Seth Klarman

The text below is from Art Cashin’s latest note. Art Cashin is  UBS Financial Services Director of Floor Operations. According to  of Business Insider, Art Cashin is “is always on top of what the NYSE traders are buzzing about.” Cashin says that Seth Klarman’s Q4 letter (we have notes on it here and here.) is causing a lot of buzz and fright on the trading floor. Seth Klarman is overall bearish.  He belives that Ben Bernanke’s policies are causing stock markets to artificially rise. Klarman notes that Ben Bernanke and Mario Draghi, impacted himself and other investors “profoundly” in 2012. Additionally, Klarman believes the policies of both central bankers  cause investors to believe that the current equity market belief that the rally will continue.

Cashin also says that recent comments from Howard Marks are causing further concern on the trading floor.

(NOTE: please do not contact anyone from our staff asking for information on Seth Klarman.)

Cautionary Comments From Investing Icons – Near legendary investor, Seth Klarman caused a good deal of buzz yesterday. I could not locate his letter in full but here is a note from “Seeking Alpha” that traders kept handing about yesterday:

Investing today may well be harder than it has been at any time in our three decades of existence,” writes Seth Klarman in his year-end letter. The Fed’s “relentless interventions and manipulations” have left few purchase targets for Baupost, he laments. “(The) underpinnings of our economy and financial system are so precarious that the un-abating risks of collapse dwarf all other factors.

As noted, Klarman has reached near legendary status among some of the Wall Street community. He wrote a book some time back and now copies of that limited edition are said to trade for thousands of dollars apiece. We’ll try to get more on his letter and views.
Another icon causing a lot of buzz was Howard Marks of Oaktree Capital. Warren Buffet once said something like – Whatever Howard Marks writes, I try to read.
Marks gave an interview which you can access at Here’s a typical part:
The level of economic activity, anecdotal as you describe, is not an indication of health in the future. It is an indication of health in the present. The question is, what are the implications for the future? When you say restaurants are full and you can’t get a cab, there is no contravening the fact that the economy is doing well at the top. The problem is the people who are not in the upper strata; their incomes are flat to down, they are losing their overtime. The joblessness rate is up significantly and that excludes people who aren’t seeking jobs and are unemployed — their future is not good. The ratio of income from the top to bottom is higher than in the past, which itself is unhealthy.
In fact, restaurants were full in 2006 and early 2007 as well. So, don’t get carried away. The point the memo tried to make is that the world went through a period that is now about roughly 50 years old in which it levered up very substantially. Credit was available too freely, used aggressively, and people borrowed money to make expenditures. If you borrow money to take a vacation, a year later the vacation is over but you still have the debt. That is the status of the world today. The world borrowed a lot of money for expenditures, some of which were imprudent and today it is left with a hangover of debt and the current income, especially at today’s moderate levels, aren’t sufficient to amortise the debt. That is very worrisome and that is just one of the main things. You look all around the world and over-leveraging is the common thread.
Look at the average American. I have been telling my friends in Europe for several years that the average American has $1,000 in the bank, owes $10,000 on their credit card, makes $20,000 a year after taxes — by the way, I am exaggerating, these are not specific data but conceptual — and spends $22,000. That is not healthy.