Hedge fund billionaire Paul Tudor Jones is warning of a steep financial test in advance of the Federal Reserve’s upcoming rate hike meeting on Wednesday.
In a new interview with CNBC, Jones says the US economy is facing its biggest test since the 1970s and compares the challenges facing the Fed to an ocean-faring ship encountering cross-currents in open waters.
“I think this is one of the most challenging periods ahead for the Federal Reserve Board in its history. I don’t know if we’ve ever navigated something like this… we’ve just never seen anything like this since the ’70s. It’s really uncharted waters.
I like to think of it as a cross-hatch ocean. Normally in the ocean, you’ll have one swell that moves one direction, occasionally you’ll get a situation where [two swells intersect].
Imagine trying to navigate that in a boat where you’re dealing with [swells coming from different directions]. That’s what we’ve got right now.”
The billionaire, who heads investment management firm Tudor Investment Corporation, says the combination of rising inflation and contracting economic growth poses a significant test for the Fed, which is expected to raise interest rates tomorrow.
Tudor Jones thinks the overall environment is also treacherous for the average investor.
“You can’t think of a worse environment than where we are right now for financial assets. Clearly, you don’t want to own bonds and stocks.
I think we’re in one of those very difficult periods where simple capital preservation is… the most important thing we can strive for.
I don’t know if it’s going to be one of those periods where you’re actually trying to make money.”
Looking toward the future, the investor mentions the generational divide regarding new technologies like Web 3.0 and says that the “smartest and brightest minds that are coming out of colleges today” are interested in cryptocurrencies.
“It’s hard to not want to be long [on] crypto because of the intellectual capital, just the sheer amount that’s going into that space…
It’s a borderless internet where all of a sudden you have blockchain as the verification code to allow anyone on the internet to instantly connect… and then that opens up huge possibilities.
Clearly central banks and central governments are not going to necessarily be huge fans of that, particularly when it comes to using crypto as a means of exchange.”
Regarding his own stake in digital assets, the billionaire says,
“I’ve got my modest allocation to crypto. I have a trading position on top of that goes from fully invested to zero.
Right now I’m modestly invested and I would think that it’s going to have a bright future as we roll through these rate hikes. A lot of it depends on what our central bank does… and how serious we are about fighting inflation.”
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