Paul Tudor, Hedge fund manager, talked to CNBC about inflation, crypto, and the Fed. Paul Tudor made it clear that bitcoin and the stock market are possibly not the places to be if the Fed seriously sticks to its plan of getting a lasso around rampant inflation. He further told CNBC on a Monday morning, “I still have a minor allocation to bitcoin.”
In mid-2020, Paul said that he gave bitcoin (BTC) 1%-2% of his multi-billion dollar portfolio and could give as much as 5% of his assets if U.S Federal Reserve continued as planned in monetary debasement. His comments helped raise crypto prices already in the bull market. Firms and crypto markets today hardly noticed his remarks about digital assets, with Bitcoin prices remaining in the low $19,000 area.
The Fed was amid several stimulus schemes to maintain the financial and economic system float during the COVID-19 lockdowns. Currently, the U.S is doing things oppositely as it is quickly tightening the monetary policy to deal with the inflation surge it contributed to. Jones suggested that the Fed should continue tightening monetary policy quickly to avoid long-term economic hardships.
“If they don’t keep going and we have high and permanent inflation, it just creates, I think, more issues down the road,” Jones told CNBC. “If we are going to have long-term prosperity, you have to have a stable currency and a stable way to value it. So yes, you have to have something 2% under inflation in the long run to have a stable society. So there’s short-term pain associated with long-term gain.”
The giant investor also said it might be hard for investors to bring inflation back to the 2% target because of a significant salary increase. According to Tudor,
“Inflation is a bit like toothpaste. Once you get it out of the tube, getting it back in is hard.” The Fed, he said, “is furiously trying to wash that taste out of [its] mouth … If we go into recession, that has negative consequences for a variety of assets.”
Tudor admitted too that he believes bitcoin will be valuable. He added that cash is the right place to be if the Fed can be trusted to do as promised and follow through on its promise to bring back inflation to the 2% target.
U.S Economy Close to Recession
Jones believes that America’s economy is near or already amid recession because the Fed hurried to tamp down increasing inflation with challenging rate hikes. Regarding this, on Monday, Jones said to CNBC’s ‘Squawk Box,’
“I don’t know whether it started now or it started two months ago. We always find out and are always surprised when a recession officially starts, but I’m assuming we will go into one.”
Jones further said that investors follow a specific rule book about recession when dealing with it. As shown by history, risky assets do not just fall. They take time before hitting rock bottom. According to Jones,
“Most recessions last about 300 days from the commencement of it. The stock market is down, say, 10%. The first thing that will happen is short rates will stop going up and start going down before the stock market bottoms.”