Paul Tudor Jones Has A Message For Janet Yellen: "Be Terrified"

Tyler Durden's picture

Billionaire investor Paul Tudor Jones has a message for Janet Yellen and investors: Be very afraid.

Echoing a number of recent high profile managers' warnings...

Guggenheim Partner’s Scott Minerd said he expected a "significant correction" this summer or early fall,  citing as potential triggers President Donald Trump’s struggle to enact policies, including a tax overhaul, as well as geopolitical risks.


Philip Yang, a macro manager who has run Willowbridge Associates since 1988, sees a stock plunge of between 20 and 40 percent, according to people familiar with his thinking, citing events like a severe slowdown in China or a greater-than-expected rise in inflation that could lead to bigger rate hikes.


Seth Klarman, who runs the $30 billion Baupost Group, told investors in a letter last week that corporate insiders have been heavy sellers of their company shares. To him, that’s “a sign that those who know their companies the best believe valuations have become full or excessive."


Larry Fink, whose BlackRock Inc. oversees $5.4 trillion mostly betting on rising markets, acknowledged this week that stocks could fall between 5 and 10 percent if corporate earnings disappoint.


Another multi-billion-dollar hedge fund manager, who asked not to be named, said that rising interest rates in the U.S. mean fewer companies will be able to borrow money to pay dividends and buy back shares. About 30 percent of the jump in the S&P 500 between the third quarter of 2009 and the end of last year was fueled by buybacks, according to data compiled by Bloomberg. The manager says he has been shorting the market, expecting as much as a 10 percent correction in U.S. equities this year.


Even billionaire Leon Cooperman -- long a stock bull -- wrote to investors in his Omega Advisors that he thinks U.S. shares might stand still until August or September, in part because of flagging confidence in the so-called Trump reflation trade.

Their views aren’t widespread. They’ve seen the carnage suffered by a few money managers who have been waving caution flags for awhile now, as the eight-year equity rally marched on.

But the nervousness feels a bit more urgent now, as Bloomberg reports,  legendary macro trader Paul Tudor Jones, who runs the $10 billion Tudor Investment hedge fund, says that years of low interest rates have bloated stock valuations to a level not seen since 2000, right before the Nasdaq tumbled 75 percent over two-plus years.

That measure - the value of the S&P relative to the size of the economy - should be “terrifying” to a central banker, Jones said earlier this month at a closed-door Goldman Sachs Asset Management conference, according to people who heard him.


In fact Total US Market Capitalization-to-GDP is struggling to bust above its 2007 highs...

While the billionaire didn’t say when a market turn might come, or what the magnitude of the fall might be, he did pinpoint a likely culprit.

Just as portfolio insurance caused the 1987 rout, he says, the new danger zone is the half-trillion dollars in risk parity funds. These funds aim to systematically spread risk equally across different asset classes by putting more money in lower volatility securities and less in those whose prices move more dramatically. Because risk-parity funds have been scooping up equities of late as volatility hit historic lows, some market participants, Jones included, believe they’ll be forced to dump them quickly in a stock tumble, exacerbating any decline.

“Risk parity,” Jones told the Goldman audience, “will be the hammer on the downside.”

Indeed, with all that low-vol leveraged, it wouldn't be the first time.


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Raffie's picture

Would have been better if he was holding a noose for her.

Bigly's picture

It is easy to hoist a munchkin albino garden gnome though....

J S Bach's picture

Who in the f*** is Paul Tudor... and why should I care what the f*** he thinks?

(Answer: He is a billionaire who profited off of the existing corrupt system - therefore his opinion is to be held suspect and shunned.)

Mr.Sono's picture

Another words, get ready for new highs. Btfd bitchezzzz

Donald Trump's picture
Donald Trump (not verified) Mr.Sono Apr 20, 2017 10:56 PM

What good it serves to have money if you don't have a nice piece of ass to eat into your savings?

Plebs, meet Yellen.. EVERYONE's piece of fat kike ass eating at your $. Those that can kick ass might afford a bonus though:

Ronda Rousey Announces Engagement to Fellow UFC Fighter (NSFW)

mdr attitude's picture

I could do with a bonus.

Wait.. is she a millennial with no job, no prospects, leaving with her folks?

Then better keep it only at dick length...not closer, you don't want her to get too comfy with your finances. For that we have Yellen.

The Management's picture

"rising interest rates in the U.S. mean fewer companies will be able to borrow money to pay dividends and buy back shares."

... And there it is folks, the biggest ponzi scheme in human history in plain sight.

kwatinhu's picture

Yeah, that sentence kind of caught my eye too.

I'm like, maybe that's the whole f#cking problem,??

Who in the hell borrows money for such stupid reasons? 

Moneychangers who see a way to skim, same as it ever was.

Joe Sichs Pach's picture

"at a closed-door Goldman Sachs Asset Management conference"


Where was my invite?

Tribe members only?

ASimpleTrader's picture

There was an post about a month back about companies liek Verizon borrowing money to pay dividendsand prop up their share prices. But as long as there's nearly 'free' money from the Fed flowing, everyone is gonna do stupid things to try to get more $$ until it comes crashing down.

