Per his latest letter, Paul Tudor Jones expects a return of inflation and perhaps a bear market caused by rising interest rates.
“We are replaying an age-old storyline of financial bubbles that has been played many times before,” Jones, founder of Tudor Investment Corp., wrote in a Feb. 2 letter to clients. “This market’s current temperament feels so much like either Japan in 1989 or the U.S. in 1999. And the events that have transpired so far this January make me feel more convinced than ever of this repeating history.”
Jones, in the 10-page letter seen by Bloomberg, hinted at a parallel between Powell and former Bank of Japan Governor Yasushi Mieno, who took to the helm in December 1989 amid a boom driven by speculative investment in land and stocks. Within a week, he began raising interest rates.
Mieno “was ultimately blamed for pricking a bubble over which he had no control,” Jones said. “While the messenger always gets the blame, the real fault lies at the feet of the policymakers of the late 1980s who allowed systemic imbalances to build up in the Japanese stock and real estate markets.”
From ValueWalk, Paul Tudor Jones on his career:
Being first a commodities and then macro trader in the late 70s and early 80s was simply an incredible time to ply the craft. The opportunity set was so large as the marker was coming due for the previous misjudgments of errant central banking. Markets routinely doubled and then gave back the entire move within a space of a few years if not months! Bull markets turned into bear markets seemingly overnight in one asset class after another. My only regret was that one of the unintended consequences of coming of age in those volatile times was learning to never want to own anything for the long run. Classic investing had a negative sign associated with it. Bear markets were very rewarding since fear is a stronger emotion than hope and something can be torn down in fractions of the time it takes to build—whether that be a house, a reputation, or a bull market. Sometimes I almost wish I was a child of a different era as the ensuing 36-year bull market in equities was not something for which I was prepared or trained.