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We welcome our TV and radio audiences for a conversation with one of the most respected traders on Wall Street. Paul Tutor Jones is known for his foresight. He shot to fame after anticipating the Black Monday crash in nineteen eighty seven.
He then went on to make a series of.
Successful global macro trades, like shorting tech stocks ahead of the dot com bubble, but also big in philanthropy. He founded the Robin Hood Foundation, a charitable organization committed to fighting poverty in New York City. Every year, the Foundation enlists the boldest names and finance in a stock picking contest known as Pick a Ticker and Paul Tutor Jones, I'm happy to say joins us now here at the desk.
Paul, thanks so much for your time.
I want to first ask you about robin Hood before we get to the markets, because I know you have a big conference with JP Morgan tomorrow, right we do.
We have a conference tomorrow.
There's still a few tickets that are available.
We have some great, great speakers.
I'll be interviewing Dario Amity, who's the CEO of Anthropics. So Actually he's the person that should be answering your AI questions, not not me. I can't what there's so many I want to ask him on a We've also got.
Ken Griffin and Jamie Dimmond.
It's gonna be it's gonna be your fantastic and very informative and educational debt.
Will all of those guys participate in pick a ticker because this is a contest you do with Bloomberg.
Right right, So pick a ticker is you pick one long, one short. It's a six month it's a six month contest. Think of fantasy football meets the markets. Because this year we're going to allow you to change your picks.
Uh, I think two or three.
Times during the six month process. So you have you put in ten thousand bucks, it's going to go to charity. It's gonna seventy five percent is going to go to robin Hood to help the least among us in New York City, which sadly has twice the national poverty rate. And I think we've all got a vested interest in
making sure New York not just survives but thrives. Because obviously Wall Street, which is the I guess the reason for so much financial wealth that all your viewers have is something that we need to be able to in New York City have again a thriving city, because the most important city in this country has got to always succeed.
Yeah.
I mean you have raised I think three billion dollars over the time since you founded robin Hood for fighting poverty in New York. I want to ask about Wall Street and specifically about this equity market. I do watch our competition, and I saw your interview with Andrew last week.
You said this is like October of nineteen ninety nine.
But after that, as you pointed out, you know, the stock market doubled. We had a drop in October, like an eleven cent inter day drop, but then the stock market doubled to March of two thousand. Are we still in line for a doubling of this market?
Well, it's so funny because you had mentioned that fifty four percent of fund managers think that we're in an AI bubble.
If it's a bubble, it's it's a small one.
If you just think about and again, how do you actually define bubbles? If you think about the bubbles of the past three or four decades, the nikkiing eighty nine, nasdek of ninety nine, Biotech two thousand and just after twenty eleven, twelve, China two thousand and seven. All those were four to six hundred percent gains. The Nasdaq's up two hundred percent off the bottom. So I don't know whether we're going to blow off like we did in
nineteen ninety nine. Is it possible or all the ingredients in place, I think clearly they are.
For me.
The one thing that you can never ever forget is that a year from today, assuming that the President gets his wishes, that the FED funds rates can probably be and then two and a half. You know, I think they're I think they would like to see that two and a quarter. So I think two and a half, two seventy five. Obviously, whoever the new FED chair is going to have to be able to intellectually move that board.
A majority of the board, he's probably whoever the new FED chair, Let's say they've got six solid votes, so he'll have to find one more.
And I don't think it'll be that hard to do.
But if you're going to have two and a half percent overnight rates or two seventy five, that's a really compelling story for higher equity prices.
Well, not just that.
I mean you've got Neil Casar on our opinion team yesterday laid out the argument that this is not the same as nineteen ninety nine because these companies are so profitable. Right, ninety five percent of the S and P five hundred is expected to post innings growth next year, and the average earnings growth is sixteen percent. It's obviously a lot more for the mag seven or the Great eight. Plus, you don't have the same kind of leverage that you
had back then. You have less than one hundred percent debt to equity, and in nineteen ninety nine it was more than double that.
Right.
Well, the only thing I'd say is I don't think you've got the leverage necessarily in the corporate balance sheetshet you clearly have leverage within the equity ecosystem, And by that I mean you just had a proliferation and explosion in derivative products. I want to say that lebty tfs are of two hundred and fifty percent since the twenty twenty two bottom, and I want to say that there's four or five hundred, with another another couple one hundred
in the pipeline. So you're clearly creating derivative leverage. Whether it's in the options market, we see single stock options. We just see options activity exploding.
Everywhere you look.
