Paul Tudor Jones: We are getting ready to deploy our recession playbook

Paul Tudor Jones: We are getting ready to deploy our recession playbook

Paul Tudor Jones became famous after appearing in the PBS documentary The Trader in 1987 where he anticipated a stock market crash. He used stock index futures to triple his capital under management during the Black Monday crash in 1987 with large short positions while most other traders were ruined or suffered huge losses. His hedge fund had a 125.9% return on that one day after fees with an approximate $100 million profit. This made him a trading legend. His fund went on to have great returns for decades with minimal drawdowns.

Paul Tudor Jones Interview

Paul Tudor Jones’ thoughts on the recent recession during his interview on CNBC:

“You know if you think about every decade the 70s were the decade of inflation the 80s was a decade of kind of boom bust, huge swings in dollar volatility. The 90s was equitization the dot-com bubble. The 2000s was the mortgage bubble and the great financial crisis. The teens or the peak of globalization and probably the peak of central bank experimentation with monetary policy, right. The 20s I’m afraid are going to be that period where
we really focus on debt dynamics country by country, fiscal deficits, and the need to run certainly fiscal policy in a way that gives people confidence in the long run value of the currency. The problem that we’ve had really for
the last 12 years is that we’ve done this massive experimentation with monetary policy where we suppressed
yields and we did this massive experimentation with the fiscal side during the pandemic, and so my guess is the 20s are going to be just the opposite of both. We’re already seeing that right now from the central bank. Whoever is the president in 24 is going to be dealing with debt dynamics that are so dire.”

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“So dire that what this is the 1970s?”, asked the CNBC host.

“No, so dire that that we’re going to have fiscal retrenchment and that fiscal retrenchment means that if we don’t have physical retrenchment, then everything that we spent, if you think about the teens which was all about suppressing yields, right. I think the 20s will be just the opposite I mean higher term premiums and bond markets, higher term premiums and stock markets. It’ll be just the opposite of what we experienced the
last decade.  So in a time when there’s too much money which is why we have inflation and too much fiscal spending, something like crypto specifically Bitcoin and ethereum where there’s a finite amount of that. That will have value at some point someday. I don’t know when that will be, but it will have value that scarce and the value.” Jones continued.

“At a much higher number than where we are today?”, asked the host.

Paul Tudor Jones responded, “Oh I think so yeah. I would think, so we’re probably getting ready to go through the recession playbook more likely than not, sometime. I don’t know whether it started now or whether it started two months ago. You always find out and you’re always surprised about when recession officially starts but I’m assuming we’re going to go into one there’s a specific playbook around that.”

“And what what is that playbook?” he asked

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“Well, so that Playbook is most recessions last about 300 days from the commencement of it, the stock market’s down say 10 percent. The first thing that will happen will be short rates will stop going up and we’ll start going down before the stock market actually bottoms. So that’s why you could argue that two-year rates here may have some value or somewhere through here and term premium gets put back into a variety of assets into bond markets, into stock markets and that’s obviously what’s happening. So you’re seeing multiples compressed in the stock market as they should and you’re starting to see bond market sell off because again term premiums being put back into them. So I would say when we get into that recession there will be a point when the Fed stops hiking. There will be a point when it starts to either slow down or even at some point it’ll reverse those cuts and when
that happens you’ll have it, you’ll probably have a massive rally in a variety of beaten down inflation trades.”, Jones explained further.

“But when do you expect that to happen?”, interviewer asked.

“Look we’ve got rates at three points, unemployment rates at 3.6 percent. I believe it’s very possible we haven’t even started yet. It’s very possible that when the NBR goes back and says here’s when the recession officially started that it’ll be somewhere within a month or two of now maybe. I doubt again with the unemployment rate so low that they would date it earlier than this. They look at six or seven different measures and you’re always surprised ex-posts when they do.” Paul Tudor Jones explained.

Paul Tudor Jones Net Worth

Paul Tudor Jones current net worth in 2022 is approximately $7.5 billion and it continues to grow. He’s currently ranked as the 266th richest person in the world on Forbes.

He became a billionaire through his skills of trading through the leverage of other people’s capital and steadily compounding his fund’s growth of assets under management by making his investors richer and attracting more money.

He is arguably one of the greatest traders of all time with his consistent returns and small drawdowns in capital. His fees and share of profits from investors in his fund made him incredibly wealthy over the years. His early success in the markets and big early Black Monday triple digit returns made him a legend in the trading and money management worlds.

He is incredibly passionate about the markets and believes the right risk management and a humble mindset are the core of successful trading. He has used many different trading styles in his career, trend following, reversion to the mean trading, news driven events, and he also watches the macro-economic environment which is what we see a glimpse of in the above interview.

Paul Tudor Jones: We are getting ready to deploy our recession playbook
Image Created by Holly Burns