Paul Tudor Jones, the founder of Paul Tudor Investment Corporation and Robin Hood Foundation, spoke on the sidelines of the 2024 Robin Hood Investors Conference in New York on October 23 2024.
According to Paul Tudor, for the hedge fund world the elections are the “macro super bowl”. While elections in the past weren’t this binary, the upcoming cycle is highly binary in a sense how the market will respond to the results. There are two roads coming after November 5th: one is to continue like before, and the other when the markets can have different ideas. Paul tudor Jones spoke to CNBC on the sidelines of the conference where he discussed current events, focusing on the upcoming elections.
While the markets are predicting Trump's victory, Jones is not still convinced, because according to him the markets are skewed by Republicans. Dan Loeb already repositioned his portfolio with Trump's victory in mind, which Jones also admitted to. In reality this results in more inflation trades.
Jones points out that the debt trajectory should be the focus of all talks. In the last 25 years the debt to GDP went from 40% to almost 100%. He argues that the prediction of the CBO that the debt will rise to 124% in the next 10 years. Jones finds this conservative, and his projection is much closer to the figure of 200% in the next 30 years.
Promises by the candidates of several tax cuts Jones finds crazy. While the current deficit is at 7%-8%, in the case of a Trump win it will raise an additional $500 billion a year, and in another Harris winning scenario, an additional $600 billion deficit will rise annually.
While the current debt is $35 trillion the tax take is $5 trillion, and that means that the US owns seven times the revenues next year. The deficit is $2 trillion and there are no signs of slowing down. So, bonds that the government is offering are not such a good deal, and Jones will in any case withhold investing in them.
“We’re gonna be broke really quickly unless we get serious about dealing with our spending issues,” Jones suggests letting tax cuts expire, raising the payroll tax by 1% which will be applied to all wages, and increasing corporate tax from 21% to 25%. Another measure would be to raise the tax rate on the top 4 tiers by 10% with the top rate hitting 49.5%.
And even with all these measures in place, the debt will continue to rise, only at a slower rate due to the interest debt. The interest bill this year is larger than any single line except for social spending.
Currently, much of the world including the US, Japan, France, UK, and Greece are in an economic kayfabe. After the election whoever gets into the oval office will have to deal with the fiscal cliff and the only way to bypass it is to inflate away the national debt. Jones strongly emphasized that he would not own any fixed income because it is wrongly priced.