There's greater leverage again in the equity infrastructure.
For what has become a really trader nation.
We have the highest percentage equity holdings by individuals in history. We have again more levered activity. You don't see it in margin debt because margin debt is actually an old, anachronistic tool.
You see it more so.
In the options markets. You see it more so in the Lebrety ETFs. So it's somewhere down the road a little similar. I don't think we're there yet, but somewhere down the road there's gonna be There're gonna be some there're gonna be some real issues with that.
Nonetheless, you're long now, right, I mean, at least last time we spoke to you in June, you said your portfolio would be long stocks. You said you'd be long gold, you said you'd be long bitcoin, and those have been great picks.
Check out this chart.
Right, gold alone is a twenty two percent gain, but all of them are well above zero.
Do you hold onto that portfolio.
So I would take them one by one. I think for stocks, the critical time is going to be the last week here in October and when we see the big tech earnings as well as by that point in time will have greater clarity on the resolution.
Of the US China conflict.
I would think that if the Nasdaq is higher going into early November, then you've got a chance for a real ramp in the last two months. What happens between now and then, I kind of think the market's going to be the defensive until we get to that's going to be a intersection of just so many really really important data points, so that's going to be a critical time. They also have a FED meeting that week, so I would think, you know, my prior is that it will
resolve to the upside. We'll focus on where FED funds will be. The market will look ahead six to nine months and focus on that. Bitcoin gold are interesting. They're interesting as a pair in the sense that if I just look at since Liberation Day, you've had about forty billion dollars of inflows into a combination of bitcoin and theory metfs, and you've had a like amount of inflows into the combination of gold and silver.
But if you think.
About it, the VALL adjusted forty billion that goes into bitcoin because it's got had, say five six times the VALL of gold was really.
A much much bigger.
Bet on crypto than it was on precious metals.
And yet.
Gold has outperformed Bitcoin since that period in time. So clearly retail has made a mistake in terms of trying to figure out which of the two debasement trades were going to outperform. And I have to admit, until a couple of weeks ago, I thought bitcoin digital goal was going to outperform again the historic stores of value. I think they're both probably still good. But my guess is, again we're here in the fourth quarter momentum into the end of the year that of those two it appears
that gold and silver are going to outperform crypto. You know, I'm always going to be a trend trader. I'm always going to follow the momentum, and I'm not going to be so prideful that I'm going to try to outguess what the market's telling me.
But you do think that we continue to see infleetion Because I've been talking to Neil Dudda from Renaissance Macker. He's pushing back on this. He says inflation hawks need to seek help. But his main point, I think is that housing, that the shelter component is going to come down. And he said a note last week housing prices are likely declining. The fact that home buyer demand has declined even as rates have dropped suggests that a deflationary psychology has infected the housing market.
By that, I think, I'm probably looking past current conditions and I'm just thinking about the future. And we're we're in a fiscally constrained time. So why is it that the president is hell bent on finding a fed share that's going to have easy money. Because the only way that we can reduce our debt to GDP, that you could even begin to deal with a six percent budget deficit is to have the lowest funds rates you can possibly have, to lower your interest costs to stimulate growth,
et cetera. The only way to reduce that the GDP is to have obviously nominal growth exceed your interest rate. So in a situation like that, particularly given where we are in this economic cycle where we are now, it's just hard not to see and I think this is what the market's looking ahead to see inflation not be rekindled and start up again six twelve in a more serious fashion eighteen months.
Hence you can kind.
Of see it now. It's again think of this. We have three hundred and seventy trillion dollars worth of global financial assets.
Three hundred and seventy trillion.
So when you come to a market like goal, which is twelve trillion silver, which is, oh my lord, a fraction of that bitcoin crypto, which is say two to three trillion, it doesn't take very much. Then you start thinking about the copper markets and some of the other rare earth minerals, and you think about just individual commodities. Good gosh, the ability to elevate those prices. Because we have so much again money and financial assets, it just takes a small tweak to really begin to create a
rise in the price level. And I think we'll see that assuming that we have a new FED chair who's going to take the funds rate down to two and a half percent, and I think the White House is thinking they'd like to see the funds rate at two and a quarter to two and a half.
Will we see a significant dropping the dollar from that because we had seen right in the first half, the biggest drop for the dollars since nineteen seventy three, that's the year I was born, so a long time.
Ago, but we're obeyed, but we have.
But we have recently seen the dollar recovering, showing a little bit of strength here as people look for I think safe haven in that.
Well, look, you've got a you've got an FX, you've got to you've got a fiat money debasement going on pretty much virtually around the world.
