NVIDIA is not riding a cycle. It is becoming a utility — the first technology company on a credible path to one trillion dollars in annual revenue. Not because demand stays hot, but because NVIDIA is transitioning from selling hardware to operating the base layer of global compute. Every inference call, every agent transaction, every digital twin simulation, every robot brain update runs on NVIDIA's stack. That is not a product cycle. That is a tax on intelligence itself.

The market prices NVIDIA like a semiconductor company with unusually high margins. The correct framing is a technology utility with structural lock-in, recurring software revenue, and sovereign-grade demand. The gap between those two valuations is where the alpha lives.

What The Market Sees vs. What's Actually Happening

The Perception: NVIDIA sells GPUs into a hot market for AI training. Demand is cyclical. When hyperscaler CapEx normalizes, margins compress, and revenue declines. This is a chip cycle, and chip cycles end.

The Reality: NVIDIA is building the infrastructure layer that every AI workload — training, inference, agentic, physical — must run through. The CUDA ecosystem, NVLink fabric, and software stack (NIMs, Omniverse, AI OS) create a lock-in that deepens with every generation. Customers don't buy chips anymore. They buy sovereign AI factories.

Revenue 2025E: ~$130B → Revenue 2030E: $900B–$1T

Gross Margin: ~74% → ~75% (stable)

Software ARR: ~$5B → $120–140B (28x growth)

Net Margin: ~45% → ~55% (expansion through software mix)

The margin story is the key that most analysts miss. Software ARR scaling from $5B to $140B acts as a high-margin buffer against any hardware commoditization. NVIDIA's blended margin improves as it sells more software, not less hardware.

The Historical Pattern

Every major computing era produced one dominant platform layer.

Microsoft established a monopoly in the operating system market for personal computing. Apple built the consumer platform that owns the interface between humans and devices. AWS created the global cloud utility that commoditized infrastructure. NVIDIA is building the next layer: the global intelligence utility that powers training, inference, agents, and physical AI across every industry and sovereign boundary.

The pattern is consistent. Each layer captured a disproportionate share of the value created in its era because it was the chokepoint — the one piece of infrastructure that everything else depended on. Windows took a cut of every PC sold. iOS took a cut of every app purchased. AWS takes a cut of every workload hosted. NVIDIA is positioning to take a cut of every computation that involves intelligence.

By 2030, NVIDIA will operate the base layer of compute, the OS for autonomous agents, the network fabric for planetary-scale inference, and the sovereign infrastructure stack for nation-states. That is not a chip company. That is the operating system of civilization.

The Structural Moat

Three interlocking mechanisms make NVIDIA's position far more durable than a typical hardware lead.

Forced Upgrade Cycles

NVIDIA has compressed its architecture cadence to roughly 12 months: Blackwell (current) to Rubin (2026) to Feynman (2028). Each generation delivers performance improvements so large that the previous generation becomes economically unviable within 24 months. This is not Moore's Law — it is Moore's Law on steroids.

The secondary market for AI accelerators collapses because no rational buyer purchases hardware that will be 3–4x less efficient within a year. The result is permanent demand scarcity and continuous pricing power. Every customer must upgrade. There is no "good enough."

The Software Tax

NVIDIA's software stack — CUDA, NIMs, Omniverse, and the emerging AI OS layer — creates a 90% margin annuity that sits atop the hardware base. Every inference call is a taxable event. Every agent transaction is a taxable event. Every digital twin simulation is a taxable event.

Software ARR is projected to grow from approximately $5B today to $120–140B by 2030. That is a 28x expansion in recurring, high-margin revenue that transforms the financial profile from hardware cyclical to utility compounder.

Complexity as Margin Shield

NVIDIA no longer sells chips at transparent per-unit pricing. It sells racks at $4M, clusters at $1B, and sovereign cloud deployments at $10B. Each package bundles compute, networking (Spectrum-X, NVLink), cooling infrastructure, security, and software into a single deal. The complexity of these packages makes margin extraction invisible to buyers and analysts alike.

You cannot reverse-engineer the GPU margin from a billion-dollar sovereign AI factory contract. That opacity is structural and intentional.

"NVIDIA no longer sells chips. It sells national AI factories."

