May 13, 2025 • 8 mins
As markets soared on a truce in the trade war between the US and China, Citadel founder Ken Griffin reflected on the past month, suggesting it would have been better to sit on the sidelines in cash. He is joined by Bloomberg's Sonali Basak.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News. I want to go
back to something you said a little bit earlier, this
notion that it's hard to see whether this is a
one time hit to inflation or whether it's more persistent. Ultimately,
what do you think? I mean?
Speaker 2 (00:19):
Ultimately, any effort to force manufacturing back onshore into the
United States is going to be inflationary. There's no doubt
about it. And what frustrates me on this is that
one of the reasons that Trump won the election was
the American people had had enough inflation. They wanted a
(00:41):
break from seeing their standard of living deteriorated by the
ever increasing price of goods and services. And so I
really do think that the president needs to think long
and hard about the necessity of helping to protect the
standard of living of the American people by keeping the
inflation like. It's not a genie, it's like the inflation
(01:03):
devil in the bottle.
Speaker 1 (01:05):
So what does this mean for FED chair Powell? How
difficult does this dynamic make his job? And do you
think his job is secure through May of twenty twenty six.
Speaker 2 (01:14):
I gotta tell you, I'm really happy not to have
his job, but he is the biggest no win job
in the country because through the lens of hindsight, we
will always be able to second guess every single decision
he makes. Right here, right now, he's grappling with do
you cut rates as the labor market shows ever so
(01:37):
slightly signs of softening, or do you hold the course
because of the risk of an inflationary spite coming from
tariff increases. He's going to have to make that decision
based upon evolving policies over the weeks ahead. It's a
really tough predicament he is in right here, right now.
Speaker 1 (01:55):
Ken, it sounds like you have doubts that the American
economy can be easily transitioned into a manufacturing one. What
are the chances of making that work? And do you
think that it's a realistic goal.
Speaker 2 (02:08):
I mean, look, there's a great video clip from Dave
Chappelle and it goes something like Americans want to wear nikes,
not make nikes, And I think you spot on. I
don't understand why we think it's a virtue to bring
back to America low skilled jobs in manufacturing. I completely
(02:30):
agree with the President. We need the ability to ramp
up our manufacturing base to strengthen our national defense. Spot
on right. But I don't think the American people are
looking for a return to low skill, low pain manufacturing
jobs in our country. I don't think they want those jobs.
I think they want jobs where we are building high
(02:53):
value added products, successful businesses, building high value added products,
where you can create jobs in that factory floor that
are well paying jobs. Those are the jobs we should
aspire to create in our country, not jobs that right
now China is actually trying to move to other even
lower cost labor countries. Why do we want those jobs
(03:16):
here in America.
Speaker 1 (03:18):
I'd love to see this from your position leading Citadel
and also your message to Citadel Securities employees, what do
you tell them to navigate all of this volatility?
Speaker 2 (03:30):
So I will tell you that from my portfolio managers,
it has been it has been several really challenging weeks
because every couple of days there's another big headline M.
Bloomberg that we need to react to and we need
to reshape our portfolios with respect to It's been a
(03:54):
really difficult time for fundamental investors because so much of
the value the companies that we invest in is being
dictated by very quickly changing policies from Washington.
Speaker 1 (04:08):
So your best way to navigate that.
Speaker 2 (04:11):
I think in retrospect, perhaps holding cash would have been
the best way to navigate this. But that's so contrary
to our culture of always trying to be on the offense,
always trying to find ways to create value in the markets.
Speaker 1 (04:25):
Is there something fundamental that's changing about the way you
approach markets?
Speaker 2 (04:29):
Look, I fundamentally believe that this period of instability that
we're going through will come and go. Like fundamentally, I
believe that as the Trump administration moves through time, as
policies become solidified, the economic backdrop or against which one
invests capital will become easier once again.
Speaker 1 (04:49):
Now, when you look at the tax bill, it looks
like the direction of travel is such that you have
four trillion in tax reductions, but one point five billion
here in spending required one from a trillion, very sorry
trillion with the tea. How is that going to close
the US deficit?
Speaker 2 (05:07):
Well, I mean what's clear is that the numbers that
we talk about in America are almost incomprehensible billions and trillions.
