Republican Megadonor Ken Griffin on Trump's Economy

0:05Ken Griffin:Ken Griffin is the CEO of one of the world's most successful hedge funds, Citadel. Griffin is a billionaire and among the largest Republican donors. But during this administration, he's been outspokenly critical of some of President Trump's policies, especially around the Fed, tax cuts, and tariffs. This week, Griffin sat down with Wall Street Journal editor-in-chief Emma Tucker in West Palm Beach, Florida. They're at the Wall Street Journal's Invest Live event, and they discuss the weakening of the dollar, the growing national debt, and the role of government in corporate affairs. Welcome to The Journal, our show about money, business, and power.

0:45Ken Griffin:I'm Ryan Knudsen. It's Thursday, February 5th. Coming up on the show, a conversation with Ken Griffin.

1:03Emma Tucker:This episode of The Journal is presented by Intuit Enterprise Suite. If your finance team spends more time finding data than using it, if there's one entity here and one here and one here and one here, if scaling your business feels like starting over,

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2:37Ken Griffin:Good morning, everyone, and a big thank you to Ken for joining us today for a discussion about who knows where it's going to take us, Ken. We'll see. But it's almost impossible to know where to start. There's so much going on in the markets, in the world, certainly in the news cycle. So I thought I'd start with a very simple question. Somebody's just handed you a suitcase of freshly minted dollars. What are you going to do with those dollars?

3:10Emma Tucker:This sounds like a trick asset. I know your customer ALM question. Sounds like I need to call the FBI and go, I've got a suitcase full of cash here.

3:20Ken Griffin:Okay, after you've done that and they've said it's fine, you can keep them.

3:23Emma Tucker:So we've got clean money.

3:26Ken Griffin:Clean money. Clean money. Great.

3:29Emma Tucker:So first of all, thank you for being here in South Florida.

3:33Ken Griffin:It's my pleasure, the weather notwithstanding.

3:36Emma Tucker:It's still about 40 degrees warmer than New York. True. So yes, 55 is freezing, but it's not truly freezing. So if I was handed a suitcase of money today, this is like such a strange way to frame a question. Look, what investors need to focus on is what is the purpose of their portfolio. And so if you're in your early 20s, your investment objective is very different than if you're in your mid-70s. And you need to always invest your money from the vantage point of what you need to achieve with your investment portfolio. So if you're in your 20s, even though the equity market is somewhat frothy right now, you're still going to be investing the preponderance of that money in equity markets around the world.

4:28Emma Tucker:And if you're in your mid-70s, obviously you worry about inflation, you worry about downside risk, you worry about the fact that you don't have 20 or 30 years potentially as your investment horizon. You're going to have much more of that money invested in tips or in commercial real estate or in other assets that have greater protection from the potential damaging influence of inflation.

4:52Ken Griffin:Good. What he hasn't said is what he said to me backstage, which is he'd put it under his mattress. Sorry.

5:03Emma Tucker:She had way too much fun with that. Right.

5:08Ken Griffin:OK. On to more serious matters. Debt. Now, you've always made it very clear that you think debt levels in this country have got too high. The national debt is now running at exceeding$38 trillion. And off the back of that, there's some evidence of a sort of sell America trade going on. So my question to you is, do you think we're witnessing the early stages of a genuine challenge to dollar primacy?

5:37Emma Tucker:Look, the U.S. dollar has lost some of its luster over the last 12 months. There's no doubt about that. And I do believe that the United States is unquestionably still one of the great safe harbors in the world. And at the same time, policies relating to tariffs, some of the rhetoric from the administration has taken some of the shine off the dollar. And at the end of the day, I do believe that when it's all said and done, if you are the strongest nation in the world, you are going to be predisposed to having a strong currency. And that strong currency, that reserve currency status, reduces your cost of capital, brings down interest rates, all else being equal, increases the quality of living for those citizens of that nation and allows us to engage in the global economy on a much stronger footing.

