Billionaire investor Ron Baron has expressed his belief that stocks remain a solid investment despite geopolitical conflicts and global crises. In an interview with CNBC, Baron emphasized his bullish stance on stocks and highlighted inflation as a key factor in his preference for equities.
Baron explained that during times of war and pandemics, governments resort to inflation to pay for the associated costs. He noted that instead of paying down debt, governments make money worth less as a way of repayment. This has significant implications for individuals looking to protect the purchasing power of their money.
Baron also discussed the issue of inflation in the context of the COVID-19 pandemic. He pointed out that rising prices could be attributed to factors such as increased purchasing power from stimulus checks, supply chain disruptions, and easy monetary policies that kept interest rates low. While the Federal Reserve has raised interest rates to combat inflation, essential commodities like food and housing remain significantly more expensive than before the pandemic.
According to Baron, inflation is not a one-time event but a recurring phenomenon. He stated that inflation reduces the value of money by about half every 14 or 15 years, with an annual inflation rate of four to five percent. In light of high inflation and rising interest rates, bonds are generally considered less favorable investments. Baron disclosed that he has never owned a bond and prefers to focus on stocks instead.
When asked about Tesla (TSLA), Baron, a long-time Tesla mega-bull, expressed optimism about the company’s future. He mentioned that Tesla’s shares have more than doubled in 2023 and predicted further potential growth as the company starts selling cars at lower prices. Baron expects Tesla’s market cap to reach $4 trillion within the next decade, compared to its current market cap of around $700 billion.
It should be noted that stocks, including Tesla, can experience significant fluctuations and do not always follow a linear upward trajectory. While Tesla’s shares have rallied this year, they remain down over 40% from their all-time high in November 2021.
In conclusion, Baron’s perspective on stocks as a long-term investment option underscores his confidence in their ability to withstand geopolitical conflicts and economic challenges.
