A month ago, Paul Tudor Jones explained a decision to buy Bitcoin by telling clients that the best way to “maximize profits” is to “own the fastest horse”.
Bitcoin isn’t a horse. Investors aren’t jockeys. And this isn’t supposed to be a racetrack. Clients are partners, and they should be treated as such, not subjected to the vagaries of a digital token which, on any rational assessment, is inherently worthless. “I am not a hard-money nor a crypto nut”, he promised.
As amusing as that is, the same caveat I employed on Monday while having a good-natured laugh at Stan Druckenmiller’s expense applies to Jones. He’s no joke. So, if he wants to invest in Bitcoin as a hedge against inflation, who am I to lampoon him? Nobody, I suppose. And yet, when the “low single-digit” exposure to Bitcoin he apparently took on in one of his funds ends up worthless, I hope he doesn’t act surprised.
Fast forward four weeks from Jones’s declaration (in the same market outlook piece quoted above) that “we are witnessing an unprecedented expansion of every form of money unlike anything the developed world has ever seen”, and global equities have staged their own “unprecedented expansion”.
In a webcast conducted by The Economic Club of New York on Tuesday, Jones echoed Druckenmiller’s CNBC comments, suggesting he’s been “humbled” by the rally in risk assets.
“If there was a franchise for humble pie, oh my lord they’d be a mile long to own that, because we all had huge gulps of it — me included”, Jones said.
This venue was ironic. It was during a similar webcast with The Economic Club of New York last month when Druckenmiller made the bearish call on stocks which he essentially recanted on Monday.
Jones seemed wedded to his outlook for inflation. “The biggest risk to this party coming to an end is going to be inflation down the road”, he cautioned. He called this the shortest recession in history, the shortest bear market in history, and the most spectacular M2 growth since the 1940s.
“This is not your garden variety recession, and it’s not your garden variety fiscal response”, he said. “The stock market right now is pricing in 2019 fundamentals. It’s pricing in a vaccine. It’s pricing in a recovery. That’s exactly what the stock market is doing at this moment”, he continued.
Looking into the back half of the year, Jones predicted corporate tax rates rising to 28-30% in the event of a Democratic sweep. Individual tax rates would likely rise too, as would capital gains taxes.
“It’s hard to come up with a constructive scenario in the stock market in the fourth quarter”, Jones ventured.
In the webcast, he chose a space-themed Zoom background to reflect the way he currently feels – lost in space and searching for answers in The Twilight Zone.
“Anybody that says they have a good understanding of what’s going to happen, you’re probably better off getting financial advice from TikTok than from them”, he told his hosts.
Credit where it’s due – it’s refreshing to hear what at least sounded like real humility, as opposed to a begrudging acknowledgement that fiscal and monetary policy succeeded in thwarting the dour prognostications emanating from the most recognizable “brand names” in the business.
On the state of America’s democracy, Jones described the death of George Floyd as “tragic” and lamented that the US is “fragile” due in part to what he unironically called “the largest wealth inequality of any [place] in the world by a country mile”.
The pandemic and the protests “woke people like me up”, Jones remarked. “Whatever we thought was okay is just simply not good enough”.
Jones is worth $3.4 billion.
It is interesting to see the parade of objectively great investors who have been humbled, in their own words, by the rally.
But there were great investors who played it very well. Bill Ackman, for example, who nimbly caught both the crash and the recovery.
At the end of the day, disagreements make a market. If everyone thinks the same way, there’s no trades. These guys all have different investing styles, thrive in different markets, look for different setups. None of them catch every winning setup.
They have all figured out the most important skill, which is surviving your mistakes to play another day.
“At the end of the day, disagreements make a market. If everyone thinks the same way, there’s no trades.” Finally, someone else who actually gets it. I lost a good job opportunity at a fairly good school for saying this out loud.