Tag Archives: paul tudor jones

Paul Tudor Jones on the InJustice of Income Inequality

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Paul Tudor Jones (PTJ) is a legendary trader  that runs one of the largest  Hedge Funds in the world....Tudor Investment Corporation. He recently gave a TED talk about income inequality.  https://www.youtube.com/watch?v=vesdt5vDIek PTJ shows data documenting a 40 year high in corporate profits as a % of Revenue and a 40 year low in the percentage going to labor (Classic substitution of capital for labor). I guess todays corporate leadership doesn't think like Henry Ford who famously paid his employees enough to ensure they could buy a Ford Automobile.

PJT has created an independent non-profit organization that will  poll 20k  Americans annually to  define corporate societal responsibilities that they will use to  rank the largest 1000 US companies.

Interesting that the early comments on YouTube are mostly negative. Commentators seem unconvinced PTJ is genuine. PTJ concludes that historically this level of inequality ALWAYS is corrected via Taxes, Revolutions or War. So is he worried about "killing the rich people"?  Perhaps, but someone of his stature needs to quit the BS that optimizing shareholder value is Smith's invisible hand. Read Smith, it's not.

I've  been inside the core of the Technology business (semiconductors and software) for over 35 years. I see four changes that are creating winner-take-all monopolies by compounding capital much faster than when I started in the 70's...

1) Repeal of Glass-Steagal and conversion from LLC's to Public Companies driving TBTF Banking   the largest corporate sector in total capital and profits.  We have ~$800T in capital supported by a  ~$80T global economy.

2) Knowledge (IP) , when exchanged, creates 2 owners of the same IP. The knowledge economy is a mathematical engine for exponential growth.  Most of world economic history was built upon physical object transactions which does not implicitly create shared ownership.

3) Globalization especially w/respect to the benefits of 2)

4) The flawed assumption of Ergodicity  in economic teaching and policy now well documented as a mathematical error in Menger's foundational book that created "modern" economics, http://rsta.royalsocietypublishing.org/content/369/1956/4913 . Lucky money compounds to +infinity but unlucky money stops at zero... game over for the unlucky.

I believe these have created a tangibly different environment than our economic history books.  I agree with PTJ that unintended consequences (inequitable distributions) will not settle out before Capitalism's benefits fail to benefit the majority of the people.

 

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Paul Tudor Jones: 4 Ways to Make Money

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At the 25th anniversary of the crude oil contract on the NYMEX, Paul Tudor Jones ( http://en.wikipedia.org/wiki/Paul_Tudor_Jones ) gave a presentation where he described how he categorizes trading strategies. Here they are with some examples...

1) Specialized knowledge of an Instrument

Stock picking long/short (research analysts)
Floor traders (back in the day)
Insider trading

2) Arbitrage (take advantage of pricing inefficiencies)

NYC vs. London, Cash vs. Futures
Pairs trading (statistical arbitrage or relative value)
Microstructure (Bid/Ask spreads) (HFT)

3) Trend (Momentum) Trading

Trin trading (day trading)
Nasdaq late 90’s
CTA “Trend-followers”

4) Execute at the “Peak of Human Emotions”

Small group of people (Idiot Savants) Exuberance vs Fear
Buffett “Be greedy when others are fearful and fearful when others are greedy”

This is a useful framework...if it's good enough for PTJ it works for me.

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