Do you ever wonder why we (as a society) care about celebrity endorsements?
In a lot of cases, there’s absolutely no connection between the celebrity and the product on offer. Shaq and Epson’s cartridge-free printers are a good example. The company’s pitch notwithstanding, Shaq isn’t known as an ink expert. And it’s a (highly) debatable proposition that he ever has occasion to print anything, let alone enough to exhaust so many ink cartridges that he felt compelled to help solve what, for people who do still print things, is an admittedly vexing problem.
Usually, though, there’s a connection between the celebrity and the product. But even in such cases, it’s not clear why you should care what, for example, Brett Favre, Jerry Rice and now Drew Brees, think about Copper Fit. If you’re in the market for a compression sleeve, chances are you want to know how it works for regular people and also how it holds up over time because, after all, you’re a regular person and you’re not going to buy a new one every other day. So, you might ask your doctor about the health benefits of compression sleeves and the girl down at the local activewear store about their durability. One person you surely won’t consult is Brett Favre, because in addition to being difficult to get ahold of, his needs when it comes to copper compression are in no way comparable to yours and he doesn’t have to worry about things like choosing which part of his body to support or the durability of the product, because he presumably has a garage full of every Copper Fit product ever made.
Why am I talking about this? Well, first because it’s funny and I was thinking about it on Saturday when I went on a rare, off-island excursion to buy some new running shoes. But also because everyday people are suckers for celebrity investor cameos, and in my opinion, that’s often detrimental to folks’ financial and psychological well-being.
On Monday, Paul Tudor Jones checked in with CNBC (or CNBC checked in with Paul Tudor Jones — it’s hard to know which), and regaled the network’s audience with his version of the obligatory billionaire monetary and fiscal policy critique.
Everyone is, of course, entitled to their opinion, but when you hear Jones say that “this Fed meeting could be the most important Fed meeting in Jay Powell’s career,” I’d gently note that that assessment is at odds with most Wall Street FOMC previews, the vast majority of which take the view that the June meeting is a non-event.
In the clip (above) Jones told Andrew Ross Sorkin (who apparently instructed his makeup detail to go with “Inside A Cave On A Moonless Night” when asked to choose a hair color for this week) that “so much data” has challenged the Fed’s models. That’s certainly true over the longer haul (the most obvious example being the Phillips curve), but it’s not entirely accurate in the current context.
Every, single breakdown of May CPI showed pandemic-/re-opening related factors contributing heavily to the surge, and when it comes to the labor market, the Fed is, if anything, relieved that persistent slack is affording them some plausible deniability when it comes to slow playing the taper discussion.
He did draw an ostensibly interesting distinction between the way the Fed approaches employment and the messaging around inflation. “With employment, they want to see outcomes,” he said. “With inflation they tell you ‘It’s transitory, trust our forecasts.'”
Jones called that an “intellectual incongruity” but, frankly, he’s the one being intellectually dishonest. The Fed has stated repeatedly (at this point hundreds upon hundreds of times) that average inflation targeting means overshooting 2% for a sustained period in order to “make up” for previous shortfalls. That, the story goes, will avert a scenario wherein, over time, a deflationary mindset becomes embedded in society.
Whatever you want to say about that (i.e., whether you think it’s “dangerous” or too nebulous or misguided or just downright silly), there’s no sense in which someone who’s being honest with you can argue that two months (or three months or four months) of data skewed by base effects (on the annual comps) and the collision of artificially-inflated demand with supply chain problems (on the monthly prints) can be relied upon when it comes to making policy. That’s a ludicrous assertion. If lightning hits a tree in your yard and it falls through your roof, you wouldn’t tell the roofers that your new roof needs to be strong enough to withstand a meteor strike. (Because after all, you had a normal roof and look what just happened!)
Sometimes, it’s as if folks would have you believe the pandemic never happened — that these extraordinary policy experiments just fell out of the sky. The world is coming out of a once-in-a-generation calamity that killed 3.8 million people and sickened 175 million.
