Trump’s billionaires, Wherefore art thou?
Much has been written about all the billionaires in Trump’s cabinet. But there are actually only three and one wonders if any of them knows anything about running a business. They are Howard Lutnick, Secretary of Commerce, net worth: $3.2 billion, source of wealth: finance CEO of Cantor Fitzgerald, a financial services firm; Linda McMahon, Secretary of Education, net worth: $3 billion, source of wealth: wrestling; and Kelly Loeffler, Head of the Small Business Administration, net worth: $1.3 billion, source of wealth: wife of Jeff Sprecher, CEO of Intercontinental Exchange;
Note that none of the above built their wealth in manufacturing. The Wall Street Journal remarked regarding Lutnick, that it is too bad that the secretary of commerce knows so little about commerce. Scott Bessent, Treasury Secretary has a net worth of “only” $500 million. His source of wealth is Key Square Group, a macro hedge fund destroys wealth as often as it enhances it. Only Doug Burgum, the Interior Secretary whose net worth is a paltry $100 million started a small business, a software firm, Great Plains Software which Microsoft bought for a billion dollars in 2000. (What happened to the other $900 million?) Burgum then ran a real estate development firm and venture capital company. The one influential Trump advisor who is involved in manufacturing, Elon Musk, has been the only one who has publicly strayed from Trump’s obsession with tariffs. But Musk is not in the cabinet.
BTW, a macro hedge fund is one that places bets on wide swings in the market rather than picking individual firms and stocks. So these funds short or go long in stocks to take advantage of political upheaval or movements in economic activity. One such fund had taken positions in anticipation of a Trump-induced market crash and was rewarded with a 6% gain in the market downturn following “Liberation Day.” However, that same firm lost some of its gains when the market bounced back when Trump suddenly rescinded his “reciprocal” tariffs. Another macro hedge fund sold stocks in its highest volume in 12 years. The Wall Street Journal reports that the ratio of bets on asset prices rising to bets on asset prices falling is at a five year low. No doubt that all the sell offs by hedge funds contributed to the volatility in the market. One fund is heavily into Treasurys and lost when investors dumped Treasurys as stocks plummeted. This is the world of Scott Bessent who probably advised Trump to cool it lest his hedge fund buddies take severe losses and upset their well heeled clientele.
I am not convinced that hedge funds add value. Yes they have made some of their managers like Bessent and Scott Ackerman very wealthy but most funds do not add value and collect high fees for churning portfolios. Nonetheless, their clients are generally wealthy and their hedge fund investments amount to little more than gambling money which constitute very little of their wealth.
If Trump had real businesspeople in his cabinet, maybe the path for the economy would be different than the haphazard zig zig route that we are now on. The MAGA crowd has been trying to convince me that Trump knows what he is doing. They have faith. Let’s hope that that faith is justified.
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