Helll look at the post today on ETF of ETF. comparing it ot the CDO bond shuffling or mortages just a few years ago? Remember that crash?  Todayis just another way of spreading the risk around of 'free' money thats really not so free.

Raging Debate's picture

Haha I know it right? OMG What ever will those executives do without buybacks? They will actually have to work, innovate and compete. OH the horror...

JRobby's picture

$he $eems to $tupid to be Terrified

Melgibsonyellsfreedom's picture

Do you have another words for another words?

economessed's picture

This "market" has been a steaming pile of falsified shit since 2009.  Everyone thinks the sky is about to fall, but can't and won't let the floaty things succumb to true valuation discovery ever again. 

sincerely_yours's picture

At some point, something will have to give.

Either America's economy is totally destroyed or the Fed is done away with.

ZeroLounger's picture

Spammer:  May your sight be infested with the viruses of 1000 computers.

Melgibsonyellsfreedom's picture

I wonder what would happen if the fed got into the business of computer security. They figured out how to remove all possibility of a market crash. Anything bad happens and they buy the dip. Brexit. Trump. Debt ceiling. Italian referendum. French election. Terrorist attacks. Trump not getting any tax cuts. Obamadontcare not repealed. Just buy the dip. The market has been lobotimized and is absent of anything resembling a free flowing economy. Nothing bad happens anymore. I think this is what heaven is supposed to be. We have reached financial nirvana.

So if the fed did the same thing for computer security they would eradicate all viruses. Nothing would break. They should get into health care too and no one would ever get sick again. No one would die. And in the immortal words of Al Czverik... we're all gonna get laid.

Lanka's picture

I am quite sure that 'Ol Yeller is not worried, being a multi-millionaire with security, bunker, etc. 

Déjà view's picture

Pension Funds... 'can't let that happen'...

overbet's picture

Good old tudor jones video he made a valiant effort to have removed from public because he says it reveals his secret sauce. Which is/was basically history repeats and markets react similarly during those events.

mkkby's picture

I thought his secret sauce was insider trading.  None of these guys are legit.

I've seen that video before.  You won't learn a thing.

chindit13's picture

If there are any 'good guys' in the financial industry, Paul is one of them. Largely a macro trader his entire career, opportunities for 'insider trading' don't really come his way.

I appreciate that anyone who is more successful (and for Paul, generous) in life irritates you, but the other 7.2 billion people on Earth cannot all handicap themselves just to make you feel better about you.

overbet's picture

He is known for his philanthropy to inner city niglets because as we all know people of color are treated so unjustly and denied the privleges that caucasians are endowed with such as affirmative action, priority admittance to universities, free education, along with free basic necessities such as iphone 7s. Paul Tudor Jones and all Soros like philanthropist are clearly good guys making the best of a bad situation.

MortimerDuke's picture

+1000.  Spot on my friend.  I think it's amusing how many of these clowns who like to think of themselves as somehow "enlightened" by virtue of the fact that they comment on ZH (mostly after skipping the article), are guilty of the most vapid kind of intellectual laziness, ex., financial = bankster/corrupt.  Critical thinking is a lost skill.  

new game's picture

j s bach, took the words out of my mouth, with cocksucker, fukstick and few moar adjectives to aptly describe these asswiped shithead two faced low lives.

Bigly's picture

Yes, dude. I hate to break it to you but we are all going to die.  

See the zh blurb for confirmation

SoDamnMad's picture

Somehow you better start trining to "get to the door first" because it will be very crowded when the dam bursts. Seems when you see the quarterly results, some are bad and some are "massaged to the max" to look good.  I wonder how bad some of them will have to be before analysts have the guts to say how bad they are. It is going to be UGLY.



Raging Debate's picture

Yeah, massaging. Verizon lost 300,000 subs but only missed earnings estimates by a penny. 

Strizzi's picture

on a long enough timeline the survival rate for everyone drops to zero

El Oregonian's picture

I think I heard the Fat Lady warming up in the dressing room.

J J Pettigrew's picture

>It is easy to hoist a munchkin albino garden gnome though....

from Berkley no less. And that is the tip off....

J J Pettigrew's picture

Tudor is an old Cotton trader .... and he knows that the getting in is easy and getting out is where the skill is and the difficulty...

So he identifies the predicament the Fed is in.......

HRClinton's picture

Another Tudor. Does he have a son, named Henry? The House of Windsor will not be amused.

Steroid's picture

They all think S&P will stop at 2K.

Mr.Sono's picture

Iam terrified........

yogibear's picture

I am terrified......not

mily's picture

Uh oh, shakin' in my boots...

Gorgeous's picture

"the S&P relative to the size of the economy"  So?  Where else is a nigga gonna make a buck?

Bigly's picture

Wait a minute or two.

You will learn how to make $7,000 easy peasy!

max_leering's picture

Ol' Yellen to the wall street criminals: "bring it niggas!! jus like bankers gotta bank, niggas gotta nigg"

Cabreado's picture

Oops, he forgot to expend energy on ending the Fed altogether -- go figure.