Billionaire investor warns: U.S. "wealth disparity" will end in "revolution, taxes, or war"

The sin of greed leads to the collapse of society.


Billionaire investor warns: U.S. "wealth disparity" will end in "revolution, taxes, or war"

Tyler Durden
Zerohedge
Sat, 07 Oct 2017 17:45 UTC


Having previously warned of the "disastrous market mania," and told Janet Yellen to "be terrified" in April, legendary trader Paul Tudor Jones has a new message for CEOs, urging them to stop embracing the profit-above-all-else ethic creating massive wealth-inequality, or face the "tearing down of our civilization via war, revolution, or taxes."

"One of the key things that always ends up tearing down great civilizations and countries is wealth disparity. It's not sustainable," explained the billionaire hedge fund manager at the Forbes Under 30 Summit in Boston, telling corporate chiefs that they have gone too far in embracing economist Milton Friedman's profit-above-all-else ethic and they need to change how they do business.

Corporations have paid too much attention to prioritizing shareholders, said Jones, who's backing a nonprofit called JUST Capital that will rank companies on how well they treat their employees, consumers, communities and investors.

Bloomberg reports that Jones said that even Friedman would rethink his ideas if he could see how divided the U.S. has become in terms of wealth, and worries about the outcome... "The way wealth disparity has been historically dealt with is either wars, revolution or taxes. My guess is in the future it'll be one of those three in this country."

At the time of Friedman's 1970 article, "The Social Responsibility of Business Is to Increase Its Profits," the maximum federal individual tax rate was 70 percent, versus about 40 percent today. The wealth gap was one-fifth of what it is today, said Jones.

Friedman believed corporate executives should make as much money as possible while "conforming to the basic rules of the society."

The economist also thought that if people want to do good in society they should do so through personal charity rather than through the companies they manage, direct, or invest in.

"I would argue today if he came back and saw where we are as a country, I don't think he would say that," said Jones, 63. "Shareholders have benefited at the expense of labor and that has had a huge social impact on this country." Jones ranked his own company using the JUST criteria and discovered that he underpaid the people hired to landscape the property surrounding his Greenwich, Connecticut-based firm. They were paid $11 an per hour. "We looked through our contractual workers and upped their pay so they could get to a living wage," said Jones, whose net worth is estimated at $3.1 billion, according to the Bloomberg Billionaires Index. Notably, Jones laid off 15 percent of his employees last year, a rare move for a man who's known for his loyalty towards staff, and as Bloomberg reports, after living in Connecticut for decades, Jones moved to Florida last year, which has no income tax.

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This is not the first time that Tudor Jones has discussed so-called "Just Capital." In 2015 he delivered a TED Talk on the topic...

Can capital be just? As a firm believer in capitalism and the free market, Paul Tudor Jones II believes that it can be. Tudor is the founder of the Tudor Investment Corporation and the Tudor Group, which trade in the fixed-income, equity, currency and commodity markets. He thinks it is time to expand the "narrow definitions of capitalism" that threaten the underpinnings of our society and develop a new model for corporate profit that includes justness and responsibility.

It's a good time for companies: in the US, corporate revenues are at their highest point in 40 years. The problem, Tudor points out, is that as profit margins grow, so does income inequality. And income inequality is closely linked to lower life expectancy, literacy and math proficiency, infant mortality, homicides, imprisonment, teenage births, trust among ourselves, obesity, and, finally, social mobility. In these measures, the US is off the charts.


"This gap between the 1 percent and the rest of America, and between the US and the rest of the world, cannot and will not persist," says the investor.

"Historically, these kinds of gaps get closed in one of three ways: by revolution, higher taxes or wars. None are on my bucket list."

Tudor proposes a fourth way: just corporate behavior. He formed Just Capital, a not-for-profit that aims to increase justness in companies. It all starts with defining "justness" - to do this, he is asking the public for input. As it stands, there is no universal standard monitoring company behavior. Tudor and his team will conduct annual national surveys in the US, polling individuals on their top priorities, be it job creation, inventing healthy products or being eco-friendly. Just Capital will release these results annually - keep an eye out for the first survey results this September.

Ultimately, Tudor hopes the free market will take hold and reward the companies that are the most just. "Capitalism has driven just about every great innovation that has made our world a more prosperous, comfortable and inspiring place to live. But capitalism has to be based on justice and morality...and never more so than today with economic divisions large and growing."

This is not an argument against progress, Tudor emphasizes. "I want that electric car, or the jet packs that we all thought we'd have by now." But he's hoping that increased wealth will bring with it a stronger sense of corporate responsibility. "When we begin to put justness on par with profits, we get the most valuable thing in the world. We get back our humanity."

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And here is his full TED Talk on the topic..

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Finally as a reminder, in April, Tudor Jones, who runs the $10 billion Tudor Investment hedge fund, said Yellen should be very afraid, warning that years of low interest rates have bloated stock valuations to a level not seen since 2000, right before the Nasdaq tumbled 75 percent over two-plus years.

That measure - the value of the S&P relative to the size of the economy - should be "terrifying" to a central banker, Jones said earlier this month at a closed-door Goldman Sachs Asset Management conference, according to people who heard him.


While the billionaire didn't say when a market turn might come, or what the magnitude of the fall might be, he did pinpoint a likely culprit.