6:41Emma Tucker:Yes, it makes exports a bit more challenging, but the fact that we can amass so much capital and deploy it across corporate America is stunning. I mean, the juxtaposition between the strength of America's capital markets and virtually every other country in the world is breathtaking. And we want to protect that. That ability for American firms to raise tens of billions or hundreds of billions of dollars, whether it's to build hyperscale data centers, whether it's to pursue pharmaceutical R &D, leaves us in an envied position by the rest of the world.

7:21Ken Griffin:So what do you think the administration needs to do to sort of make sure that that supremacy is maintained? Like, is it on the right fiscal track to do that?

7:28Emma Tucker:So we need to increase fiscal discipline in the United States. We are late in an economic cycle. We don't know if we're in the sixth inning or seventh inning or eighth inning, but very few cycles run as long as this cycle has run. And we're still running a significant deficit. At this point in the economic cycle, we should be running close to a break even. I mean, if you're not paying down your national debt at moments like this, when will you pay it down? And the fact that we're still running a very large annual deficit does tell you that too much of the economy is being supported by the sugar high of fiscal spending.

8:04Emma Tucker:We need to dial that back. We need to have more discipline in both spending and thoughtfulness in how we generate revenues. Like, we need to put our fiscal house in order. And I do worry that that's lost attention and focus in Washington. And I know the president has to be frustrated. You know, his first term, his tax cuts were about reigniting growth in America, right? And to get Americans to, in essence, be bolder again, right? How do we increase investment? How do we increase productivity? And he's trying to play the same playbook again. But what I think is being missed in this analysis is the incredible amount of spending during the pandemic, right?

8:46Emma Tucker:That three-year error of profligate spending, just out-of-control spending, we need to deal with the reality that we need to pay that debt down. And America did this after World War II, and America should be doing that again here today.

9:05Ken Griffin:And how, I mean, politically, though, it's a difficult, you know, needle to thread that one. How would you, if you had the presidency, what would you say to him? What should he do to bring that deficit down?

9:18Emma Tucker:You need, and I know this sounds very almost fanciful, you need to get bipartisan agreement on the steps we're going to take to put our fiscal house in order. And here's the big issue. Politicians deferring some of these decisions means that the impact of future decisions will be so much more painful for the American people. Like, that's what we're really doing, is we're not deferring some fixed amount of pain. We're going to cause far more pain 20 years down the road. I mean, could you imagine today being in your 20s and you see Social Security come out of your paycheck each and every year? Okay, will the government safety net be there for you when it's your turn to retire?

10:03Emma Tucker:That's a legitimate question, given the level of deficit spending we have today.

10:07Ken Griffin:So another area of pain, certainly one that you've highlighted a lot, is that of tariffs, which for the last year has been this sort of flip-flopping story. One minute they're up, one minute they're down, one country's up, whatever. Only yesterday we learned that tariffs on India are going to be cut to 18%. How difficult is it to sort of come up with an investment strategy thesis when this backdrop keeps changing all the time?

10:31Emma Tucker:So, you know, I see my colleagues firsthand have to grapple with this problem over the last year. I mean, all of us do in the money management business. How do you create a portfolio when every single company that you invest in can have the terms of engagement changed by the stroke of a pen in Washington? And this goes to, you know, you often hear business people say, just don't change the rules. All right? And you sit there and go, like, are they that inflexible? Are they that unwilling to change? Like, can't they go with the flow? But the problem is that when you're running a business and you're trying to grow that business, you're making decisions that have horizons often of three years, five years, 10 years, 20 years.

11:16Emma Tucker:I mean, we're building a new office building in New York for Siddall. That's a 50 to 100-year horizon decision. Okay? If you tell me the rules of the road are going to change every couple of years, you make that decision a far more difficult choice. If you tell me the rules of the road are going to change every couple months, I'm best off making no decision, right? And that's where Washington needs to think about what is the pace of change it's trying to create in the economy and having certainty or having a higher degree of confidence what the rules of the road will be will actually help the president achieve his goal of, in my opinion, of creating more capital investment in the United States and strengthening America's manufacturing base.

