‘I’m short on funds’: Billionaire Ron Barron claims US covers its wars, pandemics by ‘decreasing your money’s value’ – and that’s why he never acquired any bonds. What are your thoughts?Thank you for reading this post, don't forget to subscribe!
The financial markets are sensitive to geopolitical conflicts. Amid the crisis in Ukraine and the Middle East, investors are grappling with growing uncertainty. This may prompt some to consider altering their asset allocation strategy.
For wealthy investor Ron Baron, stocks continue to be paramount.
don’t pass up
During a recent CNBC interview, he was questioned about his ongoing stock purchases in light of the global conflicts.
“Every single day,” was his response. “I’m surprisingly optimistic.”
The founder and CEO of Baron Capital emphasized that inflation plays a significant role in his preference for equities.
“Whenever there’s a war, a pandemic, there’s inflation. The government has to foot the bill,” he elaborated. “And when it’s over, they have to settle it. They don’t do that by paying off a debt, they do it by decreasing your money’s value.
This has profound implications for safeguarding the purchasing power of your money.
‘I’m always invested’
There are several possible explanations for the surge in price levels following the COVID-19 pandemic: increased purchasing power from stimulus, disrupted supply chains raising costs, and a lenient monetary policy maintaining low interest rates and encouraging borrowing and spending.
The Federal Reserve has significantly raised interest rates to combat mounting inflation. However, prices for essentials like food and housing remain significantly above pre-pandemic levels.
Baron believes uncontrolled inflation is not a one-time event.
“We believe that inflation will halve the value of your money roughly every 14 or 15 years, which translates to four or 5% annual inflation. That’s been my entire lifetime,” he explained.
During periods of high inflation and escalating interest rates, bonds are typically not viewed as great investments. Following aggressive rate hikes from the Fed, bond prices have markedly declined. New bonds are issued at higher rates, making existing bonds less appealing. The fixed interest rate of the bond may not keep pace with the inflation rate, which means that in terms of real returns (interest rate minus inflation rate), the bond could effectively have a negative yield.
And you won’t see Barron Clipping Bond coupons any time soon.
“I’ve never owned any bonds,” the elder stated to CNBC. “And I’m short on funds too.”
In short, Barron remains focused on stocks. “I’m always invested,” he affirmed. “And whenever I have the opportunity to acquire more, I do.”
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Barron was asked about Tesla (TSLA), not surprising as he has been a long-time Tesla mega-bull. His company has been investing in the electric vehicle giant since 2014.
The company’s shares are poised to more than double by 2023. But Barron is convinced there’s still greater potential.
“Wait until you see what happens when they suddenly start selling $25,000 per car instead of $40,000 per car, which is going to occur in about a year or a year and a half,” he divulged to CNBC.
Earlier this month, he told MarketWatch that he anticipates Tesla to reach a market cap of $4 trillion within 10 years. Tesla, also a leading solar energy company, currently holds a market cap of around $700 billion.
Of course, share prices can fluctuate wildly and even Tesla doesn’t always ascend in a linear fashion. While the EV manufacturer’s shares have surged this year, they are still over 40% lower than their all-time high in November 2021.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.