Seth
Klarman is an American billionaire who founded the Baupost Group, a
Boston-based private investment partnership, and the author of Margin of
Safety: Risk-Averse Value Investing Strategies for the Thoughtful
Investor a book on value investing.
From Seth Klarman of Baupost:
Is
it possible that the average citizen understands our country's fiscal
situation better than many of our politicians or prominent economists?
Most
people seem to viscerally recognize that the absence of an immediate
crisis does not mean we will not eventually face one. They are wary of
believing promises by those who failed to predict previous crises in
housing and in highly leveraged financial institutions.
They
regard with skepticism those who don't accept that we have a debt
problem, or insist that inflation will remain under control. (Indeed,
they know inflation is not well under control, for they know how far the
purchasing power of a dollar has dropped when they go to the
supermarket or service station.)
They are pretty sure they are not getting reasonable value from the taxes they pay.
When
an economist tells them that growing the nation's debt over the past 12
years from $6 trillion to $16 trillion is not a problem, and that
doubling it again will still not be a problem, this simply does not
compute. They know the trajectory we are on.
When politicians
claim that this tax increase or that spending cut will generate
trillions over the next decade, they are properly skeptical over whether
anyone can truly know what will happen next year, let alone a decade or
more from now.
They are wary of grand bargains that kick in
years down the road, knowing that the failure to make hard decisions is
how we got into today's mess. They remember that one of the basic
principles of economics is scarcity, which is a powerful force in their
own lives.
They know that a society's wealth is not unlimited,
and that if the economy is so fragile that the government cannot allow
failure, then we are indeed close to collapse. For if you must rescue
everything, then ultimately you will be able to rescue nothing.
They
also know that the only reason paper money, backed not by anything
tangible but only a promise, has any value at all is because it is
scarce. With all the printing, the credibility of our entire trust-based
monetary system will be increasingly called into question.
And
when you tell the populace that we can all enjoy a free lunch of
extremely low interest rates, massive Fed purchases of mounting treasury
issuance, trillions of dollars of expansion in the Fed's balance sheet,
and huge deficits far into the future, they are highly skeptical not
because they know precisely what will happen but because they are sure
that no one else--even, or perhaps especially, the policymakers—does
either.
Friday, May 3, 2013
Seth Klarman: "We Are Close To Collapse"
Stocks Jubilant Following Jobs Report
I didn't think this jobs report was worthy of this kind of joy. We got 165,000 jobs, about 20,000 more than expected. That's the good part. But the jobs were produced in low-wage sectors like leisure, hospitality, temp work, and retail. That's hardly something to celebrate.
But don't try telling that to Wall St. They're too drunk on the Fed-fueled stock market bubble to notice reality!
But don't try telling that to Wall St. They're too drunk on the Fed-fueled stock market bubble to notice reality!
Thursday, May 2, 2013
Nat Gas Crash
from Bloomberg:
"Natural gas futures dropped the most in almost nine months after a government report showed that U.S. stockpiles expanded by more than forecast."
"Natural gas futures dropped the most in almost nine months after a government report showed that U.S. stockpiles expanded by more than forecast."
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