Seth Klarman: Investors Downplaying Risk “Never Turns Out Well”Mark Melin
In his letter to investors, Seth Klarman noted that “most” investors are downplaying risk and this “never turns out well,” noting that most people are not prepared for anything bad to happen. “No one can know what the future holds, but any year in which the S&P 500 (INDEXSP:.INX) jumps 32% and the NASDAQ Composite (INDEXNASDAQ:.IXIC) 40% while corporate earnings barely increase should be cause for concern, not further exuberance,” Seth Klarman's investor letter said. “It might not look like it now, but markets don’t exist simply to enrich people."
Noting that stock markets have risk and are not guaranteed investments may seem like an obvious notation, but against today’s backdrop of never before witnessed manipulated markets Seth Klarman sagely notes “Someday, financial markets will again decline. Someday, rising stock and bond markets will no longer be government policy. Someday, QE will end and money won’t be free. Someday, corporate failure will be permitted. Someday, the economy will turn down again, and someday, somewhere, somehow, investors will lose money and once again come to favor capital preservation over speculation. Someday, interest rates will be higher, bond prices lower, and the prospective return from owning fixed-income instruments will again be roughly commensurate with the risk.”
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