I mean, it's just unbelievable how big government in Washington
has become and I think one of the areas that
the Trump administration is focused on is how to reduce
the scale and scope of spending here in the United States,
(05:29):
whether it's the efforts at DOGE or the debates that
are happening right here right now as we speak about,
for example, medicaid and the cost of medicaid to the States.
The Trump administration's really thinking about how do we help
to solve our nation's spending problem. And then at the
same time they're grappling with what is the right tax
(05:51):
policy that helps us to pay for the promises that
we've made to the American people and yet ignite them
a maximum amount of growth that we can achieve in
our economy. Because when it's all said and done, the
only way the United States will solve for the problems
it's made to its people is for us to far
(06:14):
more rapidly grow our economy.
Speaker 1 (06:16):
What role is de regulation going to play in that?
Speaker 2 (06:19):
Well, I mean, deregulation is clearly already in one of
the huge accomplishments of the Trump administration. And why do
I say that, Because the onslaught of new regulation has
stopped that in and of itself has been incredibly powerful
for corporate America, the ability to focus on growing your
business again without worrying about what new rule it's going
(06:41):
to be imposed upon you from Washington. Now, having said that,
the efforts to do regulate are going to be more
slow because it takes time to re underwrite. Why was
the regulation put in place to start with? How does
this regulation serve the interest of the American people? It
takes time to think awfully deregulate our economy.
Speaker 1 (07:02):
Now your companies have a footprint all over the world.
Are you seeing investors hedging against US instability, diversifying away
from US stocks or even US treasuries given the changes
and the uncertainties that still exist around them with the administration.
Speaker 2 (07:18):
I think there's been two very strong realizations by investors
around the world. First, there was a bit of a
knee Jork reaction to pull back from the United States
to be anxious spout investing in America given the stance
and changing stance we took in areas light trade. But
(07:38):
then there's also just a realization that no country in
the world enjoys the rate of innovation and commercial development
that we enjoy here in America. And so you have
these two competing arguments that investors around the world are
grappling with, is the United States going to be a real, liable,
(08:00):
ally and economic player in the world markets? And compare
and contrast that with the reality that if you take
a step back, no country in the world other than
perhaps China, comes anywhere close to America in terms of
the rate of innovation and creative energy that goes into
(08:24):
growing our economy.
Bloomberg Audio Studios, Podcasts, Radio News. I want to go
back to something you said a little bit earlier, this
notion that it's hard to see whether this is a
one time hit to inflation or whether it's more persistent. Ultimately,
what do you think? I mean?
Speaker 2 (00:19):
Ultimately, any effort to force manufacturing back onshore into the
United States is going to be inflationary. There's no doubt
about it. And what frustrates me on this is that
one of the reasons that Trump won the election was
the American people had had enough inflation. They wanted a
(00:41):
break from seeing their standard of living deteriorated by the
ever increasing price of goods and services. And so I
really do think that the president needs to think long
and hard about the necessity of helping to protect the
standard of living of the American people by keeping the
inflation like. It's not a genie, it's like the inflation
(01:03):
devil in the bottle.
Speaker 1 (01:05):
So what does this mean for FED chair Powell? How
difficult does this dynamic make his job? And do you
think his job is secure through May of twenty twenty six.
Speaker 2 (01:14):
I gotta tell you, I'm really happy not to have
his job, but he is the biggest no win job
in the country because through the lens of hindsight, we
will always be able to second guess every single decision
he makes. Right here, right now, he's grappling with do
you cut rates as the labor market shows ever so
(01:37):
slightly signs of softening, or do you hold the course
because of the risk of an inflationary spite coming from
tariff increases. He's going to have to make that decision
based upon evolving policies over the weeks ahead. It's a
really tough predicament he is in right here, right now.
Speaker 1 (01:55):
Ken, it sounds like you have doubts that the American
economy can be easily transitioned into a manufacturing one. What
are the chances of making that work? And do you
think that it's a realistic goal.
Speaker 2 (02:08):
I mean, look, there's a great video clip from Dave
Chappelle and it goes something like Americans want to wear nikes,
not make nikes, And I think you spot on. I
don't understand why we think it's a virtue to bring
back to America low skilled jobs in manufacturing. I completely
(02:30):
agree with the President. We need the ability to ramp
up our manufacturing base to strengthen our national defense. Spot
on right. But I don't think the American people are
looking for a return to low skill, low pain manufacturing
jobs in our country. I don't think they want those jobs.
