Sell stocks. They are too risky. There's too much going against them. That is what we heard. Why?
One, the wealth gap is too great in this country and that's going to lead to a form of politics that will hurt stocks. Much higher tax rates are coming if the Democrats win. We could be on the verge of a 70% tax rate.
Two, we are late in the economic cycle and could be very close to a recession.
Three, there is an inability of central banks to ease because they have already eased and nothing good happened. Why would anything good happen going forward? Aren't we in the "cauldron that defines 2019-2020?"
Cogent? Absolutely. Scary? Totally. Sell all stocks, hundo p, especially if someone saying it is an acknowledged hedge fund genius.
Someone like Ray Dalio.
We revere Ray Dalio. He's been one of the greats. His Bridgewater Funds are so sensational that he is in the pantheon of geniuses and is one of the world's richest people. You go against him, you are a fool.
So on January 22, when he said these things with far more negative tidbits sprinkled in, you got the fear of God or the Wrath of Kahn, earwig in the ear and all, if you continued to own equities.
Now we look at the firmament and Dalio was down 4.9% for the year so far. That's fine for him. He won't miss it.
But how about you? Dalio gave you some very ethereal central banker and political reason about how the economy would turn soft soon and no one could stop it.
Those issues would put us in the cauldron.
The fact, is, though, they didn't. Sure, there are issues about politics that could impact the stock market. We have Democratic candidates that could rock things. But right now the leading Democratic candidate, Joe Biden, might be as much business as usual as you could get from a Democrat. And President Trump, like him or hate him.
We are in earnings season -- and while there is a slowing versus last year, it isn't considerable and many companies are beating the estimates.
And it turns out that Jay Powell changed his mind and is talking about cutting rates, which is spurring the market. The 10-year was at 2.75% when Dalio spoke to Squawk Box at Davos.
Now it is at 2% and the competition to stocks has dropped dramatically.
I do not mean to pick on Dalio. I respect his work. You can't not.
I am simply saying that once again we listened to a guru -- a word I hate -- and the guru was full of sound and fury, but signifying nothing having to do with the stock market. Yet, I think he caught and amplified the zeitgeist, which made you very negative on stocks.
Now he can't take it back. He's on Youtube saying it. But how many people will go back and look at the tape? If you did, one word comes to mind: wrong. He was wrong.
You want to sell now before that litany plays out. I got it. But I recap all of this because I need you to have a declaration of independence against anyone who has a broad and sweeping rap against stocks.
Oh and for all you know, Ray's changed his mind. You, however, have no right or access to what he's saying.
Is it a sucker's game to listen to anyone as smart as Dalio?
No.
Is it a sucker's game to act on it?
Simple word: Yes. You are borrowing someone else's thinking instead of your own. That rarely works. Remember the reverence with which his words were received, the gospel even. And then remember how wrong he was.
It could make you, or at least save you, some money.
