OK, that has to be one of the most misleading post titles ever but I couldn’t resist. Seth Klarman recently held the first-ever Baupost Group annual meeting after two-plus decades of existence. At the meeting, Klarman shared his views on the markets, housing, investment strategies and more.
For those who may need an introduction to Seth Klarman, he is the ultra-secretive founder of the Baupost Group, a hedge fund with stellar returns since starting up in the mid-80’s and enigmatic author of Margin of Safety, a long out-of-print book about the philosophy of value investing.
Apparently, Klarman regretted publishing the book for fear of creating more competitors, letting it go out of print (imagine an author who doesn’t want to sell copies of his book). The book has auctioned for over $1,000 on eBay.
This secrecy has extended to notes coming out of the annual meeting. An unknown author published notes from the meeting on a few blogs but has since requested these notes be removed. Unfortunately for Klarman and the author, the Internet never forgets. While I was out of town when the posts hit the ‘net, a few minutes with our friend, Google, yielded the meeting notes.
Klarman seems to be in sync with much of my recent market outlook commentaries. He doesn’t think stocks are cheap and sees major risks lurking in the markets despite (because of) the recent rally. Baupost currently holds ~30% cash.
This gells with my view that stocks and bonds are no longer cheap at this point, making it hard to find places to put cash to work with an adequate margin of safety. While our ~50% cash hoard exposes us to dollar devaluation risk, events like a dollar collapse take time to play out and rarely occur in a linear fashion so we should be able to deploy capital at some point.
In the next few days, Klarman and other pro money managers will be filing their 13F-HR filings, allowing us a peek into their stock portfolios. In the meantime, Klarman paints a very dangerous and risky current environment for investors, which clashes with the current market sentiment. Investors must recognize that “happy” times are the essential times to keep your guard up and watch for risk. Once the market crashes, it is too late to worry about risk.
Davy Bui
http://enlightened-american.com/
For those who may need an introduction to Seth Klarman, he is the ultra-secretive founder of the Baupost Group, a hedge fund with stellar returns since starting up in the mid-80’s and enigmatic author of Margin of Safety, a long out-of-print book about the philosophy of value investing.
Apparently, Klarman regretted publishing the book for fear of creating more competitors, letting it go out of print (imagine an author who doesn’t want to sell copies of his book). The book has auctioned for over $1,000 on eBay.
This secrecy has extended to notes coming out of the annual meeting. An unknown author published notes from the meeting on a few blogs but has since requested these notes be removed. Unfortunately for Klarman and the author, the Internet never forgets. While I was out of town when the posts hit the ‘net, a few minutes with our friend, Google, yielded the meeting notes.
Klarman seems to be in sync with much of my recent market outlook commentaries. He doesn’t think stocks are cheap and sees major risks lurking in the markets despite (because of) the recent rally. Baupost currently holds ~30% cash.
This gells with my view that stocks and bonds are no longer cheap at this point, making it hard to find places to put cash to work with an adequate margin of safety. While our ~50% cash hoard exposes us to dollar devaluation risk, events like a dollar collapse take time to play out and rarely occur in a linear fashion so we should be able to deploy capital at some point.
In the next few days, Klarman and other pro money managers will be filing their 13F-HR filings, allowing us a peek into their stock portfolios. In the meantime, Klarman paints a very dangerous and risky current environment for investors, which clashes with the current market sentiment. Investors must recognize that “happy” times are the essential times to keep your guard up and watch for risk. Once the market crashes, it is too late to worry about risk.
Davy Bui
http://enlightened-american.com/