Jones went on to call the current situation “bat sh–t crazy,” setting off a hilarious attempt by Bloomberg to navigate the choppy waters around working that into a headline. “Paul Tudor Jones Tells CNBC Things Are ‘Bat S Crazy’ Right Now,” read one initial attempt. A half-hour later, that was revised to “Paul Tudor Jones Says Things Are ‘Bat Sh–t Crazy’ Right Now.” Ultimately, that was nixed too in favor of the more pedestrian “Economic Orthodoxy Has Been Turned Upside Down, Jones says.” The URL still read: “https://www.bloomberg.com/news/articles/2021-06-14/paul-tudor-jones-says-things-are-bat-sh-t-crazy-right-now.”
Commenting further, Jones said investors may, depending on the Fed, need to “go all in on the inflation trade,” where that would mean “buy[ing] commodities, crypto and gold.” If, on the other hand, the Fed “corrects” its course, “you will get a taper tantrum and a selloff in fixed income and a correction in stocks.” If he were on the investment committee of a pension fund, Jones said he’d “have as many inflation hedges on as I possibly could.”
He also plugged Bitcoin (predictably), but also contended that if he were “king of the world,” he’d ban Bitcoin mining until such a time as it was eco-friendly.
The clip (above) also finds Jones delivering what somehow still counts as a “profound” assessment of the effect monthly Fed buying has on risk assets.
“I hope that we’ll mean revert back to economic orthodoxy,” Jones fretted. “I get nervous from a financial stability standpoint when the stock market’s 220% of GDP.”
That kind of rhetoric is what I find most distasteful about CNBC’s celebrity TV cameos. I’m not casting aspersions at Jones. That is, I’m not trying to single him out. But what I would say is that almost without exception, the network’s interviews with Jones, Stan Druckenmiller, Jeff Gundlach and their ilk, come packaged with ambiguous warnings that hint at some manner of “reckoning.”
Usually, the implication (it’s rarely explicit) is that some comeuppance is just around the corner — that we’re all about to pay for the “sins” of policymakers.
I’ll just be blunt, because I think that’s one reason readers come here every day. It’s obviously true that many of these legendary investors are able to do more good for humanity than you or I ever will simply by virtue of having unlimited resources to throw at philanthropy. Strictly speaking, they don’t “have” to do that, so they’re to be applauded for those endeavors. But (and this is the crux of my gripe), if you think for a second that any of these people are actually “nervous,” or “concerned” or otherwise distressed by the prospect of a policy mistake and what it might mean for the fortunes (figurative or literal) of everyday people, you’re naive, at best. At worst, you’re the kind of credulous fool who watches CNBC and reads tabloid content churned out by doomsday blogs.
Think about it this way. How much less nervous would you be about the future (in general) if you got a check tomorrow for $5 million? Now think about how much your stress level would recede if that check were $50 million. Jones is worth somewhere between $5 billion and $10 billion. Colloquially, he ain’t “nervous” about a damn thing.
Of course, that’s not to say billionaires don’t have problems or are incapable of suffering. Ray Dalio suffered a horrible personal tragedy late last year, for example. But parading these people on financial television and branding their market “concerns” as “Breaking News” (always capitalized), is pure entertainment. These types of segments are almost totally devoid of value.
Invariably, it’s all cross-promoted by the same collection of people, complete with hashtags and shoutouts. “@ptj_official interview with @andrewrsorkin is phenomenal,” gushed professional clout-chaser Julia La Roche. “A must-watch. Great job ARS!”
Yeah. Great job!
Now quick, everyone grab “as many inflation hedges as you possibly” can, allocate 5% to Bitcoin and cancel whatever you’ve got planned for Wednesday afternoon, because this week is “the most important Fed meeting in Jay Powell’s career.”
Those new shoes fit okay??
Shaq is a client of my friend who is in the computer business, been to his Fla. home many times, keeps a trash can by the front door filled with signed basketballs…..not ink cartridges…..
