Paul Tudor Jones is longing Bitcoin (BTC) and other commodities because “all roads lead to inflation” after the United States’ November presidential election, the veteran investor told CNBC on Oct. 22.
“I probably have some basket of gold, Bitcoin, commodities and NASDAQ [technology stocks] and I would own zero fixed income,” Jones, who founded hedge fund Tudor Investment Corporation, said on CNBC’s Squawk Box.
The median inflation expectation among US consumers for the next 12 months stands at around 3%, according to an Oct. 15 release from the Federal Reserve Bank of New York, a part of the US central banking system.
The Federal Reserve has set a long-term inflation target of 2% per year.
Source: Federal Reserve
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However, Jones said rising US government expenditures and looming tax cuts make hitting those targets practically impossible without dramatic policy changes.
“We’re going to be broke really quickly unless we get serious about dealing with our spending issues,” Jones said.
The Congressional Budget Office estimates the federal government will clock a $1.9 trillion deficit in the 2024 fiscal year.
That figure is on track to grow to $2.8 trillion by 2034, the CBO said.
“The playbook to get out of this is that you inflate your way out,” Jones said, citing Japan as an example of a country that’s already pursuing this strategy.
Investors are turning to gold and BTC in a so-called “debasement trade” as they brace for a “catastrophic scenario” amid rising geopolitical tensions, according to an Oct. 3 report by JPMorgan.
The so-called debasement trade refers to a spike in gold demand caused by factors ranging from “structurally higher geopolitical uncertainty since 2022, to persistent high uncertainty about the longer-term inflation backdrop, to concerns about […] persistently high government deficits across major economies,” among others, JPMorgan said.
“The fact that Bitcoin [exchange-traded funds] started seeing inflows again in September after an outflow in August suggests that retail investors might also see gold and Bitcoin in a similar fashion,” according to the report.
At around $67,000, the price of BTC is up more than 50% in the year to-date, according to CoinMarketCap.
Analysts are eyeing price targets for BTC just below its current all-time high of $73,679.
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