A Quiet Giant of Investing Weighs In on Trump - The New York Times - 0 views
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a private letter he wrote to his investors a little over two weeks ago about investing during the age of President Trump — and offering his thoughts on the current state of the hedge fund industry — has quietly become the most sought-after reading material on Wall Street.
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He is Seth A. Klarman, the 59-year-old value investor who runs Baupost Group, which manages some $30 billion.
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Mr. Klarman sets forth a countervailing view to the euphoria that has buoyed the stock market since Mr. Trump took office, describing “perilously high valuations.”
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“Exuberant investors have focused on the potential benefits of stimulative tax cuts, while mostly ignoring the risks from America-first protectionism and the erection of new trade barriers,”
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“While they might be popular, the reason the U.S. long ago abandoned protectionist trade policies is because they not only don’t work, they actually leave society worse off.”
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He worries, for example, that Mr. Trump’s stimulus efforts “could prove quite inflationary, which would likely shock investors.”
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Much of Mr. Klarman’s anxiety seems to emanate from Mr. Trump’s leadership style. He described it this way: “The erratic tendencies and overconfidence in his own wisdom and judgment that Donald Trump has demonstrated to date are inconsistent with strong leadership and sound decision-making.”
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“The big picture for investors is this: Trump is high volatility, and investors generally abhor volatility and shun uncertainty,” he wrote. “Not only is Trump shockingly unpredictable, he’s apparently deliberately so; he says it’s part of his plan.”
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he warned, “If things go wrong, we could find ourselves at the beginning of a lengthy decline in dollar hegemony, a rapid rise in interest rates and inflation, and global angst.”
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he issued a statement after Mr. Trump criticized a judge over his Mexican heritage, saying he planned to support Mrs. Clinton: “His words and actions over the last several days are so shockingly unacceptable in our diverse and democratic society that it is simply unthinkable that Donald Trump could become our president.”
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“Despite my preference to stay out of the media,” he wrote, “I’ve taken the view that each of us can be bystanders, or we can be upstanders. I choose upstander.”
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“This should give long-term value investors a distinct advantage,” he wrote. “The inherent irony of the efficient market theory is that the more people believe in it and correspondingly shun active management, the more inefficient the market is likely to become.