In my September issue, I talked about how Ray Dalio started his fledgling company -- Bridgewater Associates -- out of his apartment in 1975 and went on to grow it into the largest hedge fund in the world.
His accolades include consistently outperforming his peers (which is why his company is the world's largest hedge fund) to sounding the alarm on the looming financial crisis in 2008. It was during the financial crisis -- when few listened to him -- that he really made his mark. While most of his peers were losing money or going belly-up, he turned a profit.
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Today, when Dalio says something, everyone listens. And what he said at the World Economic Forum in Davos, Switzerland, on Tuesday might surprise you...
With stock indices notching new highs on a near daily basis and a bull market that's getting long in the tooth, Dalio said that "If you're holding cash, you're going to feel pretty stupid."
Yup, you read that correctly. He said that if you're sitting on the sidelines, it'll likely cost you.
Dalio went on to say that we're in a "Goldilocks period" right now. "Inflation isn't a problem," he noted. "Growth is good, everything is pretty good with a big jolt of stimulation coming from changes in tax laws." In other words, Dalio thinks that the equity market is the place to be invested right now. The U.S. market is healthy and the global economy is following in its footsteps.
Firing On All Cylinders
It's tough to disagree with Dalio when you consider the facts:
Fourth-quarter real gross domestic product (GDP) -- which was released today -- came in at a solid 2.6% growth. This comes on top of Q2 and Q3 GDP growth of 3.1% and 3.2%, respectively. The unemployment rate is at 4.1%, the lowest level since January 2001.
The current U.S. economic expansion has lasted 103 months and counting. Small Business Optimism is at the highest level since September 1983. Recent corporate earnings growth is strong at between 9% and 10%, above the historical average of 6%.
For the first time on record, the S&P 500 produced positive total returns in each month last year. And to top it off, recent tax cuts for corporations dropped from around 39% to 21%, with many large corporations repatriating massive amounts of cash held overseas.
Yes, things are looking great. Optimism about the economy is high. And you have the leader of the world's largest hedge fund telling you to get off the sidelines...
But all this bullishness reminds me of a famous quip by Warren Buffett: "Be fearful when others are greedy and greedy when others are fearful." Heeding this advice has paid off handsomely for Buffett throughout his investing career. And it's something to keep in mind in today's environment.
Now, don't get me wrong. I'm going to continue to enjoy the fruits of this near historic bull market, but I want to remind you that we must remain nimble and disciplined. Don't get greedy. If it's time to book gains or cut losses, we will do so. We will follow our sell signals.
Taking The Guesswork Out Of Investing
I do think the bull market has plenty of room to run and I plan on being a participant. After all, as I noted in September, some of the biggest gains come at the end bull markets... the S&P 500 has already ripped off a 15% return in the four months since that issue.
This week, my Maximum Profit system has tagged three stocks as buys: a small independent oil and natural gas company, a global investment management firm and an undervalued semiconductor stock. All three have strong tailwinds, but the last one, the semiconductor stock, has one of the highest scores my system has ever logged.
With luck, we'll one day be able to add these stocks to our long list of homeruns. Over the past three years, my subscribers and I have seen gains like 181% on Lannett (NYSE: LCI), 135% on Westmoreland Coal (Nasdaq: WLB), and a striking 242% on Bitauto (NYSE: BITA). Each time, the Maximum Profit system has told us exactly when to buy and when to sell, while we just sit back and count the returns.
It's that easy.
So if you're interested in making this kind of money with runaway stocks, I strongly recommend you give my premium service, Maximum Profit, a risk-free trial. That way, you'll have a winning system that uses proven fundamental and technical indicators working for you. You'll no longer have to worry about what to buy, when to buy -- or when to sell. Simply let Maximum Profit do the work for you. To learn more, simply follow this link.
This article originally appeared on StreetAuthority.