Ray Dalio, the founder of hedge fund behemoth Bridgewater Associates, believes investors have not necessarily invested on a sound basis and that it is a condition that must eventually be rectified.
& # 39; They sell dreams of not selling revenue, and they don't even sell a path to earnings. & # 39;
The prominent investor during a particularly disappointing CNBC interview on Tuesday suggested that investors are flush with cash due to monetary policy, but have not been discerning about choosing investment strategies. They buy dreams rather than earnings and shares, he said.
His comments come as WeWork parents We Co. canceled a prominent public sale of shares amid a delight at the business model and valuation.
At the same time, the results for the third quarter have fared better than feared, but have otherwise been weak on absolute terms.
Dalio, whose funds total around $ 1[ads1]50 billion in managed assets, painted a particularly bleak picture of financial markets that have managed to record highs over time after a good last month.
Dow Jones Industrial Average
DJIA, + 0.22%
registered its first closing high on Monday, July 15, beginning in the S&P 500
and Nasdaq Composite
COMP, + 0.14%
in the record, amid growing hopes that a protracted trade dispute between China and the United States can be resolved.
Read : Are jobs and trade news blind investors for stock market dangers ahead?
The hedge fund investor also said he believed monetary policy is "fixed … you cannot raise prices because as a result of the stimulus, companies and various entities have much more debt," he said.
Therefore, he warned that the financial markets could face a "big squeeze."
Dalio told CNBC at the Greenwich Economic Forum that he felt companies would fight to increase profit margins, which have been near records and with a higher likelihood of producing lower margins when companies are struggling to cut costs further than they already have.
"There are not many things to push it higher," Dalio said, explaining that profit margins had increased from 7% to 14%, according to projections.
The 70 The year-old investor also lamented the US government's budget deficit, which is just under a billion dollars in the just-closed fiscal year, according to the latest, almost official estimate from Cong ressional Budget Office.
Check out an excerpt from the interview below: