment. I suspect you are correct, demographics, debt, deglobalization, and slowed economic growth present headwinds that will make future investing very challenging. Time to have eyes wide open, and expectations appropriately tempered.
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shuresm7b1
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Re: Ray Dalio don't own bonds/cash

Post by shuresm7b1 »

So do we change the motto to "stay the course if you want to make CD returns" ?
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Re: Ray Dalio don't own bonds/cash

Post by Robot Monster »

bigskyguy wrote: Thu Nov 19, 2020 4:13 pm Given the present environment, one can realistically estimate realreturns going forward:

Cash -2%
10 Year Treasury -1%
Equities 2-4%
BlackRock has a page on asset return expectations over various time periods you might be interested in checking out. link
“There are no answers, only choices.” ― Stanislav Lem, Solaris
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shuresm7b1
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Re: Ray Dalio don't own bonds/cash

Post by shuresm7b1 »

Robot Monster wrote: Thu Nov 19, 2020 6:18 pm
bigskyguy wrote: Thu Nov 19, 2020 4:13 pm Given the present environment, one can realistically estimate realreturns going forward:

Cash -2%
10 Year Treasury -1%
Equities 2-4%
BlackRock has a page on asset return expectations over various time periods you might be interested in checking out. link
Not looking good for bonds for the next 10 years according to that site. Ouch
Marseille07
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Re: Ray Dalio don't own bonds/cash

Post by Marseille07 »

shuresm7b1 wrote: Thu Nov 19, 2020 6:50 pm
Robot Monster wrote: Thu Nov 19, 2020 6:18 pm
bigskyguy wrote: Thu Nov 19, 2020 4:13 pm Given the present environment, one can realistically estimate realreturns going forward:

Cash -2%
10 Year Treasury -1%
Equities 2-4%
BlackRock has a page on asset return expectations over various time periods you might be interested in checking out. link
Not looking good for bonds for the next 10 years according to that site. Ouch
So? That means equities could do well, and that's the whole point of Boglehead-style AA.
columbia
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Re: Ray Dalio don't own bonds/cash

Post by columbia »

Robot Monster wrote: Thu Nov 19, 2020 6:18 pm
bigskyguy wrote: Thu Nov 19, 2020 4:13 pm Given the present environment, one can realistically estimate realreturns going forward:

Cash -2%
10 Year Treasury -1%
Equities 2-4%
BlackRock has a page on asset return expectations over various time periods you might be interested in checking out. link
Who knows, but I took an odd pleasure in seeing that they also thing LTT are a bad idea. The worst, at timeframe most of interest to me (15 years).
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shuresm7b1
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Re: Ray Dalio don't own bonds/cash

Post by shuresm7b1 »

Makes me want to tilt back into stocks 70 30
bigskyguy
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Re: Ray Dalio don't own bonds/cash

Post by bigskyguy »

Robot Monster wrote: Thu Nov 19, 2020 6:18 pm
bigskyguy wrote: Thu Nov 19, 2020 4:13 pm Given the present environment, one can realistically estimate realreturns going forward:

Cash -2%
10 Year Treasury -1%
Equities 2-4%
BlackRock has a page on asset return expectations over various time periods you might be interested in checking out. link
GMO does routine 7 year predicted returns, and their numbers are even more sobering.
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mrspock
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Re: Ray Dalio don't own bonds/cash

Post by mrspock »

shuresm7b1 wrote: Thu Nov 19, 2020 9:56 am What do you guys think of Ray Dalio's comments on not to own bonds or cash ? It seems pretty extreme but with them making so little is it so wrong ? It seems to me he is talking about years and not just the next few months. Thanks for any ideas.

https://youtu.be/A-noFNHcrlM?t=341
How much money does he have? This might help me decide if this would work for me.
RAchip
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Re: Ray Dalio don't own bonds/cash

Post by RAchip »

Its hard to understand what he actually means. I believe what he means is that your investment portfolio shouldnt contain cash. Everyone needs a cash reserve for living expenses and unexpected events. But of the amount you consider investable money, you shouldnt have any bonds or cash.
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Re: Ray Dalio don't own bonds/cash

Post by Jeff Albertson »

You are not Ray Dalio. Some say he has a net worth of about $20 billion. If all that is in the stock market & the stock market drops 99.9%, he still has $20 million. He can afford to take risk, can you?
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