In January 2014, the U.S. stock market benchmark S&P 500 lost 3.36% after an excellent 2013. The enthusiasm went back as the market gained 4.31% over February. In March, it went up only 0.69%. The market benchmark S&P 500 closed at 1890.90 on April 2, 2014, which is the new record high. What is the situation in the other parts of the world? In March, the key indexes in Europe returned negative. Germany’s DAX index declined 1.40%. France’s CAC-40 index lost 0.38%. The FTSE 100 index was down 3.10%. Stock market performances in Asia were weak too. Japan’s NIKKEI 225 moderately decreased 0.09%. Hong Kong’s Hang Seng Index was down 3.00% and China’s SSE Composite index was down 1.12% due to the weaker-than-expected Chinese economic data.
Seth Klarman has returned $4 billion to clients at 2013 year-end due to lack of ideas and has 40% of the portfolio in cash. In his 2013 letter to investors, he mentioned the Continuing Problems in Europe, “Europe isn’t fixed either, but you wouldn’t be able to tell that from investor sentiment. One sell-side analyst recently declared that ‘the recovery is here,’ a sharp reversal from his view in July 2012 that Greece had a 90% chance of leaving the Euro by the end of 2013. Greek government bond prices have nearly quintupled in price from the mid-2012 lows. Yet, despite six years of painful structural adjustments, Greece’s government debt-to-GDP ratio currently stands at 157%, up from 105% in 2008. Germany’s own government debt-to-GDP ratio stands at 81%, up from 65% in 2008. That doesn’t look fixed to us. The EU credit rating was recently reduced by S&P. European unemployment remains stubbornly above 12%. Not fixed. Continue Reading »