Billionaire investor Ray Dalio says the US is 'on the wrong path' after inflation hits a 31-year high

Ray Dalio, Thomas Peter/Reuters founded the hedge fund Bridgewater.
Ray Dalio, a billionaire investor, has stated that the US is on the "wrong path" after inflation soared to a 31 year high.

Investors should be aware that high inflation can cause wealth erosion, even when portfolios are growing.

Dalio stated that the US must focus on increasing productivity if it wishes to continue growing and prospering.

Ray Dalio, a billionaire manager of hedge funds, said that the US is on the "wrong path" after October's inflation spiked to a 31-year record.

Dalio published a newsletter on LinkedIn, warning people that high inflation is eroding their wealth. He warned people not to be deceived into believing they are getting richer simply because their financial portfolios have increased.

He issued a harsh warning to the US: It must spend more on investment to increase productivity than on fuel consumption.

The United States is now spending more money than it is earning and is paying for it with devalued money. We must increase productivity and cooperate to improve. Dalio stated that we are currently on the wrong track.

Investors intervened after data showed that the US consumer price index inflation rose to 6.2% in October. This is the highest level since 1990. This was due to rising fuel, shelter and food prices, as the US economy recovers from the coronavirus epidemic.

Continue reading: Goldman Sachs claims these 30 stocks have optimal pricing power and will reap the most from inflation hovering at 30-year highs in an ongoing supply-chain crunch.

Dalio is the co-chief investment officer of Bridgewater Associates, a hedge fund worth $150 billion.

According to him, the Federal Reserve and the US government had created stimulus policies that caused the high inflation. He wrote that the Federal Reserve and the US government are printing more money at the moment.

"Some people mistakenly believe they are getting wealthier because their assets are rising in value, but they don't see how their purchasing power is being reduced." He said that those with cash are the ones who are most affected."

Inflation is a major concern for investors as it can erode the portfolio's value. If an asset returns 3% per year, but inflation is 4% in a given year, then the investor has lost 1% in real-world terms.

Despite the recent price rises, the stock market has remained buoyant in recent weeks. Analysts believe this is due to record-low real returns on bonds, which means there is no other option than buying stocks.