CEOInterviews.AITrader The Documentary Paul Tudor Jones

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Paul Jones0:04

Yes, there will be some type of a decline without a question in the next 10 to 20 months and it will be earth shaking. It will be saber rattling and it'll have Wall Street in a tizzy and it will create headlines that will dwarf anything that's happened at this point in time.

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Unknown0:25

Huh? I'm about there. Look, I wonder where we're going to take off. 8 minutes to go. And I'm getting ready to give them a little drums along the Mohawk. Do a little tomtoming on the market here on the end. Offer 370.

Offer 370.

Yeah.

Into the phone.

Hey. Hey. Listen, Vinnie, don't offer that. Sell 540 market. Sell 540.

540 market. Sell 540 market.

540 market. Yeah. March. Go.

Well, anyway, the whole point is arrest 10 cents, right?

Are you risking 10 cents to make eight bucks? I'd like to, you know, that's not a bad trade, right?

Yeah.

Oh, god. Aiden, it would work so perfect for the stock market and bond market if this were to happen and the stock market would explode. I mean, the D 2500 wouldn't even be the first stopping point today.

I mean, I've heard stories about this guy. He wakes up at like 4:00 in the morning and trades like gold in Hong Kong and all sorts of places. I mean, if I woke up at 4:00 in the morning, my wife would say, 'You get back to bed. This is ridiculous.'

Yeah.

63 73 and 800 contract.

I'll tell you what I'll do. Uh, you own 540. You own 540. Only 540.

540. What are you doing? I'm 7 marks. You own 540.

He really loves it and it involves sort of the use of all his energy, all his power, all his knowledge and everything. He puts it together into one incredible life.

If I make the mark that I want to make, uh, I'll stop. I'll retire uh hopefully a champion.

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Narrator2:35

Paul Tudor Jones is a futures trader. He speculates on the future value of almost anything. It's been called an art, a science, a gambling game. It's a high-risk game for high rewards in an arena that is increasingly under scrutiny. Recent scandals have brought the Wall Street community into the glare of public and media attention, and the regulatory agencies are questioning the very existence of a certain kind of trading, stock index futures, at which Paul Jones has recently been one of the most successful players in America.

It is March 1987, the third month of one of the most dramatic rises in the history of the stock market. And Paul Jones is taking a holiday. Well, sort of a holiday.

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Paul Jones3:30

When I originally decided to come here, it was going to be vacation, get away from everything. And then as it turned out, I can't a number of the clients that I have are here in Europe and most of them here in Gstaad as it turns out. So I've done an enormous amount of business. I've been in Paris. I've been in Geneva. So I kind of combine business with pleasure. I wish it'd been more pleasure but I still wouldn't trade for anything in the world. You know, I always think of, I mean, if life ever ceased to be an educational experience, then I probably wouldn't get out of bed.

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Narrator4:05

This morning, Paul got out of bed at the Palace, one of the most elegant hotels in the world.

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Paul Jones4:10

The lifestyle in Gstaad is incredible because the people that I've met here and the people that I deal with, most of them are my clients. They pay me to allow them to enjoy this lifestyle, which is wonderful because I enjoy working. I had a friend that I played backgammon with in college all the time. We were having barbecued ribs for lunch during my second semester, senior year in college. And he said, and I've always liked backgammon and chess, those type of games. And he said, 'If you think those are fun, if you really enjoy that type of stimulation, then I'll show you a game that is the most exciting, the most challenging of all.'

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Narrator4:57

Paul's company, Tudor Investment Corporation, manages other people's money. The firm has about 300 clients and has been rated top performer in its field for two consecutive years. Paul is the oldest one in the office. He's 32. His chief economist, statistician, and right-hand man, Peter Borish, is 27.

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Unknown5:17

We're making history today. This is the market.

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Narrator5:19

Futures trading is a young game.

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Unknown5:21

Just everyone jumped in. You know there's a way, you know how there's a way to check.

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Narrator5:26

As firms go, Tudor is small. It has only 22 employees and manages $125 million, which isn't so much on Wall Street. But the team, for the time being, anyway, likes it that way. They see their firm as a small, fast boat on a large rough sea.

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Paul Jones5:43

What I love about it is I'm doing my work. I'm doing my analysis and I'm being graded instantly and through the harshest teacher in the world is the market. There's no curve. You know, I can't say that, boy, I was out late last night and everybody else in the class was at a pep rally for the football game and I only got a 70, but that was the highest in the class, so I still get an A. It doesn't work that way in the market. It's an intellectual challenge and that's what makes it so exciting. Every day is something new and every day is providing new information every day, every hour.

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Narrator6:13

Paul buys and sells futures in cotton, oil, dollars, Deutsch marks, bonds, precious metals, anything he thinks can turn a profit. Every rumor, every news item can be a warning or an opportunity. For example, this morning the wires say OPEC is on the verge of a new agreement.

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Paul Jones6:32

OPEC has basically come to an agreement whereby they're going to have a 7% production cut. And my whole feeling is that anytime that you try to get 13 people to agree to anything and I have a chance to take a position on it, well, they're going to have to, you know, wild horses couldn't keep me from betting against them succeeding in that. I'm selling the equivalent of about four tankers on the opening. You've heard nothing else on OPEC?

U

Unknown7:01

No.

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Paul Jones7:03

I got you.

