CNBC interviewed legendary trader Paul Tudor Jones (Trades, Portfolio) in Davos on Jan. 21. Jones, the chairman of Just Capital and chief investment officer of Tudor Investment Corp., is known as a very private person and doesn't often step into the limelight. Because he's promoting his Just Capital movement, he's now talking to he media a lot more, providing a great opportunity to get his idiosyncratic take on the investing landscape.
According to Jones, we are in the craziest monetary mix in history. It is so explosive it reminds him of early 1999. Today, we see similar important economic metrics like a 1.6% CPE and 2.3% CPI. Back then, the fed funds rate was 4.7% and the U.S. ran a budget surplus instead of a deficit.
Currently, you want to be on the train as it has a long way to run. Jones estimates a timeline of about 12-14 months. One potential curveball, however, is the Coronavirus. Jones considers it a big deal. If you look at what happened in 2003 with the SARS virus, the estimates were 0.5% GDP off of South Asia and 1.5% off of China’s GDP. There’s no antidote available for the virus, and the incubation period is not known.
We are entering the biggest travel period of the year in China. Though the virus seems less lethal than SARS, the situation is still unclear. As an investor, Jones would be really nervous. As a trader, he sees zero reason to be long until there is more clarity, as it could cause correction of more than 6%.
Ultimately, the train will most likely be stopped by the Fed hiking rates much earlier than even they contemplate. We’ve never seen a monetary mix like this. It argues for a massive blow-off at the top.
Disclosure: No positions.
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