Ray Dalio, one of the most successful hedge fund managers of all time, spoke with CNBC's Maria Bartiromo at the Council on Foreign Relations this morning.
The hedge fund god made some interesting comments on gold.
Here's what we've transcribed from his interview. (emphasis ours)
To this, Bartiromo asked if he owns gold.
Here's what we've transcribed from his interview. (emphasis ours)
"Gold is a currency. Throughout the
history, I won't tell you in length, money was like a check in a
checkbook and what you would do was get your gold and gold was like a
medium. So gold is one of the currencies-- We have dollars, we have
euros, we have yen and we have gold.
And if you get into a situation where
there's an alternative in this world, where we're looking at 'What are
the alternatives?' and the best alternative becomes clearly one thing,
something like gold, there becomes a risk in that.
Now it doesn't have the capacity. The
capacity of moving money into gold in a large number is a extremely
limited. So the players in this world that I have contact with that
move that money really don't view gold as an effective alternative, but
it could be a barometer and it is an alternative for smaller amounts of
money.
To this, Bartiromo asked if he owns gold.
"Oh yeah. I do. I think
anybody, look let's be clear, that I think anybody who doesn't
have...There's no sensible reason not to have some. If you're going to
own a currency, it's not sensible not to own gold. Now it depends on
the amount of gold. But if you don't own, I don't know 10%, if you
don't have that and that depends on the world, then there's no sensible
reason other than you don't know history and you don't know the
economics of it.
But, I. Well, I mean cash. So
cash...view it in terms as an alternative form of cash and also view it
as a hedge against what other parts of your portfolio are. Because as
traditional financial assets, and so and in that context as a diversifier, as a source of that, there should be a piece of that in gold is all I'm saying.
"But anyway, in that notion, what I'm
talking about here, in terms of your reflection, that putting aside
gold, I don't want to draw an inordinate amount of attention toward
gold, but I would want to say in this world of liquidity and the world
trying to find out 'What is the place?' in which also think about it for
basically you get no interest rate. So the question is, 'Is cash under
the bed better than treasuries?' You could be quite close to cash being
under the bed better than treasuries, right? Because essentially you
know you'll get it back if it's under the bed or in a bank and they're
not giving you any money on it anyway.
And so when you're looking at an
international investor, someone like I don't know a Chinese investor or
something, and you say 'I'm going to do this and you're going to give me
zero interest rate for that.' We are at one level and the question is
'does there become emerging some clear alternative?' And if
there becomes a clear alternative we have to worry about that because
that will be the notion of let's say Japan. If we think, in Japan,
there's all this Japanese save and they buy their bonds and that can go
on for a very long time and it can go on here for a very long time. The
question is 'what are the alternatives?' and that is create shifts.