Before we answer this headline question, we should start by examining the credentials of Scott Bessent, because we were led to believe that he is a master of markets, having trained under George Sorros and with Stanley Druckenmiller — two titans of the early hedge fund industry. In the 1990s they were commonly described in London’s financial district as Masters of the (financial) Universe, a description which was marred only by the dramatic failure of Long-term Capital Management in 1998.
Along with Soros and Druckenmiller, Bessent was not involved in LTCM. He was a managing partner of Soros Fund Management in London. In 2000, Bessent set up his own hedge fund, Bessent Capital, which according to an AI search had mixed-to-poor results, but there appears little to verify it. In 2015 he set up another hedge fund, Key Square Group. Its performance overall was lacklustre, leading to investor withdrawals reducing the fund from $5.1bn to $577 million.
I would comment that when you manage a large hedge fund, you should be able to get consistently good returns because you are large enough to move markets in your favour, particularly if you use the substantial leverage available to such a fund. So far as we are aware, this Master of the financial Universe appears to have failed this test.
Now in charge of the US Treasury, the entire world depends on his financial management skills, which appear to be those of a paper tiger. Druckenmiller criticised his attempts at bond yield suppression in an Op-Ed in yesterday’s Wall Street Journal. He is echoing our view, but we go further.
