Paul Tudor Jones favorite trade was recently revealed when the legendary trader said that “we’re probably on the cusp of the first rate cut after a long hiking cycle”. Paul Tudor Jones was speaking in an interview ahead of a June 12 event in New York sponsored by his non-profit organization JUST Capital.

Paul Tudor Jones’s favorite trade was the most interesting part of the interview. What’s more, it appears that Paul Tudor Jones has also joined a string of top investors who are now endorsing gold.

“We’re probably on the cusp of the first rate cut after a long hiking cycle

PAUL TUDOR JONES

“The best trade is going to be gold. If I have to pick my favorite for the next 12-24 months it probably would be gold” said Paul Tudor Jones.

So where does the legendary investor Paul Tudor Jones see gold moving to in the short term?

“I think gold goes beyond $1,400… it goes to $1,700 rather quickly. It has everything going for it in a world where rates are conceivably going to zero in the United States,” said Paul Tudor Jones.

Paul Tudor Jones’s favorite trade is gold because the globalization trade is broken, with the consequences of a recession deadhead

“Remember we’ve had 75 years of expanding globalization and trade, and we built the machine around the belief that’s the way the world’s going to be. Now all of a sudden it’s stopped, and we are reversing that. When you break something like that, the consequences won’t be seen at first, it might be seen one year, two years, three years later. That would make one think that it’s possible that we go into a recession.

Remember we’ve had 75 years of expanding globalization and trade, and we built the machine around the belief that’s the way the world’s going to be

PAUL TUDOR JONES

That would make one think that rates in the US go back toward the zero bound and in the course of that situation, gold is going to scream”.

Indeed, as we reported back in January property billionaire Sam Zell’s investment plays were also erring on the side of safe-haven assets namely gold.

“For the first time in my life, I bought gold because it is a good hedge,” said Sam Zell.

I didn’t think we’d have the first cut in 2019. I don’t think we would have had that had we not gotten into this tariff battle, and so it has accelerated everything” – Paul Tudor Jones

Paul Tudor Jones’s favorite trade is gold because he believes that the Fed is done with raising rates in 2019

Put another way, the opportunity cost of holding gold is likely to fall going forward.

“I didn’t think we’d have the first cut in 2019. I don’t think we would have had that had we not gotten into this tariff battle, and so it has accelerated everything” – Paul Tudor Jones

The catalyst for the surprise was, of course, Trump’s renewed trade war (for an extended discussion of what triggers prompt Trump to escalate and de-escalate trade war, see this post), with Jones stating that “the tariffs are a very material event” adding that “We haven’t had any experience in modern times with them. So you have to re-adjust the entire outlook”.

The tariffs sped up where “the Fed would have ultimately gone and fast-forwarded the possibility — and I double underscore possibility — that we’re going to get a more protracted global slowdown” said Paul Tudor Jones.

Paul Tudor Jones also believes that “the consequences will be slower-moving than many people anticipate”.

Read the full interview.

TRADING SOFTWARE

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Last year the activist investor viewed Campbell soup as a bargain when Third point reported that the soup maker could fetch a takeover value of $52 to $58 per share.

A year later and the activist investor Dan Loeb targets Sony

Dan Loeb's activist hedge fund Third Point is raising an investment vehicle to generate between $500 million and $1 billion so it can continue to buy Sony shares, according to a recent report in Reuters.