Just as portfolio insurance caused the 1987 rout, he says, the new danger zone is the half-trillion dollars in risk parity funds. These funds aim to systematically spread risk equally across different asset classes by putting more money in lower volatility securities and less in those whose prices move more dramatically. Because risk-parity funds have been scooping up equities of late as volatility hit historic lows, some market participants, Jones included, believe they'll be forced to dump them quickly in a stock tumble, exacerbating any decline. "Risk parity," Jones told the Goldman audience, "will be the hammer on the downside." Indeed, with all that low-vol leveraged, it wouldn't be the first time.

https://sott.net/en363965

 

Why in heaven's name should a mere market-trader be a "legend"? Just because he made one helluva lotta muney?

Sorry, but that is not nearly enough to become a legend. Not really.

But, yes, the minds of many people obsessed by the accumulation of Wealth - as some sort of Red Badge of Courage - they do indeed believe that Wealth can be correctly considered "legendary".

It would be nice to know "why, on what basis?" A general notion that having billions is somehow better than having just a miserable median-income (of about $54K a year). Is the median-income so miserable? Well, if you drive around in a Lamborghini then compared to a Chevy, yes - one might suppose so.

Which brings us to the heart of the question - our System of Values. The US has, for centuries, valued highly the acquisition of Wealth (in a capitalist market-economy) as a sociological attribute worthy of its eminence. This despite the counter-evolution of Social Democracies, whose fundamental basis I excerpt here:

And yes, in a true social-democracy, people like PT Jones would be taxed very heavily, very heavily - like all those who benefit from a market-economy without contributing sufficiently. Ripping-off Wealth need not be the sole objective of a market-economy. It is so because we have not given sufficient attention to its alternative, which is free from Income Disparity.

(And avoids inequitable Wealth Sharing as looks like this presently in the US. Do you think it "fair and decent" that the Wealth accumulated in the US by 0.1% of families should be equal to that obtained by the bottom 90%.)

Meaning neither equal nor dominant sharing of the benefits of a market-economy but equitable sharing thereto. Let's understand the serious difference between the three ...

 

There will always be wealth disparity and the more free a society is, the larger that disparity will always be. Until someone shows me a disparity in opportunity, I will remain unconcerned.

 

I agree, there will always. We cannot escape the consequences of a market-economy in which the rewards are associated very differently amongst the participants.

But it is these two fundamental criteria that make the sharing more sensibly equitable:
*High taxation of upper-incomes, and
*Sharing the benefit ensued by increased tax-receipts by fostering (for starters) both Tertiary Education and a National Healthcare Service that are free, gratis and for nothing.

The government is just not doing enough. (And I expect nada from Donald Dork, except perhaps his indictment.)

Also, I hasten to add, it is pure gluttony at the heart of the SubPrime Mess that caused such an economic disaster to the US, which could have been avoided had people like M. Jones been properly supervised (market-wise) and taxed intelligibly (to harness their desire for riches).

No, in a free market-economy the sky is decidedly NOT the limit, and if so at the peril of everyone ...

I have showed it to you a hundred times here. It is blatantly apparent that you wish to remain blind to the economic facts and have not the slightest sense of basic fairness ...

 

High taxation has no bearing on someone else's wealth. Plain and simple.

You posted a graph about wealth. Wealth has no bearing on opportunity.

 

there is a disparity in opportunity as liberalism continues the attack on our families schools and religion rendering many Americans unfit for work and wealth accumulation

there is a disparity in opportunity as liberals offshore our jobs with their taxes, unions, regulations, and deficits making wealth accumulation impossible for millions

 

to a liberal stealing money at gunpoint from the rich is fairness, but giving the poor the opportunity to earn their own money is not!

 

the pure beauty of the free market is that it makes you richer than other people only when you contribute better jobs and products than other people. Without better jobs and products we'd all be back in the Stone Age.

 

It's not wealth disparity that is the problem, it's phenomenal levels of wealth disparity.

There is a difference between a little and a lot.

That's what most of us who understand debate call a circular argument.

 

That's because you can't legislate or regulate good decision making among the population. Unless you consistently make bad life decisions, it's easy to not be poor in the US.

 

That's what people say who aren't poor so they can soothe their conscience.

Or people who are poor and simply consider themselves temporarily inconvenienced millionaires

 

No, that's what reality is.

 

Free society and economic systems are related but not one in the same. The economic system is rigged so the haves get to keep all the money while the have nots keep having to ..."pull themselves up by the bootstraps".

 

Right.. We can be like Venezuela before Chavez.

 

It is difficult to make argument with people that think America is a "free society" in all ways including economically.

 

A democratic republic won't work without a robust middle class.

 

Tell that to the Oligarchs and the barely middle class wasting their time watching NFL games.

 

so lets tell liberals to stop forcing middle class jobs off shore with their corporate taxes which are the highest in the world, and their liberal unions and liberal regulations.

 

You mean Republicans.. or are you talking about the Trump family businesses with manufacturing abroad in China and elsewhere?

 

You mean Republicans.. or are you talking about the Trump family businesses with manufacturing abroad in China and elsewhere?

 

to the right, stealing money from the working class at gunpoint is ok if your rich

 

Chavez was nothing but a typical libcommie killer like Stalin Mao Castro Pol Pot. So far this year average Venezuelan has lost 14 Lbs.

 

You mean Republicans.. or are you talking about the Trump family businesses with manufacturing abroad in China and elsewhere?

 

republicans are the pro-outsourcing party, pro-rich, anti-working class

 

who is stealing??? working class pay little of no taxes. Do you understand that?