Seth Klarman, the legendary head of the Baupost Group says investors are underplaying risk and not prepared for the end of the QE experiments

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Seth Klarman, the legendary head of the Baupost Group says investors are underplaying risk and not prepared for the end of the QE experiments. Any year in which the S&P500 jumps 32% and the Nasdaq 40% while corporate earnings barely increase should be a cause for concern, not further exuberance. On almost any metric, the US equity market is expensive. A sceptic would have to be blind not to see bubbles inflating in junk-bond issuance, credit quality, and yields, not to mention the nosebleed stockmarket valuations of fashionable companies like Netflix and Tesla Motors. On the likely outcome Klarman says: When the markets reverse, everything investors thought they knew will be turned upside down and inside out. 'Buy the dips' will be replaced with 'what was I thinking?' . . .  Anyone who is poorly positioned and ill-prepared will find there's a long way to fall. Few, if any, will escape unscathed.


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