The Tudor Investment Corp. founder believes corporate debt levels are too high — and that President Trump’s sweeping tax cuts may pop the bubble.
Paul Tudor Jones, founder of $7.2 billion global macro hedge fund firm Tudor Investment Corp., said Thursday that global credit markets are in bubble territory — and that the Trump tax cuts may act as a pinprick.
“From a 50,000-foot viewpoint, we are probably in a global debt bubble,” said Jones, who surfaced concerns about the global bond markets earlier this year. “Global debt-to-GDP is at an all-time high. I don’t know whether you are supposed to run for the exits, but we are at a point in time that is really challenging to the paradigm of ever-growing debt relative to the carrying capacity of the economy” underlying it, he said, speaking at the inaugural Greenwich Economic Forum.
Jones pointed to major credit dislocations over the past few days, including a sharp drop in General Electric Co.’s bonds, which ratings agencies recently cut to a rating just three levels above junk.
“Real estate and mortgage credit got us in so much trouble in 2007,” he said. “Next it’s going to be corporate credit, and the breakdowns are something we have to pay attention to.”...MORE
Jones is one of the hedge fund industry’s best-known managers, but his firm had fallen on hard times in recent years amid a turbulent time for global macro funds. Last year Jones shuttered one of his funds and moved his head office from Greenwich, Connecticut to Stamford. But his funds turned a corner earlier this year, with flagship Tudor BVI up 9.14 percent through October, according to a document from investment bank HSBC that tracks hedge fund performance.
Jones said President Trump’s sweeping corporate tax cuts may ultimately cause the bubble to pop, noting that the cuts were promised before the U.S. Federal Reserve started hiking rates.
“We may look back and say that may be what pricked the bubble,” he said. “Do you really think we’d have had that tax cut if we knew where rates would be today? I doubt it — that’s why we are in such a perilous time right now.”...