The sovereign angle adds a dimension that pure enterprise demand cannot. As trust in US hyperscalers erodes geopolitically, governments become the new whale customers. National AI clouds, defense-grade infrastructure, autonomous city platforms, and data sovereignty requirements all funnel through NVIDIA as the neutral geopolitical utility. This is infrastructure spending that is politically durable and not subject to corporate CapEx cycles.

Technical Setup

Trend: 🟢 Bullish

Structure: Trading above rising 20W and 50W EMAs. Held breakout above prior all-time high after January consolidation. Higher lows intact since October 2023.

Key Levels: Support $180 / $160 — Resistance $195 / $215 zone

Volume: Confirming on breakout candles, declining on pullbacks — healthy accumulation pattern.

Signal: The weekly structure supports the fundamental repricing thesis. The market is gradually shifting NVIDIA from semiconductor multiples toward platform/utility multiples, and the chart reflects that in the persistent bid under every consolidation.

What's Below The Surface

The thesis and the moat are clear. But the real questions for investors are: what exactly does $1T in revenue look like, segment by segment; what breaks the thesis; and how do you size the position?

In the C+ Premium section on Substack, we go deeper:

→ Full revenue waterfall: $550B data center + $180B networking + $130B software + $120B robotics + $70B auto/edge

→ Bear ($5.7T) / Base ($13.1T) / Bull ($15.8T) valuation with implied share prices

→ Three macro waves: Data Center Replacement, the Agentic Economy, and the Robotics Economy

→ The Canary Risk Framework: Custom ASICs, Rubin yield issues, sovereign regulation, Taiwan geopolitics, and power grid constraints

→ Portfolio: NVIDIA is a core position in the Closelook Hypergrowth Portfolio. Live tracking coming soon for C+ Exclusive subscribers.

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Thank you for reading this week's edition of Closelook@Hypergrowth, dated November 14, 2024 👋. The next edition will be published on 20 November 2024.

A Closelook At This Edition

1. This Week's Action: Trump Winners and Losers

2. Macro Insights: Sticky Inflation Landing Ahead

3. Higher For Longer: Initial Macro Forecast For 2025

4. The Hypergrowth Portfolio: Rebalancing After Earnings And Election

5. This Week's Stock Spotlight: Zeta Global - Fraudulent Financials?

6. Knowledge Corner: Why 2024/25 is different from 2016/17

7. Upcoming Transactions: More Rebalancing After the Election

8. Final Words: It’s The Bond Market, Stupid!

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(1) This Week's Action: Trump Winners and Losers

Stocks have been on a tear since Donald Trump claimed victory in the United States election last week. The S&P 500 posted its best week in a year, gaining 4.7 percent and crossing the symbolic threshold of 6,000 for the first time.

The Nasdaq and the Nasdaq 100 finally made new ATHs, breaking above the summer 2024 highs.

The best-performing Nasdaq 100 stock in the past month has been Tesla - up more than 50 percent. Animal spirits have returned.

The table below shows the Nasdaq 100 one-month individual stocks performance ranking.

Quite a few semiconductor stocks are at the bottom of the table, while software has finally outperformed the hardware/infrastructure-related AI sectors.

Super Micro, Moderna, and PDD have been the worst performers - all for different reasons.

In contrast to the two NASDAQ indices, the performance of the SP 500 Info Tech sector has been more muted (which is a warning signal to me).

I see the sector in the midst of completing wave 9. This may indicate a forthcoming top as the minimum requirements for a 5-leg impulse wave setting with extension have been satisfied.

While we are entering the seasonally best 10 weeks of the year (mid-November until the end of January), I am worried about the bond market's performance.

The 30-year fixed mortgage rate yields have risen to 7.38 % from around 6 percent at the time of the initial Fed cut.

The TTL ETF has cratered. It is trading below 90 USD and heading toward the central support zone around 87.50 USD.

It may well have completed an A-B-C consolidation pattern, followed by (the early stages of) another impulse leg down. In a more bullish scenario, yields should stop rising around the current level and move back to the 100 USD level (see A-B-C-D-E pattern above).

In a bearish scenario, yields will soon cross the 4.50 percent level and move closer to the 4.75 to 5.00 percent level.