The shoe excursion worked out wonderfully, to be honest. I happened on a sale where everything but the latest “models” was $75. The only problem was that (presumably due to the sale) they had virtually no 10.5s or 11s left, so I had to buy 11.5s, certainly not ideal, but I texted my orthopedist, and he said buying a half-size up likely wasn’t enough to risk serious injury. These are important decisions because I buy things in bulk. I now have seven new pairs.
Haha, I am guessing that you will be checking out the online “On Cloud” store, shortly!
Now THAT is an inflation hedge!
I am thinking that the risk that the Fed loses control over keeping rates “artificially” low (pretty much no matter what – within a range) is a much greater than the risk that we have inflation and the Fed has to raise rates.
Try “On”. the Swiss made running shoes. I have never had a better pair of running shoes- fit great, super lightweight!
Hberg…..best post you have ever witten.
What he said makes no sense…..90% expect nothing this Wednesday, so if FED does nothing, commodities will get no bump, and may break.
Almost all the reopening stock ETFS are breaking down, which should lead commodities, that are not precious metals, lower.
Thank you Thank you Thank you! I was watching the interview this morning and thinking PTJ was BS-Crazy, but then, he’s worth a few billion more than I am. An aside: back in 1987 I was a retail broker — excuse me, a financial consultant — for the thundering herd and the asset management arm came out with a new fund, to be managed by
PTJ, that could give our clients “conservative” exposure to the commodities market. The fund lost almost 50% of its value in the first six months of its existence. It was an expensive lesson but it cured me of following gurus.
I liked Tudor Jones better back when I only read about him in Barrons. Listening to him is distracting as I try to dissemeble that accent — I got 23% Jerry Lee Lewis, 19% Kathy Bates, 42% John Travolta’s Edna Turnblad, pluis a sprinkling of Lindsay Graham and a dusting of Marlon Brando’s Mr. Christian.
Something else I think about these billionaire celebrity interviews, if I had the floor to tell millions of people something, would I say what I thought or would I say what could benefit me? In other words, if you were buying long options positions, would you want to tell everyone to buy or hedge? We’ve already seen Elon Musk use Twitter to weaponize his words for financial gain. Why wouldn’t we assume every other billionaire would be doing the same thing when given the opportunity?
With all due respect, I think you’re off the mark on this one. These successful investors see themselves as knowledgeable about macro and give their opinions the same way that sports fans debate the trades and signings that their favorite team’s front office makes. The Knicks being horrible for the past decade surely didn’t harm anyone, but fans still passionately debate what the Knicks should do next. Folks are passionate and enjoy having a platform to broadcast their views.
I’m never “off the mark.” Not “on this one” or on any other “one” either.
Also, it has nothing to do with “passion.” It has to do with entertainment and money. There are innumerable “passionate,” “successful,” “folks” out there, but you don’t see them on CNBC. Why not? Because “passionate” Joe E*Trader with a lousy $100k delivering a constructive take on equities doesn’t pay the bills. Paul Tudor Jones being “nervous” does, and so does Druck musing about “absolute raging manias.” These guys are a side show and their musings are nothing more than for-profit entertainment sold to investors. When the cameras stop rolling, it’s not like they go in the bathroom and do a self-affirmation mirror session — “It’s ok, PTJ, you got this. Even if the policy mix is dangerous, we’ll get through this.” No, they pull out the ear piece, hop up from the Director’s chair, walk off set and go buy a Basquiat. And as soon as the set’s done, the anchors go eat a sandwich and gossip about their co-workers or something else totally irrelevant. It’s a silly charade. It’s the opposite of “passionate.”
Although I would note, from personal experience, that Sorkin will aggravate the hell out of you if he needs a quote for a story, so when it comes to badgering folks while they’re at lunch by dialing their number over and over again, he’s “passionate” about that.
Regarding the “base effects” issue, the BLS and other talking heads might look at the annualized change over a longer time frame. For example (from BLS data), across 2019 (i.e. pre-COVID) the 5-year change in the CPI-U (average across 12 monthly periods) was just under 8% total or ~1.55% per year. Year to date in 2021 (five months through May), the 5-year change in the CPI-U (including the low inflation/deflation prior impacts of COVID) was just over 11% total or ~2.15% per year… looks like the Fed may now be entering its “overshoot” territory and the key question is how long do they want this to overshoot to exist before they start to tighten liquidity.