I think they want jobs where we are building high
(02:53):
value added products, successful businesses, building high value added products,
where you can create jobs in that factory floor that
are well paying jobs. Those are the jobs we should
aspire to create in our country, not jobs that right
now China is actually trying to move to other even
lower cost labor countries. Why do we want those jobs
(03:16):
here in America.
Speaker 1 (03:18):
I'd love to see this from your position leading Citadel
and also your message to Citadel Securities employees, what do
you tell them to navigate all of this volatility?
Speaker 2 (03:30):
So I will tell you that from my portfolio managers,
it has been it has been several really challenging weeks
because every couple of days there's another big headline M.
Bloomberg that we need to react to and we need
to reshape our portfolios with respect to It's been a
(03:54):
really difficult time for fundamental investors because so much of
the value the companies that we invest in is being
dictated by very quickly changing policies from Washington.
Speaker 1 (04:08):
So your best way to navigate that.
Speaker 2 (04:11):
I think in retrospect, perhaps holding cash would have been
the best way to navigate this. But that's so contrary
to our culture of always trying to be on the offense,
always trying to find ways to create value in the markets.
Speaker 1 (04:25):
Is there something fundamental that's changing about the way you
approach markets?
Speaker 2 (04:29):
Look, I fundamentally believe that this period of instability that
we're going through will come and go. Like fundamentally, I
believe that as the Trump administration moves through time, as
policies become solidified, the economic backdrop or against which one
invests capital will become easier once again.
Speaker 1 (04:49):
Now, when you look at the tax bill, it looks
like the direction of travel is such that you have
four trillion in tax reductions, but one point five billion
here in spending required one from a trillion, very sorry
trillion with the tea. How is that going to close
the US deficit?
Speaker 2 (05:07):
Well, I mean what's clear is that the numbers that
we talk about in America are almost incomprehensible billions and trillions.
I mean, it's just unbelievable how big government in Washington
has become and I think one of the areas that
the Trump administration is focused on is how to reduce
the scale and scope of spending here in the United States,
(05:29):
whether it's the efforts at DOGE or the debates that
are happening right here right now as we speak about,
for example, medicaid and the cost of medicaid to the States.
The Trump administration's really thinking about how do we help
to solve our nation's spending problem. And then at the
same time they're grappling with what is the right tax
(05:51):
policy that helps us to pay for the promises that
we've made to the American people and yet ignite them
a maximum amount of growth that we can achieve in
our economy. Because when it's all said and done, the
only way the United States will solve for the problems
it's made to its people is for us to far
(06:14):
more rapidly grow our economy.
Speaker 1 (06:16):
What role is de regulation going to play in that?
Speaker 2 (06:19):
Well, I mean, deregulation is clearly already in one of
the huge accomplishments of the Trump administration. And why do
I say that, Because the onslaught of new regulation has
stopped that in and of itself has been incredibly powerful
for corporate America, the ability to focus on growing your
business again without worrying about what new rule it's going
(06:41):
to be imposed upon you from Washington. Now, having said that,
the efforts to do regulate are going to be more
slow because it takes time to re underwrite. Why was
the regulation put in place to start with? How does
this regulation serve the interest of the American people? It
takes time to think awfully deregulate our economy.
Speaker 1 (07:02):
Now your companies have a footprint all over the world.
Are you seeing investors hedging against US instability, diversifying away
from US stocks or even US treasuries given the changes
and the uncertainties that still exist around them with the administration.
Speaker 2 (07:18):
I think there's been two very strong realizations by investors
around the world. First, there was a bit of a
knee Jork reaction to pull back from the United States
to be anxious spout investing in America given the stance
and changing stance we took in areas light trade. But
(07:38):
then there's also just a realization that no country in
the world enjoys the rate of innovation and commercial development
that we enjoy here in America. And so you have
these two competing arguments that investors around the world are
grappling with, is the United States going to be a real, liable,
(08:00):
ally and economic player in the world markets? And compare
and contrast that with the reality that if you take
a step back, no country in the world other than
perhaps China, comes anywhere close to America in terms of
the rate of innovation and creative energy that goes into
(08:24):
growing our economy.
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