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(2) Macro Insights: Sticky Inflation Landing Ahead

Trump vs. Bond - the real battle will not be between the Democratic Party Leaders and Big D; the newly elected president will face a more challenging opponent.

The name is Bond - Treasury Bond! The real battle will be between the bond vigilantes and Donald Trump. And bond vigilantes are tough adversaries. They cannot be scared away by social media, (false) claims, or any other measures from the political campaign playbook. They like to make a deal, lock in a profit and disappear.

Yesterday's CPI report indicated inflation might become sticky above the Fed's 2.0% target. Headline and core CPI inflation rates increased to 2.6% and 3.3% year-over-year in October.

While goods prices continue to deflate, supercore inflation, rent inflation, and wage growth all saw increases last month, suggesting they are stabilizing at relatively high levels.

This, combined with strong economic growth, lends further evidence that the Fed may not ease monetary policy a lot further in the months ahead. This view is further reinforced by rising bond yields, which question the wisdom of the Fed's recent rate cuts.

One and done! One rate cut in 2025 and no more is my preferred scenario.

Ed Yardeni is not concerned about a second wave of inflation, as he believes that increasing productivity is already enhancing real GDP while containing unit labor costs inflation.

Recent upward revisions in productivity support this perspective. However, Yardeni suggests that the Fed may need to allow more time for consumer price inflation to become less sticky before considering additional rate cuts.

Ed Yardeni lifted his SP 500 targets to 6,100 for this year, 7,000 for 2025, and 8,000 for 2026. While I still align with this bullish view, I have raised the probability that we will see a much worse stock market performance in 2025.

One reason is that the bull market will be entering its third year in 2025 - this often marks the end of a bull cycle. The second reason is that while earnings have risen and are projected to continue increasing in 2025, valuations in anticipation of lower interest rates have risen even more.

Multiple expansion has contributed to more than fifty percent of the SP 500 advance in 2024.

This has been based on projecting much lower rates in 2025, as the Fed Dot Plot outlined numerous rate cuts ahead.

Assuming this will not happen, we may see multiple compression in 2025 offsetting any positive effects from rising earnings.

I think it will all depend on the bond market, where we may see the “higher for longer” views re-emerge as soon as December 2024.

(3) Higher For Longer: Initial Macro Forecast For 2025

In the U.S., several factors contribute to the concern about a potential uptick in inflation in 2025, particularly when compared to 2024 numbers.

Sticky Inflation

• Inflation, especially in the service sector, is showing signs of becoming sticky. This means that despite overall inflation rates slowing down, specific components of inflation are not decreasing as quickly as expected. Services inflation, in particular, is stubborn and continues to be a concern.

Supercore Inflation

• The supercore inflation measure, which isolates components of core inflation that are highly sensitive to economic conditions, has been rising. This indicates that demand-driven inflationary pressures are persistent.

High Rents and Housing Costs

• Shelter inflation, which includes rents and owners' equivalent rents, remains elevated. Although there was a slight deceleration in shelter costs in some months, they have not cooled as quickly as anticipated. Housing insurance costs are also increasing due to more frequent and expensive natural disasters, contributing to the stickiness in housing-related inflation.

Structural Changes in the Economy

• Structural changes, such as labor shortages, especially in industries requiring in-person work, and the aging of the U.S. population, are driving up costs for health care services, health insurance, and other services. These factors resist the Federal Reserve's efforts to drive inflation back to the 2% target quickly.

Comparison to 2024 Numbers

• The year-over-year comparison of inflation rates in 2025 will be influenced by the inflation rates experienced in 2024. The base effect could make the year-over-year inflation rates in 2025 appear higher.

Federal Reserve's Stance

• The Federal Reserve may turn more cautious about cutting interest rates due to the persistent inflation, particularly in the service sector. While there are forecasts for potential rate cuts in late 2024 and 2025, the Fed may wait for further cooling in inflation before making any significant moves.

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The path to achieving the Fed's 2% inflation target may be slower and more challenging than anticipated, leading to concerns about an uptick in inflation in 2025.

The reflationary policies anticipated under a second Trump administration could significantly impact the economic landscape, particularly in the context of adding to inflation concerns.

Inflationary Pressures

• Trump's policies, including tax cuts, increased infrastructure spending, and protectionist measures such as tariffs, are expected to drive inflation. Tariffs, in particular, can lead to higher consumer prices as the costs of imported goods increase.