U

Unknown7:04

Thank you, Paul.

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Paul Jones7:04

Yeah.

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Unknown7:06

What do you think of it, JJ? Hey, is this a spot to nail it?

I'd rather sell it down though than sell.

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Narrator7:11

Betting that the agreement won't hold, Paul is selling oil futures as fast as he can, hoping that the other traders won't see what he's up to. Speed is everything.

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Paul Jones7:21

It's 40 bid and a half. Offer a 1,000. Offer 1,500 40. Offer 1,500 and a half. Show the size. Ask him how much he sold. Give me a number. Tell him more behind it. Do it. Do it. Do it. There's more behind it.

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Unknown7:33

Behind it.

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Paul Jones7:35

I can feel it. They're gonna get it. I'm gonna get it.

Iraq just said something. What does Iraq say? That's great. They have an agreement between 13 people, but two of them said they won't agree, which happened to be two of the five biggest producers in the world. That was tough to figure out, wasn't it?

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Narrator7:55

Paul is on the phone to an oil trader who's saying somebody's been selling a lot of oil, but he doesn't know who.

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Paul Jones8:02

That was my buddy at probably the second or third largest crude trading firm. And this guy, man, they stole the hell out of it. And the people that he worked with don't know that it was... great. That's even better. I hope they think it's some wild Arab who knows the whole agreement is getting ready to fall apart.

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Narrator8:30

Even though Paul trades in every kind of commodity, his specialty is stock index futures, which are traded in pits at various commodity exchanges like the Chicago Mercantile Exchange, the Merc, or the New York Futures Exchange, the Knight. These people are betting not on a company or an industry, but on the future direction of the entire economy. And this week, just before Thanksgiving 1986, the big news is not good. The Iran Contra affair has just broken. The insider trading scandal is heating up and the market has been going nowhere.

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Unknown9:10

Okay. Is it a fast market?

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Narrator9:14

In spite of the bad news, Paul and Peter are convinced that at any moment the market is going to soar.

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Paul Jones9:20

With a half an hour to go because not only will we be selling, so will every other uh so will everybody else in the street. Which means I want to... do it again. Another 300. Sell him. Three minutes. Three minutes.

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Narrator9:34

Paul has bet a lot of money that the market is about to go up, but nothing is happening. If he's bet wrong, he's in trouble.

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Paul Jones9:43

The market goes down so much more faster than it goes up. It's incredible, right? It can take out two weeks of work in 3 hours.

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Narrator9:51

In fact, it took out six months of work in one day in September.

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Paul Jones9:54

We're going to get a big move one way or the other. And it's just right now trying to gauge which way that move is going to be. Everyone right now has to be negative walking in the morning looking at the newspaper, looking at the fact that the bonds are down and yet this thing is maintaining an enormous premium to spot. All that stuff is sitting there looking at us every morning in the headlines and yet the market won't go down. It's telling a different story than the headlines are. What is happening again is that the market continues to build energy and every time you see these incredibly sharp downturns, all that's doing is to me all that is is a signal of the fact that people are absolutely skeptical, negative, and to a certain extent frightened through here. And yet the market won't break. It is screaming to me that it wants to go higher.

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Narrator10:47

At times like this, what gives these two confidence is a theory that says the stock market moves in cycles, in patterns. And Paul and Peter subscribe to the Elliot wave theory, which says to them that what happened 49 years ago in the late 1920s is happening again now.

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Paul Jones11:07

If the market is a reflection of people's behavior and people behave similarly in similar circumstances then history of market prices may give us an indication of what may happen in the near future. Well, one of the last great bull markets really was the 1920s. And we looked back and did a statistical analysis on the 1920s through today, punching in literally thousands of Dow high, low and closes to run correlations between what happened in 1925 to 1928 to what happened between 1982 and where we were in 1986. Well, that correlation turned out to be over 90%. In fact, since I've run that correlation, the correlation has gone up from about 90.7% to close to 92.2%.

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Unknown11:58

Which one is which one is the 20s?

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Paul Jones11:59

The 20s is the blue and the red is the 80s.

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Unknown12:02

So, what day back in the 20s are we at right now? Approximately.

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Paul Jones12:07

We're like in early August 1928. And so let's see if my memory serves me correctly and we've got another 40% in the day on the upside.

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Unknown12:18

Correct.

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Paul Jones12:19

So we are talking about... and about another year a little over a year of move in the Dow... and then it looks like there might be some storm clouds in the rising.

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Unknown12:31

To say the least. The correlations here are phenomenal. That's incredible. What are the chances of taking any two five-year period in the stock market and getting that kind of correlation? What would you guesstimate off the top of your head?

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Paul Jones12:45

I mean, it's got to be astronomical. You're talking a thousand observations. I don't know, one in a thousand. It's really pretty scary. You know, if it looks like a duck and it acts like a duck and it sounds like a duck, it's probably not a chicken. And that's what's scaring me about the activity in the stock market right now.

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Narrator13:02

Some analysts disagree, but Paul Jones and Peter Borish are among those who think there's a crash coming and a big one.

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Paul Jones13:10

You're probably talking about something with incredible fireworks, with unbelievable and unprecedented volatility and with moves that will leave people gasping. It's going to be total rock and roll.

