Oaktree’s Marks Says Trump’s Policies Defy Economic Reality

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Billionaire Investor Howard Marks Gets Political
  • Isolationist proposals would result in job losses: billionaire
  • Investor, who avoided political views, sends memo to clients

Policies proposed by Republican presidential nominee Donald Trump would result in a credit downgrade for the U.S., job losses and a more isolated economy, billionaire investor Howard Marks said.

Trump’s most unrealistic claim is that he could reduce the federal debt by negotiating to pay off less than the total amount owed, Marks said in a memo to clients Wednesday. Such a move would hamper the country’s access to capital markets, the Oaktree Capital Group LLC co-founder said.

Howard Marks
Howard Marks
Photographer: Chris Goodney/Bloomberg

“The United States could refuse to pay its debts in full -- that’s called ‘rescheduling’ or ‘default’ -- but we’d be unlikely to have the same access to the credit markets,” Marks, 70, wrote. “We would certainly cease to enjoy the benefits of a high credit rating and resulting low interest rates.”

Marks, whose Los Angeles-based firm is the world’s biggest investor in distressed debt, previously refused in interviews to discuss his views on specific policies put forth by the 2016 presidential candidates. The billionaire, who uses his widely read quarterly memos to opine on issues in finance, investing and economics, added a rare postscript to Wednesday’s letter, apologizing if his statements cause readers “unhappiness.”

While investors at the top echelons of private equity, hedge funds and real estate are typically split between supporting the Republican and Democratic presidential nominee, some prominent Republicans such as Blackstone Group LP’s Steve Schwarzman and KKR & Co.’s Henry Kravis have withheld public support for Trump.

Kravis last year said “that was scary” when Trump suggested he would ask Kravis to be Treasury secretary. Billionaire Paul Singer, a Republican donor, in June said Trump’s anti-trade policies would be “close to a guarantee of a global depression.”

Colony Capital Inc.’s Tom Barrack and Cerberus Capital Management’s Steve Feinberg are economic advisers to Trump’s campaign. Billionaire distressed-debt investor Wilbur Ross has spoken out in favor of the nominee and held a fundraiser for Trump in July.

Clinton Shortcomings

Democratic nominee Hillary Clinton has her own shortcomings, Marks said, though “she hasn’t been anywhere near as guilty as Trump of defying economic reality.” Her faults, according to Marks, include using a private e-mail server while Secretary of State and embracing positions with the apparent focus of winning over voters who supported Bernie Sanders in the primary campaign. He cited Clinton’s opposition to the Trans-Pacific Partnership and promising free public college for some as examples.

Protectionist policies by Trump, such as his proposals to fight China on trade, may cost some American jobs by motivating trading partners to increase tariffs on U.S.-made goods, said Marks.

“Trump’s campaign is mainly targeting people who fear being left behind by globalization, and ignoring the individual winners and positive overall effects,” Marks wrote, comparing such potential voters to those in the U.K. who opted to separate from the European Union.

Oaktree oversaw $98.1 billion in assets of June 30. The firm, started by Marks and other partners in 1995, manages distressed debt, private equity holdings, real estate, infrastructure and energy-related assets.

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