Billionaire investor Seth Klarman lambasts the Fed for distorting markets – and says Tesla’s stock has surged ‘seemingly beyond all reason’



Seth Klarman
Seth Klarman, president and CEO of the The Baupost Group

Billionaire investor Seth Klarman warns stimulus and interest prices are hiding marketplace risks.The Baupost chief when shareholders to”frogs in water that is slowly being heated to a boil. “Klarman added that Tesla inventory has jumped”seemingly beyond all reason.” Visit Business Insider’s homepage for more tales .

A billionaire investor hailed as”the next Warren Buffett” blasted the Federal Reserve and Treasury at a private letter that week, accusing the duo of disrupting the stock exchange and putting investors at risk.

Seth Klarman told customers of the Baupost hedge fund which investors are acting as if risks have”simply vanished” due to rock-bottom interest rates and wave after wave of government stimulus, that the Financial Times reported.

Federal interventions to buttress growth and decrease unemployment have also made it tricky to appraise the financial health of the nation, Klarman said.

“Trying to figure out if the economy is in recession is like trying to assess if you had a fever after you just took a large dose of aspirin,” he explained, according to the Financial Times.

“But as with frogs in water that is slowly being heated to a boil, investors are being conditioned not to recognize the danger,” he added.

Read : ‘I have seen this movie before’: Legendary investor Jim Rogers unloads about the bubbles that he says are forming across markets, particularly in big tech stocks and bitcoin – and stocks 4 alternatives he’d buy for his child over the next decade

Klarman emphasized Tesla as an instance of how heady markets have become. Elon Musk’s electric-vehicle company has seen its stocks skyrocket over 850% since the start of last year, and currently commands a market capitalization north of $800 million.

The”barely profitable” automaker’s stock has jumped”seemingly beyond all reason,” Klarman said.

Warren Buffett himself has tapped the Baupost manager because of his spiritual successor. When a school student asked the Berkshire Hathaway CEO in 1992 who could be the following Buffett, he swiftly replied”Seth Klarman,” in line with this professor teaching the class.

Klarman and his staff are more adventuresome than Buffett in recent months. Baupost’s latest portfolio upgrade showed a 400 million stake in Bill Ackman’s special-purpose buy vehicle, Pershing Square Tontine, in addition to a 52 million standing at Redball Acquisition Corp, a second SPAC that’s co-chaired by”Moneyball” celebrity Billy Beane.

On the other hand, Baupost slashed its stakes in Google-parent Alphabet and Facebook at the second and third quarters of 2020, following setting those positions in the initial quarter. Those moves imply Klarman is worried those technology stocks are outpacing their prospects.

Read : Bank of America says to buy these 16 semiconductor stocks since the US sector is poised to jumpstart its own growth rate of the past 3 years

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