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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moorewasthebestbond's picture

I don't have a liquor cabinet prepared for the next big crash.


I have liquor steel shelving!

Ouagadoudou's picture

20% drop u'd still be around 2000. Make it 50% if market price the real EPS ex buy back n tricheries, plus another 20% for the panic and Trump pushing some stupid button. More like 70% to me

orangegeek's picture

all the chart porn in the world doesn't mean squat


CENTRAL FUCKING BANKS have been buying to keep markets up - makes for a rosy narrative (effectively an ongoing lie).


when CBs stop buying, for whatever reason, we roll


until then, we hold and earnings (or lack thereof) mean sweet fuck all

kurzdump's picture

CBs cannot buy demand for goods and services. 

AE911Truth's picture

Wanna bet?

The CBs can put a million dollars of monetary units into everyone's bank account in a day.

People aren't going to save that crap, they are going to demand real goods and services in exchange for the newly deposited trash as fast as they can.  That's demand for goods and services.

Yes, price will rise, and whoever spends it the fastest reaps the biggest benefit.

kurzdump's picture

If the central banks keep buying financial assets, the cost of living will increase. Since wages do not rise, people will no longer be able to pay their rents and go bankrupt. They become homeless, lose their jobs and demand will decrease. There will be no way to stop this. You can already see the number of homeless people rising. 

Helicopter money is not an option. It would quickly cause hyperinflation.

silverer's picture

"CBs cannot buy demand for goods and services. "

Or make productive, educated people have children. The quality of the US work force is spinning down. You can't print real productivity. For 50 years, it was the US's turn. Now, it's somebody else's turn.

Singelguy's picture

Or when the markets finally wake up and realize that the half trillion dollar deficits are never going to end and the twenty + trillion dollar debt can never be repaid. Confidence in the dollar will be lost, inflation will go through the roof, interest rates will have to rise dramatically, and all those companies that borrowed money to buy back their stock will be crushed servicing the debt. The Fed can print all the money they want but at that point nothing will stop the march to Argentina and Zimbabwe.

CHX13's picture

These sc(d)umbags will say anything just to make a buck. While they rant the sky is falling they may well be buying and when they say BTFD they sell. I think everyone can agree that these markets are overvalued, but they may be kept high by CBs for longer than any bear can bear (think SNB buying apple to keep the still too strong Swissy from getting even stronger). It's  $#yte $how that will only stop when the paper precious metal ponzi or the remaining economy fall completely apart. But when the wheels come off, but a handfull of deep insiders know, and maybe even they don't. GLTA 

Last of the Middle Class's picture

Banks and their derivatives drive markets now while real purchasing power of households, available spare cash has been sucked up by Obamacare. That is what government control of healthcare and QE has done to the economy. There is no recovery from this massive banker and Fed debt that can never be repaid. There is just MSM with their constant caterwauling about gun control, climate change (formerly known as global warming), safe spaces and how Russia fixed the election for Donald Trump. We'r'e living in a government created perverse alternate universe that no one can wake up from. Hell, here in Louisiana last week we lost a 5 billion dollar job producing oil company expansion to Texas and the oil company's express reason for NOT choosing Louisiana was "The tax climate" Yesterday John Bel Edwards once again (for the 5th or 6th time in as many weeks) proposed yet another tax increase to pay for more entitlements that the state just cannot afford. The people running our country are mentall ill. They are completely detached from any sort of reality that deals with the real mathematics of a grossly overburdened economy. Shit, I heard Paul Ryan has yet again given birth to another form of RINO care that we will all have to feast on if the damn thing passes. Never have we been so lost and without any direction other than the direction of greed, as a country.

OCnStiggs's picture



(One state short this month!)

Nomad Trader's picture

What he says is irrelevant - he is probably net long for all we know.

Kefeer's picture

"according to people familiar with his thinking" - End

Now that is original; I have not seen that phrase.  Perhaps the Fake News could use that.

Trump will destroy N. Korea, according to people familiar with his thinking.  :)

bwdiii's picture

Whose hedging options might expire by fall?

economaly's picture

wake me up when my horoscope predicts immediate downturn... zh is really predicting the same SHTF prophecy for years, I'm tired. luckily i bought gold, but when should i start buying puts, finally?

lurker since 2012's picture

How true but as ....everything is ready... nuclear codes.... Obomb care.....POW

Swamp Yankee's picture

Yellen?  Worried?  Is she even conscious?

Solio's picture

Everything's ready, is it not? The crimes requiring cover-up are too numerous to list so the nuclear bombs are poised.

Cutter's picture

This is all dependent on investors being rational, and caring about valuation.  And the last five years have shown that "investors" these days are anything but rational.

aqualech's picture

Why is the FED responsible for the stock market?

naro's picture

If Tudor Jones of Palm Beach knew something he certainly would not share it with the rest of the world.  His job is to make money, not to enlighten the world of investors.

Sir John Bagot Glubb's picture

The market is a beast that cannot be slayed.  We've been hearing this shit since 2010.  But the market just keeps chugging higher.  It seems the more these billionaires come out and say this, the higher the market goes.  The reality is no one seems to know anything.

Deep Snorkeler's picture

The stock market is no longer a human-based system.

Algos, bots untended.

Human emotion is gone.

My tattooed forehead burns.

orangegeek's picture

yellen and other CBs have destroyed the fund business - Tudor is pissed


if you can murder a SCOTUS and call it a hunting accident, whacking yellen or it's relatives is a fucking no brainer



Insurrexion's picture

More fucking proof of a Monster movie where you are the one who dies in the end.

Now, you might say, “So what? I’m making money, who cares how.”

I say, “Fine, you fuckers. Get it your fake returns in a fake economy while you can, because the fake Central Banks have made real economics irrelevant.”

Look at the fucking real interest rates around the fucking world (the real indicator of the health of the real economy). Down, down, down (since 1980).

The fucking CBs created fake this economy by “hoping” their fucking Keynesian “stimulation” would work on what was a structurally sick real economy.

It didn’t fucking work. They created the “Frankenstein Economy.”

Now the CBs, (the Dr. Frankensteins) have blistering tight assholes riding the shoulders of a Monster towards a cliff in the dark; while, you and your families’ lives depend on them to “monitor and respond to the data”…for fuck’s sake.

Be crystal clear about this. The Dr.s cannot stop pumping fake cash into their Frankenstein Economy. Otherwise, the Monster stops walking, or falls over the cliff, crashing down with the Dr.’s on its shoulders and everyone dies.


The question for you is not if, but when.