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Peter Borish13:27

The market should continue to rally into the first quarter of 1988. A rough projection would be somewhere around 3,200 on the Dow and then in March April of 1988 there's weakness and at some point shortly thereafter and if you're going to hold me to a date let's say the end of March 1988 the market then drops sharply and retraces 50% of this bull move from 770 to 3,200 in a matter of a couple of months.

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Paul Jones14:03

The last guy that buys a share of stock when the Dow is at 3,000 or whatever number it is, he's buying it because he thinks it's going to 6,000 because it's been reinforced in his mind over the past however number of months, years, or decades that stocks can't go down.

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Peter Borish14:19

In one sentence, buy low and sell high. That means buying now, riding it out till the market goes to about 3,100, 3,200. Don't wait for top tick. That's 1988. Severe drop, a little rebound. By 1991, the market is going to be under 500 on the Dow.

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Paul Jones14:39

The debt gets to the bottom of every accumulation and then the repayment of debt basically drives every economic cycle that there is. And right now we have probably explored the envelope with regard to mortgaging our future earnings. The next part of this cycle will be the repayment of what we've enjoyed now for the past four or five years. I mean again we're in the largest post-war business expansion cycle in history. I'm concerned. And knock on wood, if we're successful here and a play comes about, we make a lot of money, I want to go work for the Treasury or work for the State Department or work for the Fed to help out of this out of what I consider will be dire economic consequences.

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Narrator15:43

Paul spends weekends at his farm in Virginia overlooking Chesapeake Bay. It is early Sunday evening, but the only markets open at this hour are in New Zealand and soon in Hong Kong. So he gets on the speaker phone with some brokers and starts to trade currencies.

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Paul Jones16:02

Our contract. You give me a dealing quote on... at any hour, any day of the week, someone is trading money, and the price of the dollar is never still. It jumps and falls in little ticks every half minute or so.

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Narrator16:16

At this hour, most of the players are Japanese, Chinese, and Australian.

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Paul Jones16:20

What kind of size can you give me right now? Can you do me? Can you do me 1,100?

U

Unknown16:24

1,100?

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Paul Jones16:25

Yeah.

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Unknown16:26

1,100 contracts?

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Paul Jones16:28

Yeah. $60 million. Can you do 60 million? No, that's 135 million Deutsch marks.

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Unknown16:33

That's a bundle, isn't it?

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Paul Jones16:35

Yeah, you better uh you know, that's about $67. That's about $70. Yeah.

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Unknown16:41

Okay, let's do it.

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Paul Jones16:42

Hey, hold on a second.

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Narrator16:45

What a nice way for them to begin their morning.

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Unknown16:48

180 contracts.

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Paul Jones16:49

I hope they never see daylight on them.

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Unknown16:51

Okay, that's 135 million.

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Narrator16:54

Here's the deal. Paul is betting that the dollar is about to go up. So, as quickly as possible, he wants to sell a huge bundle of Deutsch marks he bought last Friday and buy dollars.

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Paul Jones17:05

I think they'll be bidding it up as soon as they walk in, which should be 15 minutes. And that's why I'd rather go and buy them right now. I'd like to go on and do business, but none of these guys will make me a quote. They don't want to. They don't want the exposure. They all think that we know something.

Yeah. Can you do me? Can we do it again? If you can give me 30 45, I'll deal on that.

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Unknown17:25

I can't hear what you're saying, Paul. If you can give me 20 11 30 bid at 45, I'll deal on that for the whole amount.

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Paul Jones17:31

Okay. Well, let me see what they...

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Narrator17:33

The price of currencies is a little hard to follow, but if Paul can sell his Deutsch marks at a quote that sounds like 3045, he figures he's getting a terrific bargain.

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Paul Jones17:43

I want a quote and 15 pips for the whole thing.

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Unknown17:46

Okay, stay with me.

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Paul Jones17:48

They all think that whenever someone from the States is coming in and dealing this early in the morning that they know something. So they're very wary about doing business because they assume that we have some knowledge that they don't know about. Whereas an hour from now if the market's been open and they've had a chance to adjust all the news items that you know and they've seen the direction of trading the volume that's gone through that they're not as nervous. But by that point in time the dollar could be considerably higher than where it is now. That's why I want to do business. Oh, I'm asking this one very good bank in Tokyo for the whole wad.

U

Unknown18:25

Yeah, you know, I would like to break it up because I probably make it uh...

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Paul Jones18:30

When you take your initial position, you have no idea whether you're right or not. What's exciting is if it starts to go your way now. That's really...

I'm asking these banks for the whole amount. I know you wanted a quote. I'd rather break it up. I mean, even if you have to sacrifice a little bit because they're going to check, right? You know what? I'll just call you back in 10 minutes. No, hang up. I'm asking. Maybe they're gonna come back.

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Unknown18:49

Okay. Okay, you see what they say. You can always pull it back and then we could split it up.

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Paul Jones18:54

Okay, wait a minute. Somebody's making me I think.

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Unknown18:56

Okay, because I mean after a while the size means nothing. You know, it's just again it's gets back to question of whether you're making 100% rate of return on $10,000 or $100 million. It doesn't make any difference, right? You know, if you're completing 78% of your passes, it'd be nice if you're in the NFL, but if you're in college or high school or even elementary school, I'm sure the thrill is just as great.

Okay. You still want to go after that size?

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Paul Jones19:30

Yeah, I do. What are you showing on your screen?

