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Paul Tudor Jones Calls Out Buyback “Mania” CNBC Interview From Inside ETFs [FULL TRANSCRIPT]

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CNBC Exclusive: CNBC Transcript: Billionaire Investor Paul Tudor Jones Speaks with CNBC’s Bob Pisani Immediately

WHEN: Immediately, Monday, February 11, 2019

WHERE: CNBC’s “Closing Bell” – Stay from the Inside ETFs Conference

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The following is the unofficial transcript of a CNBC EXCLUSIVE interview with Billionaire Investor Paul Tudor Jones Speaks with CNBC’s Bob Pisani on CNBC’s “Closing Bell” (M-F 3PM – 5PM) at the moment, Monday, February 11th.

Billionaire Investor Paul Tudor Jones: We’ve got a mania happening in buybacks

 

SARA EISEN: The world’s largest ETF convention is presently beneath means in Florida. Our own Bob Pisani is there and he’s joined by legendary hedge fund manager and Tudor Investment founder Paul Tudor Jones. It is a CNBC unique. Bob, take it away.

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BOB PISANI: And we’re here on the largest ETF conference on the planet, Sara. 2,500 investment professionals talking concerning the future outlook for international progress and naturally, investing normally. Paul, thanks very much for joining us. You’re about to provide a serious speech on, let’s name it social accountable investing. ESG, setting social governance, usually. Your level is an fascinating one. You’re telling the gang: It’s time for the American investing public to vary their outlook on how and what they consider the aim of firms are. The previous Milton Friedman model. You argue that the purpose of an organization is to maximise shareholder returns is an outmoded one. Why and what do you need to substitute it with?

PAUL TUDOR JONES: Properly, you must understand when Milton Friedman stated that, and he was all the time a hero of mine, that was in 1970. The highest revenue tax fee had been 90%, had simply come to 70. Wealth inequality was one fifth of what it is right now. So we have been dwelling in that semi socialist state in that time of time. And so, he was the sort of counter stability to that. Quick ahead to the place we are in the present day, and we now have the very best wealth inequality within the history of this country. We’ve acquired actually half the country that can’t increase $1,000 for a family emergency. We’ve got acquired — 35% of the wealth was owned by the lowest 90% of the population — the bottom — backside 90% of the inhabitants in 1985. At this time the underside 90% of the inhabitants owns 23% of the wealth. In order that they have misplaced a 3rd. And that 12% has gone to the highest 1%. So we’ve acquired a system that I feel all of us might agree on the incorrect monitor.

BOB PISANI: You’re going to share a slide with the individuals here that I feel is fascinating. JUST Capital firm — you’re very concerned with – you’ve helped found.

PAUL TUDOR JONES: Foundation.

BOB PISANI: Foundation, excuse me. You helped discovered.

PAUL TUDOR JONES: Right.

BOB PISANI: Has very totally different rules in maximizing shareholder return. You went to the American public, surveyed them, they usually had very totally different values about what an organization ought to be doing to maximize shareholder return. They stated 25% of the company ought to be doing is ensuring staff get truthful pay and advantages. 20% say customer remedy of privateness are primarily. Products ought to be socially useful, 15% say. Take a look at this. And good for the setting, 13%. I need to put up the subsequent one because only — respondents felt that only about 9% of the actual function of an organization, eight%, excuse me, ought to be to maximise investor returns. That’s previous the Milton Friedman– Friedman stated 100%. Your level is the American public is already socially accountable. How do you get them to vary the angle? How do you go to a boardroom of buyers and inform them: “No, no. Adopt this model. Don’t adopt Milton Friedman,”?

PAUL TUDOR JONES: So listed here are the information. The information are, since 2008, 92% of corporate income gone to shareholders. It’s the precise photograph adverse of what the American public thinks a “simply firm ought to do. So we now have this massive disconnect of what the American public thinks and what company boardrooms, the C-suite, are actually doing. The fascinating thing is there’s a method to bridge that gap where everyone wins. So what JUST Capital does is we rank the Russell 1000 corporations 1 to 1,000 yearly in accordance with these metrics, not decided by us are a tutorial panel but by the American public. We’ve polled over 100,000 individuals over 4 years. So that is what the American public thinks. We rank these corporations 1 to 1,000. We created an ETF, which is why I’m right here, that takes in the 33 industries that monitor the Russell 1,000, it takes the highest half, the top performing of those 33 sectors and we have now an ETF that has half the names of the Russell, the perfect performing on those metrics, in accordance with the American public, which might be essential. That index on so many metrics outperforms the rest of the companies.

BOB PISANI: Now, that symbol –

PAUL TUDOR JONES: It outperforms stock costs higher. It outperforms the Just index. It outperforms the Russell 1,000. On common these corporations create jobs which are 27% quicker price. Has a 3% greater return on fairness. Recycles waste 9 occasions the typical. I might go on and on.