H, interesting take as always. Can’t we say Sorkin got Giuliani’s hair guy for the day?
On inflation, Yogi Berra has it right – it is hard to make predictions especially about the future. Right now people are leaning on “transitory” on the assumption supply chain normalization meets long term demographic and technological disinflation/deflation. We’ll see.
I’ve tried to write this comment a couple times, and think I finally have figured out how to make it intelligible.
If you take a very successful investor and challenge him or her to make predictions about imponderable financial or economic developments that the market hasn’t already figured out, would you expect his or her success rate to be 90%? 70%? 50%? 30%?
I think something like 50% to 60% would be great, 60% to 70% would be amazing, and no one in history would have a sustained success rate over 70%.
Why is that? Answers to these imponderable questions are immensely valuable, and are being sought by hundreds of thousands of extremely motivated, smart, skilled, even brilliant people with all the experience, intuition, wisdom, information and computational power that billions of dollars can buy. Most of these questions get figured out and priced in, through the consensus expectations process that we all live in but hardly think about, like breathing air.
The remaining questions – the imponderable ones – are essentially coin flips.
I mean, if the rocket scientists and data-miners, AI engines and non-public information gatherers – the brainpower and resources aimed at some of these questions are almost mini-Manhattan Project level – can’t agree on an answer and price it in, then our hypothetical very successful investor would have to be superhuman to know the right answer even 70% of the time.
Our very successful investor doesn’t owe his or her isn’t success to being able to call the coin flip so very much better than 50%. Okay, 55% maybe. It is because s/he can place bets that will profit if s/he calls the coin correctly, hedge against big downside, step quickly on throttle or brake as the data starts coming in, and do this repeatably over a market cycle and another and another.
I mean, were it otherwise, wouldn’t the investing greats mentioned from time to time here have all been up +200% in 2020?
You and I are humble indeed compared to those investors, but assuming we’ve had some small success in our careers, think about exactly what happened. Did all or even 70% of your initial picks over the market cycle really outperform the market? Or was it more like you culled the early losers before they became big losers and leaned into the winners early in their winning moves? (Question constructed to weed out simply riding an index fund during a bull market – that’s profitable but, I suggest, doesn’t indicate skill.)
It’s not chess. You don’t have to play just one move at a time and you aren’t stuck with a move just because you touched the piece. You can move the knight and the bishop, then if you see the Red Queen moving to threaten the knight you can recall the horseman while urging the frocked one onward.
I admit to knowing nothing about Paul Tudor Jones’ investing process or record. Honest – celebrity hedge fund managers are irrelevant to me. So he might be the one whose predictions are right 70%+ of the time. Or, he might not be. Odds are . . .
Oops, there is an errant “isn’t” there . . .
There is a source that ranks the success rates of financial pundits. Jim Cramer, for example is right less than half the time … and he’s got his own show! 60% would put you in the top ten (not 10%, just top ten). For rankings see:
https://www.cxoadvisory.com/gurus/
“Sometimes, it’s as if folks would have you believe the pandemic never happened — that these extraordinary policy experiments just fell out of the sky.”
Well put.
Whatever ‘information’ you harvest from the TV billionaires is OLD news, they have already initiated those trades months ago. Anyone with a shred of common sense knows the market is…’hyped, overvalued, with not many reasonably priced stocks……all investors should have had a handle on the bilge pump since 2009…..I only watch those shows for the pretty girls……
“Whatever ‘information’ you harvest from the TV billionaires is OLD news, they have already initiated those trades months ago.”
This was the first of several pieces of sage advice my grad school mentor gave me and he didn’t limit the sources to billionaires. His secret to success was to do your own thinking, discover a truth no one else has found, act on it and then tell your secret to everyone your can. He generally delivered his secrets on Monday mornings and was always out on Friday with a nice profit. His net worth was well into nine figures in the late 1960s when that was real money.