Global Courant
Billionaire investor Ray Dalio thinks U.S. government bonds will become risky as the country plunges deeper into the debt crisis. “I think it’s a very risky investment,” Dalio said Monday on CNBC’s “Squawk on the Street” when asked about Treasurys. “The risk is not measured by whether you pay back. Their only obligation is to give you money that they can print. History has repeatedly shown that when you are in a position where governments cannot pay back, it is their obligation to pay back (what) the printing press can produce.” The founder of Bridgewater Associates, the world’s largest hedge fund, said government bond redemptions are increasingly hurting government spending. Meanwhile, a rapid rise in interest rates has led to major losses at institutions, including the Federal Reserve, he said. “The Federal Reserve’s losses are largely due to holding bonds that have fallen in value and therefore lost money and funding with interest rates that are too high,” Dalio said. Another factor is possible sanctions against foreign countries for buying government bonds, said the much-followed investor. “Other countries are still increasingly concerned about sanctions,” Dalio said. “If you get them to sell the bonds, then that’s a real problem. So because that means either interest rates go up a lot more, the central banks have to step in and print a lot. That’s where we have to be wary are from.” In such an environment, equities tend to outperform government bonds, Dalio said. He recalled that in 1971, when President Richard Nixon ended the convertibility of the dollar to gold, the stock market bounced back. “The valuations of money, the printing of money, and so forth supported the stock market versus a bond market. It devalues money,” Dalio said. The S&P 500 is up more than 12% this year, back above 4,300, near its highest level since August. .SPX YTD mount SPX in 2023