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Unknown19:32

Okay. My screen is 455, but let me... You know, the bank called me up and they said they could do it all in one shot. So, that's 1.

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Paul Jones19:43

Yeah. That's exactly what we're talking about.

I'm already... I saw some late Friday. I saw some Deutsch marks.

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Narrator20:05

If the quote rises over 5060, Paul's plan is in trouble. And with every passing minute, it keeps rising.

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Paul Jones20:12

I should have been 65. Oh, no. Tell me to forget it. That's nothing.

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Unknown20:19

Nothing.

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Paul Jones20:20

No, nothing. I'll call you back.

I can't hear you, Gerard.

This is unbelievable. Do you hear this? We started off as 35 45 40 50 60 now 607. This is just pissing me off.

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Narrator20:46

Paul's choices are narrowing fast, so he lowers his sights and goes for a smaller deal.

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Unknown20:53

Yeah.

63 73 and 800 contract.

I'll tell you what I'll do. Uh, you own 540. You own 540. Only 540.

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Narrator21:03

Paul settles for half the dollars he wanted.

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Paul Jones21:05

I'm selling Deutsch marks. You own 540. Sometimes you'll find a cowboy who'll say, 'Okay, come on. I'll play. No problem. Take your best shot,' which I was hoping would happen tonight. And then sometimes, and more often than not, you're better off calling up maybe three different houses and say, 'Give me a quote for 50 million a piece.' And then just going boom, boom, boom. And I probably should have done that. The people that I call a lot of times again like to be macho man. They want to take the whole thing. And you know this time in terms of execution it was very poorly done. Trading requires an energy level and it's very difficult to sustain it 24 hours a day which is what this requires. So this lack of aggressiveness probably cost me a little bit.

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Narrator22:00

Even at the higher price Paul made money. He eventually sold his dollars for a profit of $100,000.

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Paul Jones22:08

To do the job right requires again such an enormous amount of concentration that you got to be able... it's physically and emotionally mandatory that you find some time to relax and you've got to be able to turn it off like that. There'll be times though when I get so incredibly excited about a trade or even a project that I'll wake up at 4:00 in the morning, there's no way in hell I'm going back to sleep. I'll sit there and I'll trade in my dreams for 4 hours.

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Unknown22:42

What we've got to pray for is another major calamity on Wall Street or in the White House because if we...

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Narrator22:47

December 3rd, 1986, the market is about to close. Paul is on the phone from Chicago and Peter is at the helm.

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Peter Borish22:55

Yesterday there was so much buying after the close that the tape was nine minutes late and that was 130 million share day. I believe that today will be record volume which matches perfectly with the analog to 1928 when there was record volume on the decline and it did not take it out until the week which corresponds to this week on the analog right when the market exploded. I know it's mindboggling. Trying to draw a scenario on what happens as the Dow approaches 2000.

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Narrator23:24

Just days after we heard Peter and Paul forecast a major rise in the market based on their 1920 stock charts, it now seems to be happening.

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Unknown23:32

Okay. I'll be here until about 7:30.

Okay.

All right. Bye-bye.

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Paul Jones23:40

I'm speechless to tell you the truth. There is nothing we can do now. Now we have to let the market tell us it's phenomenal. Record volume, advanced declines. So everybody all of a sudden is starting to turn bullish. This thing to me is not going to stop immediately. You just don't stop a train with a brick wall. Even if there's a wall of selling, the train is going to go through that brick wall and take out a lot of bears. This morning we were trading over a million shares a minute.

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Unknown24:08

And then what happened? They were caught short and they got out and on the futures exchange where I traded, they got out 30 40 points away from their position. We were sitting there at new highs and everybody was just looking to see what was going on with the S&Ps and we just sit there and everyone was just nervous. They wouldn't there were no bids and no offers. I mean literally for 20 30 seconds we would all just sit there and look at each other because it was just an anxious time and it was just constantly moving.

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Narrator24:37

December 5th, 2 days later and the energy is still building.

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Paul Jones24:44

I feel like it's already in the market, you know, in terms of... may as well just whatever's going to happen is going to happen.

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Narrator24:52

10 minutes to the opening bell. Paul is phoning friends and competitors trying to get a feel for the market.

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Paul Jones24:58

Charlie, yes, sir. What do you think? Bonds and stocks, bonds first.

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Unknown25:02

I'm very bullish on bonds.

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Paul Jones25:05

I'm very bullish on both of them. My guess is that you're going to have to fool enough people to get some people short, get people out of their long positions, and you're going to have to do that by looking like shit for most of today.

Zack.

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Unknown25:18

Oh, what do you think?

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Paul Jones25:23

Well, I think that uh and the bonds, bonds and S&Ps. Let's do bonds first.

U

Unknown25:28

Okay. Well, you know, same thing. I hope yesterday was a B-wave, which it looks like it was.

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Paul Jones25:32

No matter how you cut it, the news today bullish on stocks. No question. And the thing is everyone's going to be watching bonds and euros and that's going to be the trap. And I'm just thinking that this might be the perfect scenario for it to go today.

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Unknown25:45

All right. Joy's going to do his orders.

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Narrator25:47

Mike Marin, a pit trader, prepares his clerks to take some of Paul's orders.

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Unknown25:52

Do all those orders. I'm not going to worry about that.

All right. We'll do.

