Beware! The Oracle of Boston Ain't Digging Trumponomics

The money crowd has dubbed him the “Oracle of Boston,” signifying his exceptionally high standing in the investment world as an equal to Warren Buffett, the “Oracle of Omaha.”

Used copies of his book, “Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor,” sell for thousands of dollars on the Internet.

He’s so important in the financial circles that, when he had heart surgery a while back, the Wall Street Journal kept its readers apprised of his medical condition and progress.

Meet Seth Klarman, age 59, a Baltimore native, Harvard grad, resident of Chestnut Hill, billionaire, frequent donor to Republican office holders, (including Charlie Baker), and founder of the Baupost Group, a Boston-based private investment partnership.

And, guess what? Our new Republican president has Mr. Klarman shaking in his boots.

As just reported in the New York Times, Klarman recently wrote a private letter to his investors, which found its way to Times reporter Andrew Ross Sorkin.  In an article headlined “A Quiet Giant of Investing Weighs In on Trump,” Sorkin revealed that Klarman views with skepticism and alarm the gains in the stock market that followed Trump’s election.

“In particular, Mr. Klarman appears to believe that investors have become hypnotized by all the talk of pro-growth policies, without considering the full ramifications,” wrote Sorkin.  “He worries, for example, that Mr. Trump’s stimulus efforts ‘could prove quite inflationary, which would likely shock investors.’ ”

Sorkin’s piece, replete with quotations from Klarman’s letter, is a must-read.  There’s a link to it below.  I should not summarize it when the original’s readily available and better written than my blog.  But I'd like to present a few choice excerpts from Klarman’s letter, as reported in the Times:

“President Trump may be able to temporarily hold off the sweep of automation and globalization by cajoling companies to keep jobs at home, but bolstering inefficient and uncompetitive enterprises is likely to only temporarily stave off market forces.”

“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.”

“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.”

“The big picture for investors is this: Trump is high volatility, and investors generally abhor volatility and shun uncertainty.”

“Not only is Trump shockingly unpredictable, he’s apparently deliberately so; he says it’s part of his plan.”

“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.”

Here’s the link to “A Quiet Giant…”:

https://www.nytimes.com/2017/02/06/business/dealbook/sorkin-seth-klarman-trump-investors.html