A hedge fund manager warns against US debt

American businessman Ray Dalio, founder of the Bridgewater hedge fund, warned against American debt, considering that bonds are not a good investment in the long term.

The billionaire investor confirmed, during his speech at the 10th Milken Asia Institute Summit in Singapore, that the US Treasury may sell huge amounts of bonds as the federal deficit expands, pointing out that the situation also represents a global problem.

He warned that if investors did not get a high enough real interest rate, they would sell those bonds.

The American billionaire said, “The imbalance between supply and demand is not limited to the size of new bonds only. Rather, it is a question of, “Would you choose to sell bonds?” Dalio said: “I personally believe that long-term bonds are not a good investment,” noting that if the sale occurs, it will force interest rates to rise further, as the market needs to attract bond buyers. This means that the monetary authorities will face a difficult task

He added, “When interest rates rise, the central bank must then make a choice: Does it allow them to rise and bear the consequences, or does it then print money and buy those bonds?” “This has inflationary consequences,” Dalio said. Therefore, we are currently witnessing this dynamic,” he said, noting that the bond market is drowning in American debt. In just one quarter, the Treasury Department flooded the market with $1 trillion worth of Treasury bills

Meanwhile, with $7.6 trillion of US debt maturing in less than a year, debt servicing costs will likely mean a slight rise in interest rates.

When Dalio was asked later at the Milken event for his investment advice, he said: “I don’t want to have debt, you know, bonds and things like that. “I think cash is a good investment temporarily at the moment.”

It is worth noting that Ray Dalio is an American businessman, founder of Bridgewater Investment Company, one of the largest hedge funds in the world. In 2012, Dalio appeared on Time 100’s list of the 100 most influential people in the world. In 2011 and 2012, Dalio appeared in Bloomberg magazine as one of the 50 most influential people in the world.