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Paul Jones25:57

It's Friday. The Dow gets up this afternoon. No one in the world's going to sell this thing if it's up 10 bucks. Any it that crosses into positive territory. I think it's just a question when they close it. The bulls will be on the stampede all the way to the close.

U

Unknown26:11

60 1020 1020 Lord.

Hey, I made my 80. Hey 607

The one minute warning bell.

What?

You try to watch Dave.

I'll try to watch these guys.

P

Paul Jones26:23

Tell him I want about 300 in the first two minutes no matter what the price is.

U

Unknown26:28

Walk that in. Write it now. Walk it in.

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Narrator26:31

Paul is assuming that any second stock prices could shoot up. So he tells his traders to buy stock futures as quickly as possible before the price goes up.

U

Unknown26:41

After the buy one market first two minutes.

Hey, I'll play Byron Eden.

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Paul Jones27:00

Once you bought, give me a total.

U

Unknown27:02

All right, hold on.

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Paul Jones27:03

Just tell them approximately how many. Come on.

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Unknown27:06

All right, hold on.

Damn, son of a bitch.

What about 200 so far?

Mark. Yes. What about 200 so far?

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Paul Jones27:18

Do you have a catcher in that ring?

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Unknown27:20

Excuse me.

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Paul Jones27:20

Do you have a catcher? There should be somebody there signaling that stuff to you. You shouldn't have to leave the phone. Do not leave the phone.

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Narrator27:33

Finished buying. The longer this takes, the more it costs.

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Paul Jones27:37

Finish it up right now.

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Unknown27:48

Yeah. Go up. I got more. Go down now.

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Paul Jones27:56

What do you got? Just buy anything you can get. Find anything you can get out there. Speak to me.

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Narrator28:04

Prices are still rising.

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Unknown28:13

75 bit out there.

Time to offer offer offer, 75, 5 right now.

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Narrator28:20

Paul offers to sell some contracts to disguise the fact that he's buying anything to keep prices from rising so fast.

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Unknown28:27

Mark. Mark. 75. He's offer, 75.

I'm out.

Hey, Mark.

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Paul Jones28:40

Mark, you're on the rest. Do not ever leave this phone. You get someone get the other broker to come and run the orders in. Do not leave this phone.

U

Unknown28:48

All right, Paul.

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Paul Jones28:50

What do you got?

U

Unknown28:52

He's got my card. 10 of that. You got it. All right.

205 bucks.

75 and 80. 75.

So he bought 300 and sold 20, right?

Yes.

What do you got, Paul?

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Narrator29:06

Paul is checking Chicago prices at the same time he's trading in New York. Every bit of information could give him a critical advantage.

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Paul Jones29:13

Buy 390 or better right now.

U

Unknown29:16

Repeat that.

90 for 300.

One for 300.

P

Paul Jones29:18

By 390. By 390.

U

Unknown29:21

Okay.

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Paul Jones29:24

This is setting up as a beautiful trend day. Look at this. I know it's not even moving.

U

Unknown29:28

We could be right. That's what I'm thinking. That's where I want to run a couple of days from this period because that's where we are.

Let's look at the 1500, too. Is that what you're looking at? That's perfect.

Okay.

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Paul Jones29:37

What do you got, Mark? Speak to me.

U

Unknown29:39

75. Joey.

Hello, Joey. What are we doing? We're trying to buy 390, right?

P

Paul Jones29:47

Give me totals. Give me totals. In time, do not fuck around. I want to buy them.

U

Unknown29:51

OKAY.

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Paul Jones29:53

Quote me. Quote me. Quote me. What's the market?

U

Unknown29:55

8590. 85 90.

80 90 for 3,000.

90 for 3,000. Fill or kill.

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Narrator30:04

Fill or kill means do it now or don't do it at all.

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Unknown30:09

Hey Joe, we

All right. Let me know what we've done. Call Son back. Let me know what we've done. Paul, how many we done?

All right, I'll call you back. I got to get

Well, I think we have a position.

Right.

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Paul Jones30:33

Jimmy, what did I do with you, Joey? What did I do with you? Hey, what did I do with you?

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Narrator30:38

In just 10 minutes, Paul has acquired stock futures contracts worth approximately 80 to 90 million. He is betting the market will keep going up, but 10 minutes later, it is slightly down.

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Paul Jones30:52

These tennis shoes, the future of this country hang on because they've been good for a point rally in bonds and about a $30 rally in stocks every time I put them on and I wait till I get the max and then I put these suckers on. I bought these at a charity auction. They're Bruce Willis's, the man's stud. Pretty good. Right now everything's on the low. I hope he in spirit can do a little bit better than this though. We'll find out.

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Narrator31:29

The business seems to attract people often very driven by greed.

U

Unknown31:42

Life expectancy. Yeah. I'm 32 years old right now and I've been trading, let's say, since I was about 23. I've been physically on a trading floor for about seven years, since I was about 25. And I hope I won't have to be here too much longer. I sort of have goals for myself in terms of an income that I'm trying to put some away in savings and get to a place where I can retire, so to speak. Realistically, I'm guessing another five, six years. Most people don't last too long in this business. I don't know of many older men or women in the business. There are some, but the floor trading game, which is a very high pressure, even physically demanding job with the voice. You can hear my voice. And they're being pushed around, they're being spit on, they're being knocked out of the ring, getting into fights, all this kind of stuff. The sort of work expectancy is not too long. As I said before, people that would last 10 years, I think, have done an admirable job in terms of survival.

