Paul Tudor Jones: ‘Crazy’ Market Is Like 1999 Melt-Up, Dot-Com Bubble Bust
Hedge fund titan Paul Tudor Jones said today’s stock market reminds him of the end of the 1999 bull market run which saw a giant melt-up before the popping of the dot-com bubble.
That’s not exactly a great comparison for people holding stocks considering the market peaked in early 2000 — right before the dot-com bubble burst.
“We are just again in this craziest monetary and fiscal mix in history. It’s so explosive. It defies imagination,” Jones said on CNBC’s “Squawk Box,” broadcasting from the World Economic Forum in Davos, Switzerland. “It reminds me a lot of the early ’99. In early ’99 we had 1.6% PCE (personal consumption expenditure), 2.3% CPI (consumer price index). We have the exact same metrics today.
“The difference is fed funds were 4.75% — today it’s 1.62%. And back then we had a budget surplus and we’ve got a 5% budget deficit. Crazy times.”
So if the closest comparison to the present market was right before a big crash, should investors be ready to sell now?
“Not really. The train has got a long, long way to go if you think about it,” Jones said on CNBC, noting that the Nasdaq has more than doubled since being at a similar stage to the dot-com bubble top. “That’s a long way from now. At the top theoretically, rates (would) be substantially higher.”
The tech-heavy Nasdaq Composite rose from about 1,000 in 1995 to more than 5,000 by early 2000, and everyone was celebrating. Companies were going public left and right, with some doubling in value on the first day.
On March 10, the combined Nasdaq value was at $6.71 trillion.
And then came the crash.
Less than a month later, more than $1 trillion in value was wiped from the books and some companies lost between $10 million and $30 million a quarter before finally going under, taking their investors down with them.
Jones said a new “curveball” that could end the record bull market run could be the recent outbreak of the new coronavirus that began in China. The virus has affected hundreds in central China, killing 17 so far, and can be spread between people, raising alarms like the 2004 SARS crisis, which caused $40 billion to $50 billion in losses from reduced travel and spending.
The Center for Disease Control told Reuters that a Chinese traveler in Seattle was the first U.S. case of the coronavirus.
“That’s a big deal. If you look at what happened in 2003 … stock markets sold off double digits,” Jones said. “If you look at the escalation of the reported cases, it feels a lot like that. There’s no vaccination. There’s no cure. If I was an investor, I’d be really nervous.”
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