• Reducing the labor pool due to stricter immigration policies could also contribute to inflation by reducing the supply of workers, potentially leading to higher wages and prices.

Fiscal Policy and Debt

• The Trump administration's plans for tax cuts, such as extending the Tax Cuts and Jobs Act of 2017, will likely increase economic growth and lead to higher fiscal deficits and national debt. This could exacerbate inflationary pressures and create uncertainty in the markets.

Monetary Policy

• The Federal Reserve may need to adjust its monetary policy in response to these reflationary measures. Higher inflation expectations could lead to higher interest rates to control inflation, which would impact bond markets and the overall cost of borrowing.

Market Reactions

• The anticipation of these policies has already led to market reactions, such as higher yields on 10-year Treasury notes and a stronger US dollar in the short term. However, long-term uncertainty around trade policy, fiscal deficits, and inflation could further challenge bond markets.

Labor Market and Immigration

• The impact of stricter immigration policies on the labor market could be significant. While some analysts argue that the reduction in the labor pool might not immediately lead to wage pressures due to existing slack in the unskilled labor market, others warn that mass deportations could disrupt the social and business fabric and lead to higher costs and inflation.

Reflationary Trades

Reflationary policies of the Trump administration are expected to:

• Increase inflation due to tax cuts, tariffs, and labor market adjustments.

• Lead to higher fiscal deficits and national debt.

• Influence monetary policy, potentially resulting in higher interest rates.

• Impact various market sectors differently, with equities likely benefiting and bond markets facing challenges.

• Create uncertainty and volatility in financial markets due to trade policy and immigration changes.

Investors are already positioning themselves for a reflationary environment, with markets pricing in higher inflation and interest rates.

(4) The Hypergrowth Portfolio: Rebalancing After Earnings And Election

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Thank you for reading this week's edition of Closelook@Hypergrowth, dated November 06, 2024 👋. The next edition will be published on 13 November 2024.

A Closelook At This Edition

1. This Week's Action: The Election and the Stock Market

2. A New Market Leadership: Hypergrowth Reflation Trades?

3. Did You Know? Hypergrowth in the Russel 2000 Index

4. The Hypergrowth Portfolio: Rebalancing Before the Election

5. This Week's Stock Spotlight: Astera Labs Inc - Semiconductor-Based Connectivity for Cloud and AI Infrastructure

6. Knowledge Corner: The Fed, Trumponomics, and the FOMC Meeting

7. Upcoming Transactions: Rebalancing After the Election

8. Final Words: What Can Possibly Go Wrong? A lot!

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(1) This Week's Action: The Election and the Stock Market

The newly elected Trump administration can impose higher tariffs (raising inflation risks) and lower taxes (ballooning the federal deficits). That could push the 10-year yield up to 4.75%-5.00%.

A Republican-controlled presidency and Congress will mean less regulation and a more dovish stance on mergers and acquisitions, which benefits financial stocks and some mega-cap names.

As advocated by Donald Trump, extreme tariffs may interrupt the path of disinflation and lead to higher interest rates and inflation.

Universal tariffs under the Trump administration might impair companies that heavily source their goods from overseas markets and increase the sourcing costs of those American companies dependent on imports.

Trump has made universal tariffs a core part of his economic agenda, suggesting a 20% tariff on all goods from all countries and a 60% rate on Chinese imports.

Trump has described universal tariffs as drawing a “ring around the country” and denied they would be inflationary.

Universal tariffs will produce a lot of revenue, which can be used to cut corporate and individual taxes, significantly boost growth, and pro-capital and investment.

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Given this, the SP 500 could climb to around 7,000 next year. Nasdaq and Nasdaq 100 may pose similar gains. The R2K index may outperform all three indices by quite a margin.

(2) A New Market Leadership: Small-Cap Hypergrowth Reflation Trades?

Stocks inside the Russell 2000 Growth Index, which fall under the reflation trade category and are not negatively affected by higher rates, may provide the best return in 2025 as the market leadership may change substantially under the Trump administration.

The table below shows the largest stocks by market capitalization in the index. Sprouts Farmers Market is part of the hypergrowth portfolio.

The index has exhibited a stellar performance in the past 52 weeks - up close to 100 %.