Where can we put this, Sally? Should we put this?

N

Narrator32:57

11:10 a.m. The market's been open an hour and 40 minutes and still nothing is happening.

U

Unknown33:03

This is what we need to ward every bear on Wall Street back into their dens.

I think this will do it.

P

Paul Jones33:10

And the past two weeks, we've been playing as big as we've ever played before because of fact, we think we know what's going on. Like right now I'm watching the currencies, I'm watching crude, I'm watching stocks and bonds. They're all interrelated. You know, the whole world is simply nothing but a big flowchart for capital. And if I start getting hurt in, for instance, stocks or bonds, then I'm going to make a total portfolio adjustment just because of the fact I might not like the way the numbers are going over the course of the day. I've personally gone bankrupt, not declared bankruptcy, but lost everything I had and had to borrow from friends three times in nine years that I've been in the business where I'd go sit in the park and just sit there and just go, I can't believe this. This is the end. This is the end of my life. Where you want to be is always in control, never wishing, always trading and always first and foremost protecting your ass. And that's why most people lose money as individual investors or as traders because of the fact they're not focusing on losing money. They need to focus on the money that they have at risk. How much capital is at risk in any single investment they have? If everyone spent 90% of their time on that rather than 90% of their time on pie in the sky ideas about how much money they're going to make, then they'd be incredibly successful investors.

U

Unknown34:40

20 30 95 even at 90.

Jesus Christ.

N

Narrator34:45

12:20 p.m. The market has suddenly turned sharply down.

U

Unknown34:49

What's he say?

90 offer. 8090.

Bid. Give it a 10.

Okay, these guys are

Don't worry about it.

N

Narrator35:06

Paul decides to cut his losses.

P

Paul Jones35:08

Tell him to cancel the buying and sell out whatever he just bought.

U

Unknown35:16

Sally, call Marin. Cancel the balance out.

I got 350.

You show him 300 and a half.

300 and a half. Sell 300. No, not you. Not you.

N

Narrator35:29

The phone in his hand connects Paul to the bond pit in Chicago, where bonds are also taking a beating. Another bad sign.

U

Unknown35:36

Go, go, Paul. Time to go. Do it.

N

Narrator35:40

The pressure to sell heats up.

U

Unknown35:45

110.

Time to do it. Move it. More. More. More behind it.

8590. 8590. 8590. 85 90.

Go Paul.

Tell him to offer it right now Jim everybody.

Jesus Christ.

Hey what do you got?

We're out Paul we're out just tell me do a total of 350 that's

N

Narrator36:24

2:30 p.m.

P

Paul Jones36:28

Get Tony on. Sally, what do you got?

U

Unknown36:34

It's 567. Now, if it goes five, seller, sell unit.

Okay, that's that's one.

If it goes five, seller, sell a unit. What do you got?

N

Narrator36:51

All afternoon, the market has been dropping, then pausing. Every pause brings hope for an upturn, but then it drops again.

U

Unknown37:03

Go, Tony.

P

Paul Jones37:07

That's just total devastation. You know, the agony and the ecstasy. This is what's known as the agony.

N

Narrator37:15

4:10 p.m. The stock market is closed. We were on the wrong side of the market. What can you say? Just it's total devastation. We had a game plan and we lost the battle.

P

Paul Jones37:27

Yeah, we lost the battle. We haven't lost the war by any stretch imagine. Look, we just fumbled. We're down 17 nothing. It's only the first half and we can score three touchdowns in the third quarter and take the game easily. You know, we're still up for the month. It's just painful to give when you got a good profit, it's really painful to give some stuff back.

They cost me a lot today and they're going to pay me 100% just for this purpose. They're going to pay 100%.

N

Narrator37:57

They in this case means the market. And today they are the enemy.

U

Unknown38:03

Well, did you have it to give?

P

Paul Jones38:06

Well, I did too. So the hell with it. That's part of the business. Lied, buddy. Take it easy.

U

Unknown38:16

God, Zach had a 10% day.

No.

Yeah.

You're kidding.

No, I'm afraid to guess what ours is.

P

Paul Jones38:27

So, we lost 500 there. We lost. And we lost.

Well, I think we lost about 5% today, which is one of the bigger hits we ever taken, which is drag.

N

Narrator39:00

5% of Tudor Investments equals about $6 million.

U

Unknown39:07

Well, you just hate losing, right?

P

Paul Jones39:09

And you hate I mean the money's wrong. It's just the whole concept of having analysis that's so completely off the mark that it's a mental blow. It's an intellectual blow and you know it's part of the business. Who is it? I have you'll have to get a message on calling back. This is going to happen a thousand times in the next 5 years to me. So, it's just something you learn to live with.

U

Unknown39:38

Hate it.

N

Narrator39:40

Paul learned to handle the bad days 11 years ago in New Orleans. He got a job working for a commodities trader who taught Paul much of what he knows.

P

Paul Jones39:49

It was a hell of a training ground. The first year I did nothing but get his coffee. I mean, I was learning by osmosis and stuff like that, but I was a glorified secretary, which is fine because I was soaking in everything, every move that he made, every step that he took. And I'll never forget Friday afternoon, three wives, three of his clients from Mississippi came into his office because he had the most beautiful office I've ever seen, period. And everyone wanted to come in and see his office, his art collection stuff. And he sat there right in the middle of getting absolutely decimated across the board in these commodities and with the most beautiful smile on his face, the most incredibly elegant, poised and stylish composure and just had a wonderful little chat with them for about 45 minutes to an hour and I just was overwhelmed that anybody could be that strong.

