Several big names on Wall Street sounded the alarm on the market and economy this week.
Among them was billionaire hedge fund manager Paul Tudor Jones, who said in an interview with CNBC this week that the U.S. economy will be in the throes of a “Second Depression” should the coronavirus pandemic not be contained within a year.
It “just depends on whether, unfortunately, this goes to a year with this kind of a lockdown,” Jones said. “If a year from now, we are still in the same situation, we would be called a second depression.”
The founder of Tudor Investment Group said the U.S. may have difficulties following contact tracing and other methods used by other nations to contain the virus quickly because of how Americans value individual freedoms.
“Americans are too different. I don’t think we would be able to come together and do that,” Jones said. “I think America’s biggest strength is individualism, its love of freedom. In the case of the pandemic, it’s also our biggest weakness. If you look at the Asian countries that are succeeding and beating this, they are doing it because they place a much greater emphasis on society values than they do on individual rights.”
As the coronavirus began to ravage the U.S., the stock market tumbled into the fastest bear market on record between mid-February and March 23. Since then, stocks have bounced swiftly, with the S&P 500 rising more than 27% since that bottom.
“I think this part of the bounce was easy to forecast, I think what happens from here again depends a lot on COVID stuff,” Jones said. “There’ll be a shift in focus from liquidity issues somewhere down the line to solvency issues. If we don’t find a vaccine or cure, if we don’t find a much better way of testing at scale… then I think the market’s going to have a much more difficult time.”
Jones told clients last week that inflation is coming as a result of central bank money-printing to the tune of $3.9 trillion, or around 6.6% of global economic output, printed since February.
“It has happened globally with such speed that even a market veteran like myself was left speechless,” Jones said. “We are witnessing the Great Monetary Inflation – an unprecedented expansion of every form of money unlike anything the developed world has ever seen.”
To hedge against the coming inflation, Jones said he considered various bets on gold, Treasuries, certain types of stocks, currencies, and commodities, before finally recognizing a “growing role for Bitcoin.”
“The best profit-maximizing strategy is to own the fastest horse,” Jones said. “If I am forced to forecast, my bet is it will be Bitcoin.”
“I am not a hard-money nor a crypto nut,” he added. “The most compelling argument for owning Bitcoin is the coming digitization of currency everywhere, accelerated by COVID-19. … Bitcoin reminds me of gold when I first got into the business in 1976.”
Tudor concluded his interview with CNBC by saying that he wanted to do his part to help the U.S. recover from the coronavirus pandemic.
“I want to be able to say in 20 years to my grandchildren when they ask me what did I do during the second depression, I would look them in the eye,” Jones, one of the founders of the Robin Hood Foundation, a philanthropic organization created to help fight poverty in New York, said. “And I want to tell them I did more than I ever though I could do.”