Believe In Something
Friday October 25th, 2024 - Issue # 86
(Any views expressed below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)
Coming to you live from Hilton Head Island, South Carolina, where I’m determined to break 100 for the first time. The boys and I are playing two of the most preeminent courses on the island today and tomorrow. Naturally, we’re all pretty competitive with each other, and thankfully, even though they golf 10x more than I do, they’re still not that much better than me. When I chimed into the chat that I fully intend on breaking 100 for the first time, I got hit with an abundance of messages and pictures of course topography — course design, layout, hole architecture, etc.. Essentially, these courses are very hard — the guys gave me every reason why this trip would not be the one where I break 100. While these blowhards are flying with their own clubs, I opted to travel light and rent, which, according to them, guarantees I won’t break 100.
Believe in something. Even if the odds (and your friends) are stacked against you, sometimes you just have to trust yourself. Whether it's breaking 100 with rented clubs or being all in on crypto in a volatile market. I’ll report back during our webinar next week…
Legendary macro hedge fund trader Paul Tudor Jones had a lot to say this week…Please watch this clip.
“All roads lead to inflation. I’m long gold, I’m long Bitcoin” - Paul Tudor Jones
Every investment fund manager looks to PTJ for signals. When he speaks, they listen. In fact, they drop everything they’re doing to listen when he gives a rare appearance.
Here’s the last and only two times he let the world know he was long BTC…
Let’s unpack what PTJ said in his CNBC interview this week.
Positioning for a Trump Win: Jones believes a Trump victory will drive more inflation trades, anticipating policies that will fuel economic expansion at the cost of larger deficits. He’s positioning his portfolio for this outcome.
U.S. Debt Trajectory: The U.S. federal debt-to-GDP ratio has ballooned from 40% to nearly 100% over the past 25 years, and could reach 200% in 30 years without drastic changes. Both political parties are offering unsustainable tax cuts and spending increases that the bond markets might not tolerate after the election.
Debt and Bonds: PTJ compares the U.S. debt situation to a person earning $100k annually but owing $700k, while asking to borrow an additional $40k every year for the next 30 years. With $35 trillion in debt and a $2 trillion deficit, bond investors may soon question the government’s ability to repay.
Avoiding Fixed Income: After the election, Jones expects a potential "Minsky moment" in U.S. debt markets, where investors realize the fiscal promises are untenable. He plans to short long-duration bonds, believing they are mispriced for the risks ahead.
Inflation is Inevitable: Jones predicts that all roads lead to inflation. The U.S. will need to inflate its way out of its debt by running interest rates below inflation and relying on nominal economic growth. This is the historical playbook for governments dealing with excessive debt.
Fiscal Adjustments: Stabilizing the debt-to-GDP ratio will require letting Trump’s tax cuts expire ($390 billion), raising payroll taxes, increasing the retirement age, and imposing higher tax rates for high earners. Even these drastic steps will only stabilize the debt, not reduce it.
Portfolio Positioning: Jones is bullish on inflation-hedge assets—he’s long gold, Bitcoin, and commodities. He believes these are under-owned in portfolios and will benefit from the upcoming inflationary environment.
Fed's Role: He suggests the Fed should ease monetary policy to help manage the debt burden. Every 100 basis points of interest rate cuts could save $90 billion per year in deficit costs.
I honestly feel like I can just leave it here for this week…tee off time is in an hour and this guy needs to hit the range to warm up.
Cheers 🍻