Jones, Icahn, Einhorn, Gundlach — Some of the biggest names in investing are betting on inflation

Published Sat, Oct 23 20218:51 AM EDT

Inflation has been a top-of-mind concern for Wall Street for quite some time, and warnings about persistent price pressures from some of the biggest investors reached a crescendo this week. A number of legendary traders and investors, including Paul Tudor Jones, Carl Icahn and David Einhorn, are sounding the alarms on surging prices that some Federal Reserve officials insist are "transitory." These big names believe that the trillions of dollars in Covid-19 stimulus in the system is the impetus for inflation to run hotter for longer. These widely followed investors revealed where they are hiding out and which areas of the markets they think will benefit from rising prices. Paul Tudor Jones Paul Tudor Jones didn't mince words when it comes to his option about inflation. The founder and chief investment officer of Tudor Investment Corp. called inflation the "No. 1 issue facing Main Street investors" on CNBC's "Squawk Box" this week and said it's the single biggest threat to financial markets and society in general. "Inflation can be much worse than what we fear. We have the demand side of the equation ... and that is $3.5 trillion greater than what it normally would have ... just sitting in liquid deposits," Jones said. "They can go into stocks, or crypto, or real state, or be consumed, so that's a huge amount of dry powder just sitting waiting to be utilized at some point, which is why inflation is not going away." The longtime trader said it's time to double down on inflation hedges including commodities and Treasury inflation-protected securities, and that investors should avoid fixed income in this inflationary and low-rate environment. "Double down on long commodities, long TIPS breakevens, long Aussie/yen in FX world," Jones advised investors, referencing Treasury inflation-protected securities and the Australian dollar/Japanese yen currency pair. "You don't want to own fixed income," Jones said. "You do not want to hold that whatsoever, because what they're saying, what they're telling you by their actions, is that they're going to be slow and late to fight inflation and somewhere down the road, somebody will have to come in ... and put the hammer down." The trader and hedge-fund manager also reiterated his bullish outlook on bitcoin and cryptocurrencies, calling the digital assets his preferred inflation hedge. Carl Icahn Longtime activist investor Carl Icahn said the U.S. markets could see major challenges over the long term in the face of excessive money supply and rising inflation. "In the long run we are certainly going to hit the wall," Icahn said on CNBC's "Halftime Report." "I really think there will be a crisis the way we are going, the way we are printing money, the way we are going into inflation. If you look around you, you see inflation all around you and I don't know how you deal with that in the long term." Icahn was adamant about not making a market timing call, but he believes one day over the long term the markets will pay the price for those unprecedented stimulus programs. David Einhorn Greenlight Capital's David Einhorn is betting big on homebuilder Green Brick Partners in the current inflationary environment. Einhorn told CNBC's "Halftime Report" that Green Brick is his hedge fund's largest holding, and that it makes a good bet on rising housing prices as the economy recovers from the pandemic. "The reason we're positioned for inflation is we believe that whether the Fed acts or doesn't act, there's going to be quite a lot of inflation," Einhorn said. The star manager has been playing the trend of higher prices in industries from real estate to financials and to commodities. His hedge fund holdings at the end of the second quarter revealed a number of inflation plays in resources. Canadian mining company Teck Resources is a bet on the rise in base metal price. His CNX Resources stake is meant to take advantage of an expected bump in natural gas prices, and Einhorn also invested in Chemours Company to bet on a titanium dioxide price increase. Jeffery Gundlach B ond king Jeffrey Gundlach sees inflation in consumer prices likely staying elevated through 2021 and stay above 4% through at least 2022. Citing pressures from shelter costs and rising wages, the head of DoubleLine Capital told CNBC's "Halftime Report" that he sees the current inflation run as non-transitory and instead likely to persist well into the future. "We believe that it's almost certain that 2021 will end with a 5-handle on the [consumer price index], and it's going higher in the next couple of readings, thanks primarily to the price of energy," Gundlach said. "And we don't think inflation is going below 4% anytime in 2022." — CNBC's Jeff Cox contributed reporting.

Exterior view of the New York Stock Exchange and Wall Street on June 2, 2021.

Kena Betancur | VIEW press | Corbis News | Getty Images

Inflation has been a top-of-mind concern for Wall Street for quite some time, and warnings about persistent price pressures from some of the biggest investors reached a crescendo this week.