Billionaire investor Ray Dalio no longer thinks 'cash is trash' - and says the Fed has hiked interest rates enough for now

After declaring "cash is trash" in the past, Ray Dalio now sees the US dollar as a good investment.

I no longer think cash is trash because the facts have changed.

He said that the current interest rates and the Fed's shrinking of the balance sheet are neutral. The short-term interest rate is currently about right.

Cash was dismissed as worthless by the billionaire and co-chief investor in April 2020 as he expected near-zero rates and a ballooning money supply to erode the value of dollars over time.

The Federal Reserve shifted from pumping dollars into the economy to reducing its bond holdings as a result of hiking rates. Interest rates on bank deposits are going to rise, rival assets are going to perform less well, and there's less pressure on the dollar from supply growth.

The dollar's value is no longer a concern for Dalio. The US dollar index has risen to a 20-year high this year.

The second part of Dalio's message suggests that he's content with the current fed funds range of 3% to 3% and would be more bullish on the dollar if rates went up. He recently predicted long-term rates of more than 4.5%, indicating he sees more rate hikes in the future.

There are still doubts about the dollar. Inflation, which hit a 40-year high of 9.1% in June, is a key threat because it reduces the purchasing power of dollars.

He said in May that cash is still garbage. Do you know how quickly you lose buying power?

In April 2020, the Fed wouldn't be able to raise rates high enough to compensate for inflation and generate a real return for investors, as suggested by the man. There's a lot of concern about the central bank hiking and causing the US economy to go into a recession.

Inflation remains high and there may be a limit on how high rates can go, so it seems that Dalio is less bearish on cash.

It's worth pointing out that he hints at his opinions on other assets. If he's warmed to the dollar, that suggests he's less optimistic about non-cash assets than before, and that the dollar will hold onto its gains against rivals this year.

There are a number of reasons that stocks could be in for a big rally in the fourth quarter.