Seth Klarman, “Warren Buffet of Boston”, Issues a Dire Warning for US Rates

via MarketWatch:

When the leader of one of the biggest economies in the world gathers his chiefs for an economic pep talk, the rest of the world best listen up.

At the top of the radar for investors returning to the action Tuesday, was a hush-hush meeting between Chinese President Xi Jinping and his Communist Party leaders, who were warned to watch out for unpredictable “black swan” events and “gray rhino” (obvious, yet ignored) occurrences that could hurt the economy and shake up social stability.

Xi met those leaders on the heels of the 2018 growth numbers, the worst since 1990, inspiring POTUS to tweet that China should “do a Real Deal and stop playing around.” He means, of course, a trade deal, which looks no closer than an agreement to end the longest partial government shutdown in history. (Read on in the buzz).

And there’s plenty of gloomy talk coming from the World Economic Forum in the tony Alps town of Davos, where Bridgewater Associates’ Ray Dalio said the thought of the next economic downturn is what’s keeping him up at night, given there will be limited monetary tools to fight it off.

That brings us to our call of the day, from Seth Klarman, who heads up the Baupost Group, one of the biggest hedge funds in the world. He’s apparently not at Davos, but his downbeat annual investment letter warning of several big risks being ignored by investors, has been haunting those halls. That’s according to the New York Times, which saw a copy.

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“Social frictions remain a challenge for democracies around the world, and we wonder when investors might take more notice of this,” Klarman reportedly said, as he expressed disbelief that investors could keep shrugging off POTUS’s tweets and a more isolated U.S. that leaves “global leadership up for grabs.”

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Klarman, sometimes referred to as the Oracle of Boston because his list of admirers includes Berkshire Hathaway’s BRK.B, -0.86% BRK.A, -0.78%  Warren Buffett, also warned about fallout from mounting debt being absorbed by developed countries since the 2008 financial crisis.

The U.S., in particular, could reach an “inflection point,” when a skeptical global debt market will no longer lend at reasonable rates, and by the time the crisis comes it will be “too late to get our house in order. “Complacent” investors have been not only ignoring those risks, but taking on even more risk, he says, indicating he too is struggling to figure out where to invest right now.

Want ideas? In case you missed it, Barron’s Roundtable 2019 is offering up 48 investment ideas from Doubleline’s Jeffrey Gundlach on gold funds to global bargains from Goldman’s Abby Joseph Cohen.

 

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