Right.
The bond vigilantes, though, are being held in check by again central banks and populism that are pushing central bankers to run hot. So the the currency debasement trade has really turned into a gold trade and a crypto trade. Right, Bond vigilantes have been have been shunted to the back, told or been put in abeyance, and instead it's manifesting itself in gold and crypto.
That's really what's going on.
So uh again, look at the new Prime Issu of Japan, she's all read advocating for the boj to go slow on normalizing rates. You can't make it up. They got they've gotten negative, they've got negative one and a half percent, and it's almost like they just want to deny that they have an inflation problem. But so that's what we're seeing. And again, at some point in time, at some point in time, we're going to have some precipitous moments in
sovereign debt markets. I don't know whether it's Japanese bond market, the US bond market, but we're going to have some precipitous times. And if you just think about we had, we're not even close to that yet. We're not even close to that trust moment we had three years ago where the currency was under attack, the stock market, the bond market was under attack. Just imagine if and when we get to that day, which I think with six percent budget deficits in the US, that day will come.
Just imagine what.
Gold and crypto for that matter of the dollar, imagine what they're all doing. We're in good times now, right, even with a shutdown. Yea, even with the shutdown, we're in good times now.
I wonder what you think about that.
You mentioned rare Earth's and even we can't inflate our way out of that problem, right, JD. Van said, we have the cards, but it seems to me China has
us between a rock and a hard place. Mereth Whitney put out a note on Sunday and she says, you know, don't bother being distracted by one hundred percent additional tariffs that President Trump was talking about, because aside from the massive dependence on the US industrial complex for these rare earth minerals and magnets, the US military is one hundred percent dependent on them and is.
Nearly depleted of its reserves. What can we do about that?
Yeah, I'm sorry, I don't have a good answer for that one.
I wish I did.
I really I don't envying Trump in his cabinet trying to figure out what's going to happen here in two weeks.
I really don't.
I just think of the strategy that it looks like the White House is falling.
Right.
They take a steak in MP materials, they take a steak in lithium Americas. They're trying to ramp up mining so they can produce these things, and at the same time they're taking steaks in private companies. How do you feel about that? As a long term free market capitalist? The US government getting in and picking winners and losers.
I'm not in favor of that.
And again, the reason why is it's the same reason my concerns are. I see concentration risk everywhere.
I'll look.
Well, now we have individual investors with the highest equity allocation they've ever had in the history of the United States, really four times that of the rest of the developed world. So I get nervous about that concentration. I get nervous about the fact that we have thirty five percent of the SMP's now concentrating the seven stocks. I get nervous about the fact that this administration, even if all those decisions.
Were smart and correct.
Again, if you just think about the number one rule of portfolio of portfolio management is you want diversification. That's why our founding fathers create us as a democracy, not a monarchy, because you want that contestation of ideas. So I'm nervous when I see concentration.
Virtually in anything.
Again, whether it's in the stock market, whether it's the composition of the stock market, who owns the stock market, or the decision making that's getting made in Washington. It makes me nervous because I don't think in the long run, right, even if all the decisions that President Trump making are great? Is that going to embolden the next president who may not make as good as decisions to do the same thing. So I'll look, I'll look at that, and again it raises caution flags.
But you're still you're still long stocks right now, You're still long the Nasdaq.
I am. I wouldn't say I'm long at this second. I'm clearly again, I think there's such a confluence of possibly negative, possibly positive events. I think I want to kind of wait and see where we are and in a week or two times, but my belief is that we'll be substantially hired by the end of the year.
All right, So just to end on where we started with the pick a ticker contest for Robinhood, I asked you last time, and I'll ask you again.
For players at home. Yeah, what tips would you give us? What would you put?
I'll probably so, I think it's going to begin November one, I'm sure I'll probably be long. The Nasdaq will be my long remember.
You See, it's really interesting because.
The last twelve months of a bull market typically you double the annual gains up until.
That point in time. But that's to the end of the bull market.
So we've got this situation confronting us where the best part of the market's possibly straight ahead, but it's also the most dangerous because it could be the top. So I would probably be long. The Nasdaq would be my long, and I'm I've got to think about what my short would be.
It could be.
H it might be the bond market again, though that'll be a bit boring.
Now, that wouldn't be boring.
I'll take it, okay, Paul, thanks so much for joining us.
Really appreciate your time.
Paul Tutor Jones, Coach, chairman, the chief investment Officer of course of Tutor Investment Corporation and the founder of Robin Hood