Jones, a Wall Street investor known for his macro trades, particularly his bets on interest rates and currencies, has amassed an estimated wealth of $US5.1 billion ($7.4 billion), according to Forbes Magazine. Having for years bemoaned the lack of market volatility because of quantitative easing, he warned that during the next downturn the US will face a dangerous expansion of its deficit.
Wall Street’s S&P 500 benchmark index is up 23 per cent this year, and the US Federal Reserve has cut rates three times. The budget deficit widened to almost $US1 trillion in the latest fiscal year, surging to the highest level since 2012 as President Donald Trump cut taxes and boosted spending.
Because the world is looking for a yield or something, companies can sell dreams rather than earnings.
Fellow billionaire investor Ray Dalio
Jones was speaking with fellow billionaire fund manager Ray Dalio on Tuesday at the investment conference Greenwich Economic Forum in Connecticut. Dalio said that another effect of low rates is that investors are more willing to listen to companies selling ambitions rather than making a profit.
“Because the world is looking for a yield or something, companies also can sell dreams rather than earnings,” he said. “So the number of companies that produce earnings is the lowest since the dot-com bubble in terms of their need because you can sell the dream.”
Startups including ride-sharing business Uber Technologies have attracted investors despite not producing profits, in part because of the strength of their branding and strategic plans.
Jones also said next year’s presidential election “will be more meaningful than any in my lifetime.”
The S&P 500 would drop about 2 per cent if Democratic Senator Elizabeth Warren were to win in 2020, Jones has previously said.
Warren, who advocates for a 2 per cent tax on America’s richest families, “Medicare for all” and new regulations on private equity, has been stoking fear on Wall Street as she’s gained momentum in the lead-up to the Democratic primaries.
Hedge fund managers including Steve Cohen, Rob Citrone, and Leon Cooperman have warned she would tank the market.
Dalio focused much of his comments on economic inequality in the US. He said the country’s wealth gap will not be fixed unless Trump and other leaders take charge of what he called a “national emergency.”
Economists, policy makers and presidential candidates have been grappling with how to narrow the widening divide between the rich and poor. The issue shaped the 2016 presidential race and has emerged as a key theme among Democrats in the current contest, particularly Warren and Senator Bernie Sanders.