Economics of investing in bonds have become stupid: Ray Dalio

As of late, bonds have been in a 40-year bull market. This implies that a lot of investors that are long on the asset have not been seriously stung by a price decline.

March 16, 2021 / 04:50 PM IST
Ray Dalio (File Photo)

Ray Dalio (File Photo)

Ray Dalio, the founder of Bridgewater Associates, feels that the economics of investing in bonds have become "stupid" and the US overborrowing is pushing investors into attractive Chinese bonds.

According to the hedge fund founder's Linkedin Blogpost titled, "Why in the World Would You Own Bonds When..", the real yields of reserve currency sovereign bonds are negative and are their lowest ever.

During this period, governments, particularly the United States, is adding on to this pile of debt.

"The economics of investing in bonds (and most financial assets) has become stupid," Dalio said, adding that after taking into account inflation, bonds make an even worse investment.

As of late, bonds have been in a 40-year bull market. This implies that a lot of investors that are long on the asset have not been seriously stung by a price decline.

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"Based both on how things have worked historically and what is happening now, I am confident that tax changes will also play an important role in driving capital flows to different investment assets and different locations," the Bridgewater founder said, adding that if history and logic are taken as a guide for what's to happen, policymakers who are short of money will raise taxes.

This is because policy makers will not like movement of capital out of debt assets into other storehold of wealth assets and tax domains.

These policymakers could well then impose prohibitions on such movements, Dalio said, adding that tax changes could be more shocking than expected.

-- With inputs from Reuters
Moneycontrol News
first published: Mar 16, 2021 04:50 pm

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