BillionairehedgefundmanagerPaulTudorJonesissoundingthealarmovertheU.S.government’sballooningfiscaldeficit,warningthatthecurrenttrajectoryofspending,exacerbatedbythepromisesofbothpresidentialcandidates,couldpushthecountrytowardafinancialreckoning.HepredictsthebondmarketmayultimatelyforceWashingtontoaddresstheissuepost-election.
“We’regoingtobebrokereallyquicklyunlesswegetseriousaboutreininginourspending,”JonesbluntlytoldCNBC’sAndrewRossSorkinonTuesday.
AsthefounderandchiefinvestmentofficerofTudorInvestment,Jonesexpresseddeepconcernthatrunawaygovernmentspendingcouldtriggerasharpsell-offinthebondmarket,leadingtoaspikeininterestrates.
Herevealedhispersonalstrategy:steeringclearoffixedincomeandactivelyshortingthelonger-datedportionofthebondmarket.
“Ithinkallroadsleadtoinflation,”hesaid.“I’mlonggold,longbitcoin.”Tudoraddedthathewouldshortfixedincome,particularlylongerdurationpaper.
“Thequestionis,afterthiselection,willweexperienceaMinskymomentintheU.S.debtmarkets?”Jonesasked,referencingthetermusedtodescribeasuddencollapseinassetpriceswhenmarketscannolongersustainexcessiverisk.
“Willtherecomeamomentofcollectiverealizationthatwhatwe’retalkingaboutisfiscallyunsustainable?”hecontinued.
Forfiscalyear2024,thefederaldeficitsoaredpast$1.8trillion—up8%fromthepreviousyear,accordingtotheTreasuryDepartment.Tocoverthisgap,thegovernmentsellsTreasurybonds,aprocesscloselymonitoredbyWallStreettraders.Risinginterestratesoverthepastthreeyearshavefurthercomplicatedmatters,astheymakeservicingthenationaldebtincreasinglyexpensive.
JoneshighlightedthatbudgetdeficitsswelledduringboththeTrumpandBidenadministrations,andhepointedlycriticizedbothTrumpandVicePresidentKamalaHarrisasbeing“leastsuited”totackletheloomingbudgetcrisis.Headdedthatinflationremainsasignificantconcern,especiallyifTrumpweretoregainoffice.
JonesemphasizedthattheU.S.hasoptionstobringspendingundercontrol,buttheywon’tbeeasy.PotentialsolutionsincludeallowingtheexpirationofTrump-erataxcutsorimplementingdrasticreductionsinthefederalworkforce.
Havingfoundedhishedgefundoverfourdecadesago,Jonesearnedhisreputationbycorrectlypredictingthe1987stockmarketcrash.Now,hislatestpredictionwarnsofanotherloomingfinancialstorm,withthebondmarketatitscenter.
It’salsoasignthatBitcoinersandGoldbugsarenowonthesamepage.Bothhaveperformedwellthisyear,withGoldup30%,andBitcoinup52%.
Source:TradingView
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