Investors are like frogs in boiling water and Tesla’s rally is ‘beyond all reason,’ warns ‘the next Warren Buffett’
“ ‘As with frogs in water that are slowly being heated to a boil, investors are being conditioned not to recognize the danger.’ ”
That’s Seth Klarman, the billionaire investor behind the massive Baupost hedge fund, explaining in a recent letter cited by the Financial Times why the Fed and the Treasury have ramped up market risk. “Trying to figure out if the economy is in recession is like trying to assess if you had a fever after you just took a large dose of aspirin,” Klarman, who has been dubbed “the next Warren Buffett,” said.
He warned that low interest rates and a steady flow of government stimulus have created an environment in which investors are playing the market as if the risks have “simply vanished.”
That behavior can be seen perhaps most glaringly in Tesla TSLA,
Even as many hedge funds enjoyed spectacular returns in 2020, Klarman, who founded Baupost nearly four decades ago and rode years of outperformance to turn it into the $30-billion giant it is today, lagged the broader stock market, according to the Financial Times.
Meanwhile, stocks just continue to bang out record highs, with the Dow Jones Industrial Average DJIA,