It has outperformed the R2K index and the R2K value Index by a considerable margin.

(3) Did You Know? Hypergrowth in the Russel 2000 Index

Small-cap are potential winners under a second Trump presidency, as investors expect it would ease regulations on businesses weighing more heavily on smaller businesses. Tailwinds and catalysts for sustained outperformance for small caps entail:

1. Trump’s domestic-focused agenda,

2. deregulation policy increases small business confidence,

3. higher M&A/sponsor activity with weaker DOJ/FTC

4. extension of individual/pass-through tax cuts,

5. a larger fiscal package passed by Congress in 2025, removing the downside to U.S. growth.

Headwinds include higher interest rates due to the inflationary tariffs and growth agenda. This may affect small-cap stocks negatively due to increased borrowing costs.

Valuation and Market Dynamics

• Valuation Discounts: Small-cap stocks in the Russell 2000 are currently trading at historically wide discounts relative to large-cap stocks. This valuation gap presents an opportunity to capitalize on potentially undervalued growth companies

• Rotation from Mega-Caps: As money may be reallocated out of highly concentrated mega-cap stocks, it may flow into more attractively valued small-cap stocks.

Attractive ways to play the Trump small-cap stock trade at the ETF level entail the Russel 2000 Growth Ishares ETF, the Russel 2000 Ishares ETF, and the Small-cap ETF Vanguard.

The table below shows the fifty largest Russel 2000 companies by market capitalization.

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The table below shows the fifty best-performing Russel 2000 companies year-to-date (06 November 2024).

Growth areas inside the R2K include healthcare, consumer discretionary, infotech, communication services, and industrials.

Zeta Global and Sprout Farmers Market are among the top 15 and are part of the hypergrowth portfolio.

(4) The Hypergrowth Portfolio: Rebalancing Before the Election

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Thank you for reading this week's edition of Closelook@Hypergrowth, dated October 23, 2024 👋. The next edition will be published on 30 October 2024.

A Closelook At This Edition

1. This Week's Action: Nasdaq 100 And Its Subsectors Look More Toppy

2. Valuation: The Buffett Indicator Screams A Very Loud Sell Signal

3. Did You Know? Goldman Sachs Just Predicted A Miserable Decade For US Stocks Ahead

4. The Hypergrowth Portfolio: Anticipating a Year-End Rally, But Less Than Usual

5. This Week's Stock Spotlight: Sprouts Farmers Market

6. Knowledge Corner: What Is A Minsky Moment?

7. Upcoming Transactions: Waiting For A Dip

8. Final Words: What Can Possibly Go Wrong? A lot!

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This Week's Action: Nasdaq 100 And Its Subsectors Look More Toppy

The Nasdaq 100 may still be in the process of forming a double top. It has closed all three gaps from the July high to the August low and has moved sideways since.

The price action looks increasingly “wedgy” to me, which is always alarming. A wedge is a topping formation with potentially more long-term trend-reversing implications.

The Nasdaq 100 Equal Weight Index has failed to push through and confirm the ATHs.

Given that we have entered the final week of mutual fund tax selling, are in the middle of the earnings season, and only a few days away from the US elections, elevated volatility can be expected into November. The key message from last week still holds.

The wedge-type move-up we have seen since mid-September may also indicate a short-term top. I expect election uncertainty and tax selling by mutual funds (until October 28) to put pressure on the stock market in the two weeks ahead.

The same applies to the other key messages from last week’s edition:

Geopolitical tensions may also rise as the winter war period approaches in Ukraine, and the Israeli counterstrike against Iran is due shortly. Any slight earnings or guidance misses will lead to wild downturns in hypergrowth stocks, as the ASML example from last week shows.

I would also like to repeat this statement from last week: Contrary to its regular seasonal pattern, the US stock market has increased in the past six weeks. I believe a more significant dip is overdue for a year-end rally to start in November.

The Nasdaq 100 Technology Index has failed to move close to its old highs.

The Nasdaq 100 Ex Tech Index reached a new ATH but has displayed significant weakness this week. The Nasdaq 100 Ex Top 30 Index has also lost steam.

The broadening theme inside the Nasdaq 100 has ended, and I have started to favor the Mag-7 stocks over the smaller ones for the rest of the year.

