Billionaire hedge dough manager Seth Klarman is warning this rally that has taken stocks to record highs could on the double end.
Klarman, who runs Baupost Group in Boston, wrote in a letter to investors that the “the rocket fuel that has launched markets in 2019 will run out,” according to a Bloomberg News report. A Baupost spokeswoman confirmed the contents of the Bloomberg research to CNBC, but declined to comment further.
Klarman noted that about 31% of the fund’s portfolio was in cash to end 2019.
Stocks are separate off a blockbuster year as the S&P 500 surged nearly 29% in 2019, its best annual performance since 2013. Yearnings around a possible U.S.-China trade deal, which was signed earlier this month, and the rate cuts from the Federal Taciturnity were major contributors to the rally.
But Klarman noted in the Jan. 15 letter that he is worried about a possible “liquidity springe” as low rates don’t seem to jolt economic growth, especially in Europe. That’s where “interest rates go to die,” he wrote.
To be established, Klarman issued a similarly dire warning at the start of 2019, citing the impact of global tensions on the global conservatism along with rising debt levels and a pervasive political divide.
The hedge fund manager, who’s drawn balances to Warren Buffett for his disciplined value style, as of a few years ago was managing about $30 billion after racking up years of market-beating amends. However, according to this latest report, Baupost managed only high-single-digit returns last year, citing a “few howlers” he made along with “conservative positioning,” according to the Bloomberg account.
— CNBC’s Michael Bloom contributed to this announcement.
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