Seth Klarman, Baupost Group Owner. Courtesy of Wikimedia Commons.

A private letter written two weeks by Seth A. Klarman to his Baupost Group investors has become one of the most popular reading items on Wall Street in recent memory.

This is not that big of a surprise considering that Klarman, called by The Economist magazine as “The Oracle of Boston,” is most likely the most successful and influential investor that you probably never heard of.

Well known in Wall Street circles, Klarman tends to keep a low profile outside the rarefied environment of finance. One of the few hedge fund managers to earn the praise of Warren Buffet, Klarman declared in his letter the need to come down from the unreasonably high expectations President Donald Trump’s promises has buoyed the investment community with.

Describing the stock market’s response to the election of Trump as a collection of “perilously high valuations.”

“Exuberant investors have focused on the potential benefits of stimulative tax cuts, while mostly ignoring the risks from America-first protectionism and the erection of new trade barriers,” he wrote.

“President Trump may be able to temporarily hold off the sweep of automation and globalization by cajoling companies to keep jobs at home, but bolstering inefficient and uncompetitive enterprises is likely to only temporarily stave off market forces,” he continued. “While they might be popular, the reason the U.S. long ago abandoned protectionist trade policies is because they not only don’t work, they actually leave society worse off.”

Specifically, Klarman fears that investors have become blinded by all the Trump pro-growth policies without giving much thought to the full consequences of such policies. Klarman is nervous about Trump’s stimulus activities actually proving to be “quite inflationary, which would shock investors.”

He is also worried about the expanding national debt that Klarman thinks will undermine long term growth of the economy.

“The Trump tax cuts could drive government deficits considerably higher,” Mr. Klarman wrote. “The large 2001 Bush tax cuts, for example, fueled income inequality while triggering huge federal budget deficits. Rising interest rates alone would balloon the federal deficit, because interest payments on the massive outstanding government debt would skyrocket from today’s artificially low levels.”