12:32Ken Griffin:You can apply in the wallet app on iPhone subject to credit approval. Apple card issued by Goldman Sachs bank, USA Salt Lake city branch terms and more at apple.co slash benefits. This episode is brought to you by indeed hiring. Isn't just about finding someone willing to take the job. It's about finding someone with the right skills and background who can move your business forward. And a good way to start your search is with Indeed Sponsored Jobs. It's one of the best ways to make your job post stand out and reach the candidates you're looking for faster. According to Indeed data, sponsored jobs posted directly on Indeed are 90 % more likely to report a hire than non-sponsored jobs.

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13:53Ken Griffin:I wanted to ask you about sort of the dangers of crony capitalism. You are a big free market champion. You always have been. But there has been sort of, you know, you were very clear that you didn't like the regulatory burden of the previous administration. But now you've got a situation where the government is taking stakes in companies. You've got sort of talk about a credit card, a cap on interest on credit cards. You've got all the interference with tariffs, and the attempt to reshore manufacturing. Do you think there's a role for that sort of interference, given that America has to sort of take a stand against the biggest crony capitalist of all, China?

14:34Ken Griffin:Or does that sort of behavior make you shudder?

14:36Emma Tucker:Well, let's take a huge step back. Government has a really important role to play in the economy. It has an important role in the economy to ensure that consumers have fair and reasonable disclosure. Like, when you're a consumer that picks a credit card, you should be able to get through the fine print pretty quickly and understand the cost and interest rates you're going to pay. Government has a really important role in the economy in preventing externalities, the archetype of that being pollution. You know, you can't just build a factory and dump your waste into the river in the backyard. You just can't do that.

15:09Emma Tucker:So I think it's important to appreciate that no one, when they argue for less regulation, is arguing for a reversal of these very important policies that protect the safe and health welfare of the American people. When the U.S. government starts to engage in corporate America in a way that tastes of favoritism, I know for most CEOs that I'm friends with, they find it incredibly distasteful. Like, we want to go run our businesses and win on the merits of providing a better customer to our products at a lower price. Like, that's how we win. And when you start to say that you're going to win or lose because you get a regulatory favor out of Washington, do you know what you say?

15:55Emma Tucker:God, I mean, I'm close to this administration, but does that mean the next administration's going to grant a favor to one of my competitors? or take a favor away from me because I don't support them publicly. Most CEOs just don't want to find themselves in the business of having to, in some sense, suck up to one administration after another to succeed in running their business. They want to focus better products, better marketing, better distribution, more value created for their customers, some of which is shared with their shareholders.

16:29Ken Griffin:So these are all great points. And we live in a world, in a country, where people really look up to corporate leaders. Why is it so difficult for the corporate world to voice publicly the sort of thing you're saying now?

16:44Emma Tucker:So I think there's a couple of challenges that corporate executives face on this front. What we saw over the last, we go back over the last 10 years, companies that found themselves the middle of the whole woke movement, would find their products either embraced or ostracized by tens of millions of Americans overnight. And that's created a level of fear and apprehension amongst the corporate CEO class to insert themselves in any publicly facing issues these days. Like the power of social media to persuade millions or tens of millions of consumers to make a product choice is really terrifying to corporate executives.

17:25Emma Tucker:And I think it's put them in a very just intrinsically like withdrawn position.

17:30Ken Griffin:I wanted to ask you as well specifically about there has been a trend of people in the administration using their positions to enrich themselves personally. I don't know if you saw the journal we did a story a couple of days ago about a half billion donation that was made from an Abu Dhabi royal to the Trump crypto vehicle days before the inauguration. Does that sort of behavior matter to you? Does it bother you?