BOB PISANI: That symbol is JUST, that ETF you’re talking about. You speak quite a bit about wealth inequality. Is there a connection here? Do you assume if firms handle the problems and started adopting the type of values you’re espousing here, that that might assist tackle the wealth inequality drawback? Is there a connection right here?

PAUL TUDOR JONES: Clearly there is a connection. I feel we now have obtained a mania happening in buybacks and a mania happening when it comes to shareholder primacy. It wasn’t all the time that method. Right? If we return to once I was a teenager, company pay, CEOs made 20 occasions that of the typical line worker. So things have been totally different and may be totally different once more. And if they’re not, I’m actually nervous about what the last word social consequences are on this country.

BOB PISANI: Nicely Senator Schumer and Sanders launched a bill to limit buybacks just lately. Do you help that?

PAUL TUDOR JONES: Nicely I’ve been talking with Senator Schumer on justness for over a yr. I don’t know if I need to see a legislative end result for this. I’d like to see this happen organically. If I was, and I’m not, if I was a director on a public firm or a personal firm, for-profit company, there’s two questions I might ask earlier than I even considered shareholder buybacks, dividends or anything. The first query can be: what number of of my staff do not make a dwelling wage? That’s the first question that I might ask. The second one, if I have been a director I might ask is: what are we doing to assist native communities? What proportion charitable contribution goes to probably the most needy and the place the place we have now clients? What are we doing? So, in 1985, charitable contributions by corporations have been 2% of revenues. At this time it’s 1%. Why is that? Why is that?

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BOB PISANI: Let me simply transfer on. Let’s go to the taxing wealth question that we’ve had typically — we’ve got seen a spade of democratic hopefuls announce just lately. How do you are feeling concerning the new democratic proposals for taxing wealth?

PAUL TUDOR JONES: Properly I feel the rationale that we started JUST is so that we wouldn’t get so far, right? If I think about the taxes, it is the most inefficient strategy to allocate assets inside an financial system. In order that’s why I feel JUST Capital is so necessary. I’d like to seek out an organic answer and meaning an entire cultural, social, mental shift of the best way that we think about our corporations and what their obligations are. Why don’t they have larger social duties? The neatest individuals on the earth run American corporations. Let them — let’s deliver them into this dialogue on how we deal with those left behind.

BOB PISANI: I’ve received to maneuver on and ask you concerning the international financial system and concerning the markets. Obviously individuals right here — international progress is the most important challenge. Are you able to just a give us you temporary overview of the markets. What do you think of america markets right now? Europe and China proper now?

PAUL TUDOR JONES: I’m very bullish on the U.S. inventory market. If you consider what happened last yr, final yr we – I think of issues when it comes to flows, and last yr we walked right into a state of affairs with plenty of euphoria. A huge quantity of investor positioning lengthy equities. Each in the USA and globally. And we took these positions and pretty much washed them into a trillion dollars of corporate buybacks. Quick forward to where we’re at present, all that leverage positioning particularly from the lengthy brief group, the macro group, the discretionary asset managers, that’s all been washed out. But we nonetheless have, just like the Terminator, 1 trillion plus in buybacks in all probability scheduled — nicely, definitely globally and perhaps close to that even in america. I don’t know the place the inventory’s going to return from. It should be I feel greater costs defined, a gaggle of buyers prepared to promote their stocks.

BOB PISANI: Europe, EU final week, primarily flat progress in Italy going nowhere, 1% at greatest for the rest of Europe right now. Is there any type of relative value play given how Europe has underperformed? What do – how ought to our viewers really feel about Europe?

PAUL TUDOR JONES: So again – right. So I feel we are going to have — I feel this yr we are going to proceed to have U.S. exceptionalism and U.S. outperformance. And I feel the S&P 500 will outperform its peers, it’ll outperform rising markets. And I feel from that, you’ll should take all the correlated trades. So I feel rates gained’t go down. They’ll in all probability return up. And I feel the greenback will in all probability keep agency.

BOB PISANI: Okay. Paul Tudor Jones, it’s a really well timed matter you’ve acquired about wealth inequality and methods to deal with it. We’ll comply with JUST Capital, and I’m going to go in with you and watch your speech. Thank you for joining us.

PAUL TUDOR JONES: And don’t overlook the ETF, don’t overlook it.

BOB PISANI: J-U-S-T.

PAUL TUDOR JONES: Yeah that’s the index and the ETF is J-U-L-C-D.

BOB PISANI: J-U-L-C-D. Thank you very much. Paul Tudor Jones, all the time a pleasure right here. I’m right here at present and tomorrow. The most important ETF Conference on the earth. We may have loads of different visitors we’ll be talking about, as nicely. Sara, back to you.