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Higher yields usually do not bode well for the smaller Nasdaq 100 stocks. And the yield on the 10-year Treasury has moved above the crucial 4.2 % level. And I expect it to stay above 4 % until the end of 2024.

Valuation: The Buffett Indicator Screams A Very Loud Sell Signal

The US stock market has just hit its most overvalued level since the peak of the Dot Com Bubble. The SP 500 Forward price-to-sales ratio has exceeded its post-Covid peak and has reached its 2000/2001 level.

With the Buffett Ratio (i.e., forward P/S) reaching a record high of 2.9 and the S&P 500 forward P/E elevated at 22.0 times, valuations are stretched to the extreme compared to historical standards.

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The forward P/E ratio, on the other hand, is relatively low compared to the forward P/S ratio because the S&P 500 forward profit margin has been climbing to record highs and is expected to continue increasing in a soft landing scenario.

Did You Know? Goldman Sachs Just Predicted A Miserable Decade For US Stocks Ahead

Goldman Sachs just forecasted that the S&P 500 would yield annualized returns of just 3% (before adjusting for inflation) over the next decade.

They estimate that the potential outcomes range from -1% at the low end to +7% nominal returns at the high end. This is a significant decrease from the 13% average annual return observed over the past ten years. This forecast is also notably lower than the long-term average return of 11% and the broader market expectation of around 6%.

Several factors contributed to this subdued outlook. One reason is the current high level of market concentration, with the ten largest mega-cap technology firms, such as Apple, Microsoft, and Amazon, accounting for about 36% of the index. This concentration makes the index's performance heavily reliant on these companies' earnings growth.

Additionally, Goldman Sachs anticipates a slight contraction in GDP over the next decade, further impacting potential returns. This refers to a reduction in economic growth or output from current levels rather than an outright decline into negative territory.

This slowdown could manifest as lower GDP growth rates, reduced consumer spending, or less business investment, but not necessarily a full recession where economic activity declines for consecutive quarters.

Goldman Sachs also highlighted a 72% chance that the S&P 500 would underperform compared to Treasury Bonds over this period, with a 33% likelihood that stock returns will fall below inflation levels.

The analysts suggest that investors should prepare for lower equity returns relative to historical performance and consider diversification strategies, such as equal-weighted index exposure, to achieve better returns potentially.

Paul Tudor Jones and the Minsky Moment

Billionaire hedge fund manager Paul Tudor Jones has expressed concerns about the U.S. government's current fiscal deficit and the increased spending promised by both presidential candidates, warning that the bond market may compel the government to address these issues post-election.

"We will quickly face financial difficulties unless we seriously tackle our spending problems," Jones stated in an interview with CNBC's Andrew Ross Sorkin on 22 October 2024.

As the founder and chief investment officer of Tudor Investment, Jones is worried that excessive government spending could trigger a significant bond market sell-off, leading to rising interest rates.

In contrast to Goldman Sachs, he plans to avoid owning fixed income and intends to bet against the longer-dated segment of the bond market, focusing on holding Bitcoin and gold.

Jones questioned whether a "Minsky moment"—a sudden dramatic drop in asset prices—could occur in the U.S. debt markets after the election, suggesting a potential realization that proposed fiscal policies are unsustainable.

The federal deficit for fiscal year 2024 has surpassed $1.8 trillion, an 8% increase from 2023, according to the Treasury Department. The government addresses this deficit by selling Treasury bonds, and Wall Street traders closely monitor the timing and profile of these sales. Over the past three years, rising interest rates have also raised concerns among economists and traders due to the government's increased annual debt cost.

In his interview, Jones noted that budget deficits grew under former President Donald Trump and President Joe Biden's administrations, and he criticized Trump and Vice President Kamala Harris as being "least suited for the job ahead" regarding budget management. He remains concerned about inflation, especially if Trump wins.

Jones suggested several ways for the government to align its spending better, which might require significant changes like allowing Trump's first-term tax cuts to expire or significantly reducing the federal workforce.

Jones founded his hedge fund four decades ago and gained prominence by accurately predicting the 1987 stock market crash.

Tudor Jones is part of a growing crowd of elderly billionaires that has become skeptical - towards life, the stock market, the US and to mostly anything. :-))))

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