This is one of the few turkeys that thinks he's actually a dog. He was raised with a dog and he thinks he's a dog. He will follow you wherever you go. If you go inside the house, lie on the couch, he's going to come up and get on the couch with you. If you get in the car, he's going to follow you in the car. If you get in the garden and start working, he's going to get in the garden with you. I don't know whether he thinks he's a dog, Joe. Whether he thinks he's a human.

You know, I guess it's the old getting back to nature concept that I bought this place because of that tree over there. That tree in a very transitory world has been here 300 years. It's the one thing of permanence. It's been here 300 years and probably be here another 200 years and I will probably have come and gone. That house may have been burned down and something else put in its place, but it'll always be here.

N

Narrator41:42

Paul was born and raised in Memphis, Tennessee. His father is an attorney, his mother a housewife.

P

Paul Jones41:48

I would leave school early when I wasn't supposed to. I would go by myself over to Arkansas and go on backwaters of Mississippi where I shouldn't be where no one should be by themselves and I'd go duck hunting which was just the greatest feeling of adventure because you knew that if you screwed up that you were out there all night and you probably weren't going to be coming back at all. And you knew if you caught that your parents going to kick your butt and that what you were doing was dumb and was foolish and all those types of things. But it was this feeling of being somewhere 200 years ago.

N

Narrator42:28

At the University of Virginia, Paul majored in economics. He became the campus welterweight boxing champion, was elected to every office in his fraternity. After college, he wasn't sure what to do, but following the trading job in New Orleans, he joined EF Hutton, and four years later, he became a vice president at the age of 25. Two years later, he quit, moved to another firm, quit again, and started Tudor Investments in 1983. His weekend home has 18 rooms and a staff of three. Paul lives there alone.

P

Paul Jones43:04

I just donate that boat to the Chesapeake Bay Foundation because obviously being down here and watching the bay deteriorate as I have over four years, that has an impact on me. And that hurts me because when I was a kid, all I did was hunt and fish. This year, I just decided that 10% of all the money that we made as a firm was going to go to various charitable endeavors, primarily I have a dream.

N

Narrator43:32

As part of the I have a dream project, Paul has joined with other businessmen to help disadvantaged kids stay in school. At least one night every week, he meets with some of the 85 kids in his group in the Bedford Stuyvesant section of Brooklyn. He has pledged to pay the college tuition for every one of them who graduates from high school.

P

Paul Jones43:50

We talked about from the first time that we've been talking. It dawned on me that what they really needed they did not have was an enormous amount of discipline and people to motivate them and people to push them.

U

Unknown44:03

Cannot hear you. Okay.

P

Paul Jones44:07

I had a kid over Christmas, 13 years old, got in a fight with another kid who was 16 and he had a bullet put in his head at 13 years old. And that was when I stopped. That was when I decided that my role had to be one that was interventionist or that I was going to intervene in their lives as opposed to sitting back and commenting and asking them to do this. Instead, I was going to play a very active role in their life. And that is then the program has changed to the point where we are now imposing our value systems on those kids. 75 is not going to cut it. Right. We're going to have. And what did I tell you if you made an 80 next time?

U

Unknown44:56

I want to go.

P

Paul Jones44:56

That's right.

U

Unknown44:57

My average is 80.

P

Paul Jones44:59

Is it 80? It's fantastic. It's great. That's super. Well, next time on a report card, you got to bring it in so we can go over it. Being here and particularly being in the business that I have. I have been in a position to reap enormous financial benefits. Obviously, that's given me an enormous amount of power to do things that a lot of people can't do and affect people's lives. And then it seems to me that incumbent with being a human being on this earth that there is and there has to be some type of awareness of the rest of the people out there. There have to be an awareness of the fact that they need help just like I needed help 11 years ago when I didn't have a job and didn't have a clue as to what I wanted to do. And so all I'm doing is paying back and the payback that I'm making is one that everyone owes. It's just a question of whether people accept the responsibility or own up to the responsibility or the obligation.

N

Narrator46:07

February 17th, 1987. The stock market closes in 14 minutes.

Based on the 1920 stock chart, Paul has bet against the herd that the Dow will take off today. And so far, it has. Right now, Paul could cash in and make several million dollars. But if he holds on for a few minutes more, he could do better. He could also do worse.

P

Paul Jones46:34

I want to sell it so bad. I can't stand it. I've just been sitting here want to sell it all day. But I know the thing for me to do is just not to another thing for me to do is just to sit back. In fact, I shouldn't even be talking to you or looking at the screen. I should just try to go take I should go work out right now.

U

Unknown46:48

I think that's what everybody else is doing.

P

Paul Jones46:52

Dow's up 48 bucks. We're $3 off an all-time record advance. And right now I've got 10 kids in the back of the car just screaming to get out. Meaning that I'm so long I am scared to death. Oh shoot, man. There's nothing but air above this thing. It's 28660. It's 10 ticks off its all-time high. And the Dow Jones right now is at an all-time high of 2233, up 49 bucks. And we've got 13 minutes to go. And I think it's going to go I think we're going to have an all-time advance today, which will be exciting. Get Paul Davis, please. Sorry.

