Friday, September 07, 2007

Paul Tudor Jones Quote

Sometimes I get blamed for being a little too "gloom and doom". Sometimes I think those people that say that are right.

While reading some old interviews I came across the following quote from Paul Tudor Jones that made me smile and feel that I wasn't alone.

"I think the financial community, particularly Wall Street, was dealt a life-threatening blow on October 19, but they are in shock and don't realize it.

Everything gets destroyed a hundred times faster than it is built up. It takes one day to tear down something that might have taken ten years to build. If the economy starts to go with the kind of leverage that is in it, it will deteriorate so fast that people's heads will spin. I hate to believe it, but in my gut that is what I think is going to happen.

I know from study history that credit eventually kills all great societies. We have essentially taken out our American Express card and said we are going to have a great time. Reagan made sure that the economy would be great during his term in office by borrowing our way into prosperity. We borrowed against the future, and soon we will have to pay."

The moral of the story is that the USA did face a recession but we made it through without another great depression. Our great society wasn't killed by its excesses.

I find it interesting that Jones was worried about the use of leverage in 1987. Given the huge amounts of leverage used in today's markets, I wonder what he thinks now? He probably is quite bearish, but as he learned then, times will get tough but somehow we make it through.

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