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Why Citadel CEO Ken Griffin sees some rough weather ahead

Robert Reed, Chicago Tribune on

Published in Business News

When the richest person in Illinois shares his opinions about the economy and stock market, it's worth listening -- especially when you consider what's been going on this week.

Ken Griffin, founder and CEO of hedge fund Citadel, who has an estimated net worth of $8.5 billion, recently posted online an open letter to the hedge fund's investors that outlines his views on 2018's economic landscape and more. He's worried about some "dark clouds" on the horizon and Griffin, like Omaha, Neb.-based superinvestor Warren Buffett, usually knows the score.

Maybe it's a Midwestern thing.

Via a Citadel spokeswoman, Griffin declined to discuss the issues raised in his letter. Nevertheless, let's try to unpack what Griffin said because it concerns not just his clients but many of us who aren't.

Citadel's chief is pretty upbeat about this year's growth prospects. However, Griffin is wary of some looming problems, particularly rising inflation and "a heightened level of geopolitical risk" that could involve trade clashes or even military confrontation, his letter stated.

Griffin is simpatico with President Donald Trump's agenda of slashing industry regulations and backing a mammoth tax law cutting the corporate rate to 21 percent, from about 35 percent. He's also in lockstep with the parade of corporate CEOs and business interests that believe Trump's plan is a pathway to robust commercial expansion and fatter profits. Griffin has long pushed back on some government attempts to regulate the hedge fund industry.

"In the United States, a pro-growth regulatory environment and a sweeping tax reform bill have fueled optimism in the domestic economy," Griffin wrote.

Griffin isn't so sanguine that he doesn't see the prospect of trouble or disruption ahead.

He's concerned the U.S. and "many countries around the world" are showing early signs of accelerating inflation, which may help to depress corporate earnings and stock prices. Citadel is factoring in the possibility of any inflationary shock in its investment analysis, Griffin stated.

Trump's war on regulations has corporations jumping for joy. But what's the long-term impact?

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