I’ve got to be honest: I’m not so thrilled about most of Trump’s cabinet picks.

The neocons like Rubio and Stefanik signal an aggressive foreign policy. Allegations of impropriety and lack of organizational skills have hounded Hegseth. Really, only Tulsi as DNI and RFK, Jr. at Health and Human Services have lit me up.

This made me especially curious about who DJT would pick for Treasury.

Trump has nominated Scott Bessent as the next Treasury Secretary. Bessent is a macro hedge fund manager who learned his craft under some of the biggest names in the business.

This makes me happy about the pick. Let me explain why.

First Things First

Let’s answer some critical questions before we get to Bessent’s biography.

What’s a hedge fund manager?

A hedge fund manager or “hedgie” is on the “buy side” of the financial ecosystem. (The “sell side” comprises banks and brokers.) They take in assets and buy stuff with them, such as stocks, bonds, currencies, and crypto. Unlike mutual fund managers, hedge fund managers can go short (bet against stocks) and borrow money to raise capital (leverage).

There were only about 60 hedge fund managers in the 1980s, which is why they were the “Masters of the Universe.” Now, about 10,000 of them compete against each other, which is why they have much more difficulty achieving alpha (the active return over the benchmark) and use much less leverage.

What does “macro” mean in this context?

Macro means “big,” as in macroeconomics. Macro hedge funds are a type of hedge fund that looks at the entire economy and makes bets using stocks, bonds, currencies, crypto, and derivatives like futures, options, and swaps.

The people who work at these funds - the good ones, anyway - are distinguished by their outstanding macroeconomic knowledge.

Why does a hedge fund’s quartile matter?

Like everything else, only the top 20%—25% of anything is good. This goes especially for hedge fund managers and their cousins, private equity general partners. About 10% of hedge funds fail annually, and only the top 25% of funds make a return to boast about.

But Bessant didn’t merely work in the top quartile of funds. He worked in the top percentile, as you’ll see below.

Obligatory Biography

Scott Bessent, the eldest of three children, was born in Conway, South Carolina, in 1962. He attended Yale University and earned a bachelor's degree in political science in 1984. PoliSci is a cupcake major, I grant you. I know this because it was my minor, which I used to pump up my GPA.

While at Yale, Bessent was active socially, serving as an editor for The Yale Daily News, president of the Wolf's Head Society, and treasurer for his graduating class. 

Bessent's foray into the financial world began with an internship under Jim Rogers, co-founder of the Quantum Fund (George Soros was the other co-founder).

This experience paved the way for roles at esteemed institutions such as Brown Brothers Harriman and Kynikos Associates under noted shortseller Jim Chanos.

In 1991, he joined Soros Fund Management (yes, that Soros, who was the greatest trader ever before he went nuts on Open Society), where he played an important role in the firm's London operations. Bessant was involved in the 1992 "Black Wednesday" event, which made them a billion dollars from betting against the British pound and broke the Bank of England in the process.

Clearly, Bessant worked for the best in the business. I imagine this gives him insights many others, like Janet Yellen, wouldn’t have. 

After a decade with Soros, Bessent ventured into academia. He was an adjunct professor of economic history at Yale from 2006 to 2011. He later founded Key Square Group, his own global macro firm.

Political Alignment and Support for Trump

Initially a supporter of Democratic causes, including Al Gore's presidential campaign, Bessent's political stance evolved. He became an ardent Trump supporter, contributing to Trump's 2024 campaign and serving as a key economic advisor.

Bessent's advocacy for deficit reduction, deregulation, and fiscal conservatism must be lauded. But when his new boss opens up the fiscal spigot, and he will, Bessent will have his hands full. Hopefully, he can convince The Donald not to be so lavish.

Nomination as Treasury Secretary

Nominating Bessent is a strategic move to appoint a Treasury Secretary with deep financial expertise and a commitment to fiscal conservatism.

Bessent's experience in global markets and his advocacy for policies such as extending the Tax Cuts and Jobs Act of 2017 and spending cuts to address the national debt resonate with Trump's ideology, if not his immediate economic agenda.

If confirmed by the Senate, Bessent will become the first openly gay Treasury Secretary. Pete Buttigieg, the outgoing Secretary of Transportation, is the first openly gay Cabinet Secretary.

Wrap Up

Scott Bessent's nomination underscores Trump's intent to steer U.S. economic policy again towards deregulation, leveraging Bessent's extensive financial insight and alignment with the administration's fiscal objectives.

Let’s hope Bessent can appeal to Trump’s frugal fiscal better angel. If not, the deficit will explode, and the national debt will be uncontrollable.

Have a lovely short week ahead!