Paul Tudor Jones is one of the great macro traders of all time but he’s ‘a slave to the tape’

Paul Tudor Jones is one of the great macro traders of all time but he's 'a slave to the tape'

Paul Tudor Jones is one of the great investors of all time and he’s renowned for macro calls. His latest market outlook highlights the coming waves of direct debt monetization that will reshape the economies and financial markets of the world.

“There will be many assets that will move as a result of this money creation. So what is an investor to do? Traditional hedges like gold have done well, and we expect investors to continue to seek refuge in this safe asset. One thing I have learned over time is the best thing to do is let market price action guide your decision-making and then try to understand the fundamentals as they become more evident and comprehensible,” he writes in a note with Lorenzo Giorgianni.

That’s an odd thing for one of the great macro traders of all time to say, but if you look back over his (rare) public comments, it’s a familiar theme. Here’s what he said back in 2009:

When trading macro, you never have a complete information set or information edge the way analysts can have when trading individual securities. It’s a hell of a lot easier to get an information edge on one stock than it is on the S&P 500. When it comes to trading macro, you cannot rely solely on fundamentals; you have to be a tape reader, which is something of a lost art form. The inability to read a tape and spot trends is also why so many in the relative-value space who rely solely on fundamentals have been annihilated in the past decade. Markets have consistently experienced ‘100-year events’ every five years. While I spend a significant amount of my time on analytics and collecting  fundamental information, at the end of the day, I am a slave to the tape and proud of it.

In the current environment, he highlights the growth of money supply and the perils of debt monetization. He notes that Japan is the poster child for debt monetization and dismisses it by noting that:

  • M2 money supply has never grown by more than 5% a year — it’s likely to grow by 20%-40% this year in the US, he says
  • Inflation expectations were already unanchored in Japan when these policies were introduced
  • The banking system was already hobbled

The US is likely to be very different than in the post-financial crisis because:

  • A Tea Party is unlikely to re-emerge
  • Preferences for liquidity in the banking system internally and via regulation aren’t coming
  • The Fed’s elimination of the reserve requirement means the theoretical money multiplier is now infinite

Ultimately, he expects a return to inflation after a near-term drop in prices due the pandemic.

Historically, he notes that 9 different trades have worked in inflationary periods. Evaluating them over the past week, month, 3 months and year; he ranks them as follows:

  • Gold
  • Steepening yield curve
  • Nasdaq 100
  • Bitcoin
  • Long US cyclicals/short defensive
  • TIPS
  • Goldman Sachs Commodity Index (a basket of 24)
  • JPM emerging market currency index
  • He then writes about Bitcoin, while noting that he doubled his money in 2017 but it was likely a very small amount (at least by his standards):

    I doubled my money and got out near the top when it was apparent to any market technician we were blowing off. It is amazing how well one can trade when there is no leverage, no performance pressure and no greed to intrude upon rational reflection! When it doesn’t count, we are all geniuses.

    He compares Bitcoin to gold in the 1970s with this chart:

    gold bitcoin

    On gold, he says it could rally to $2400 and as high as $6700 and is a “very attractive hedge” against monetary inflation.

    Reverting back to technicals, he said this back in 2009 and with so much of price action inexplicable at the moment, it’s worth remembering:

    I see the younger generation hampered by the need to understand and  rationalize why something should go up or down. Usually, by the time  that becomes self-evident, the move is already over. When I got into the business, there was so little information on fundamentals, and what  little information one could get was largely imperfect. We learned just  to go with the chart. Why work when Mr. Market can do it for you? These  days, there are many more deep intellectuals in the business, and that,  coupled with the explosion of information on the Internet, creates the illusion that there is an explanation for everything and that the primary task is simply to find that  explanation. As a result, technical  analysis is at the bottom of the study list for many of the younger  generation, particularly since the skill often requires them to close  their eyes and trust the price action. The pain of gain is just too  overwhelming for all of us to bear!


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    Chapter 1: Global Security, Bond and Stock Trading Market Overview

    Chapter 2: Security, Bond and Stock Trading Market Data Analysis

    Chapter 3: Security, Bond and Stock Trading Technical Data Analysis

    Chapter 4: Security, Bond and Stock Trading Government Policy and News

    Chapter 5: Global Security, Bond and Stock Trading Market Manufacturing Process and Cost Structure

    Chapter 6: Security, Bond and Stock Trading Productions Supply Sales Demand Market Status and Forecast

    Chapter 7: Security, Bond and Stock Trading Key Manufacturers

    Chapter 8: Up and Down Stream Industry Analysis

    Chapter 9: Marketing Strategy -Security, Bond and Stock Trading Analysis

    Chapter 10: Security, Bond and Stock Trading Development Trend Analysis

    Chapter 11: Global Security, Bond and Stock Trading Market New Project Investment Feasibility Analysis

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    Market News: Share Market Live Today, Latest Share Market News and Headlines

    Market News: Share Market Live Today, Latest Share Market News and Headlines

    1 min read . 05:36 PM IST

    • The last time RIL tapped the public for funds was in 1991 when it had issued convertible debentures
    • One share will be offered for every 15 shares held at ₹1,257, a 14 % discount to the closing price for April 30
    • The issue price for Series I (April 20 to 24, 2020) was ₹4,639 per gram of gold
    • Sovereign Gold Bond 2020-21 is to be issued by Reserve Bank India on behalf of the Government of India
    • Disney rose 2.3% as tickets for the earliest days of Shanghai Disneyland’s re-opening in China sold out rapidly.
    • All the 11 S&P sectors were trading higher, with the defensive real estate, utilities and consumer staples indexes posting some of the biggest gains
    • The country’s reserve position with the IMF also rose by $489 million to $4.059 billion during the reporting week, the data showed
    • In the previous week, the reserves had declined by $113 million to $479.455 billion
    • Late on Thursday, Sebi issued a statement stating that Franklin Templeton should focus on refunding investors’ money
    • Global president Jennifer M Johnson’s said Sebi’s rules were one of the reasons that led to shutting down of its six debt schemes
    • At current levels, the stock is 2.8% away from its 52-week high of ₹1,67.80 registered hit on December 20, 2019
    • This is the third stake sale by RIL in Jio, with Facebook and PE Silver Lake having invested in two separate rounds
    • Indian shares failed to hold opening gains but closed in the green zone on Friday, tracking a surge in Asian equities
    • After touching an intraday high of 32,088.51 points, the benchmark Sensex settled 199 points or 0.6% higher at 31,642.70


    Author: PTI

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    Paul Tudor Jones is one of the great macro traders of all time but he's 'a slave to the tape'

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