N

Narrator47:35

4:00 p.m. The stock market has closed, up 54 points, an all-time high.

U

Unknown47:42

Excuse me, but is that a $54 day in the Dow?

Congratulations.

Want to know how much you made today?

P

Paul Jones47:57

It was a good day. It was over $5 million conservatively speaking.

U

Unknown48:06

It absolutely thrills us to death because that's what West

N

Narrator48:09

Two months have passed since we saw Paul's fund take that $6 million loss.

P

Paul Jones48:15

Right. Well, now you saw us get it back and then some.

P

Peter Borish48:18

What you didn't see is what we did between then and now, which was extract our 100% interest times about seven.

P

Paul Jones48:28

The amazing thing was the analog had a close.

N

Narrator48:34

Even on a big win day, Paul is still nervous. The futures exchanges are open for another half hour and Paul's instinct is to cash in to protect his winnings.

P

Paul Jones48:44

All right, buddy. I'll get back to you. I think that's going to be it for the day. That's a wrap.

U

Unknown48:47

Okay.

P

Paul Jones48:47

Thank you. I tell you what, do this just in case I get crazy.

U

Unknown48:50

Yeah.

P

Paul Jones48:51

Sell a unit. I mean, sell 280 at 30 at 8725. There'll be people selling. There's the easy trade is to sell, right?

U

Unknown48:59

What are you doing?

P

Paul Jones49:01

Because when a market's in new high ground, it's never been there. It's gone up so far and so high and so fast. It's like, well, I want to sell it.

U

Unknown49:08

How many did we sell?

250.

Who bought them?

Oh, I love it.

You just killed me on 30. I could have gotten those, too.

P

Peter Borish49:19

Dow's up a thousand points since we bought it. What's the point? You know what's the big deal of lightening up five or 10%?

P

Paul Jones49:27

This way you can sleep at night.

P

Peter Borish49:29

I wouldn't mind doing that.

P

Paul Jones49:31

Of course I can't sleep if I can't sleep.

I think it's good for you know the whole concept of the investment manager sitting up and making these incredible intellectual decisions about which way the market's going to go. I don't want that guy managing my money because if he can be that dispassionate then he's obviously never ever to me he doesn't have the competitive nature which is necessary to be a winner in this game. I want the guy who's not going to panic, who's not going to be overly emotionally involved, but who's going to hurt when he loses and when he wins he's going to have a quiet confidence but when he loses he's got to hurt.

N

Narrator50:12

Winning has another effect on these two. Even with Peter's 1920 stock chart, even with Paul's lucky sneakers, they're never sure of being right until they are.

P

Paul Jones50:23

What's nice about winning is not winning. But what that means is that not only have you done well to this point in time, but obviously whatever script you got that you have written for the ensuing week, two weeks, two months, two years, obviously it's a script that has a great deal of weight behind it and the market's corroborating it. So today's gratifying, but what's exciting is the fact that we probably will know what's going to happen tomorrow. And conceivably we know what's going to happen in the next couple of weeks and months and years. And so you go home and sleep better when there's no uncertainty. And that's why today is good. Not because of the money we made, but because of the fact we know where we are in the total economic landscape. Or at least we think we do. And that maybe that's an illusion. Maybe it's a false sense of security, but it allows you to sleep at night because we've done our work and so far the market's corroborating.

P

Peter Borish51:17

I'm still in awe of the fact that the way he purchased these contracts and he went out there and he made a commitment and the commitment paid off. Not, you know, for all our clients and knock on wood, you know, it'll continue.

P

Paul Jones51:33

The one thing that I am absolutely certain of as a trader and you're talking to someone right now who is incredibly long in the stock market is that all of Wall Street right now, the investment community at large basically is geared towards a Dow somewhere in the 2600 to 3,200 range. And again, these are people that I think have track records that are impeccable. Let's assume that they are 100% wrong. If nothing else, there will be a point in time unquestionably when the market turns down when all of them when the investment community almost at once will say this was that may have been the top or this was the top. And you're going to have all the people that are right now very comfortably invested that are believing and feeding off the hope that the market will move higher try to get out at the same time. When that happens, it's going to be the famous Acapulco cliff. Just a question of how fast before we hit the bottom.

U

Unknown52:53

Over here. You learn how to stop this thing.

N

Narrator52:56

It is possible to make money when the market is going down as well as going up. And right now, Tudor Investments is preparing for a market collapse in 1988. If his timing is right, Paul's firm will survive, even get richer. But what's the lesson for the rest of us?

P

Paul Jones53:15

First of all, you're talking about certainly six to eight years of pain. It's a horrible thought. It's not one that I hope happens. And I hope I lose my ass. And I hope the Dow Jones goes to 5,000 and sticks, but that's not what I think's going to happen. And it just won't be it'll be just like if you have an injury, it takes a while to work yourself back into great shape. And I think the long run benefits will be fantastic. I think the short run will be unpleasant. It'll be painful. And there'll be an enormous amount of general suffering for not just the US populace but on a worldwide basis. The other thing I mean I guess the flip side of the coin is that we've had an incredible 10 years.

U

Unknown54:31

I want

A second.

Heat. Heat.

Trader The Documentary Paul Tudor Jones

About Paul Jones