Seth Klarman: "The World Is Not Ending"

This story contains the following:

Seth Klarman, a top-performing value investor and head of The Baupost Group LLC, told clients in an Oct. 10 letter that the economic downturn could be "vicious and protracted."

"The financial market collapse and bailout makes us sick," he wrote. "There is likely more carnage to come."

The U.S. dollar will likely weaken and its reign as the world's reserve currency could end, Klarman predicted. Longer-term, U.S. interest rates may rise as foreigners have to be enticed more to invest in dollar-denominated assets, he added.

The recent Treasury Department bailout has yet to be paid for and should add to inflationary pressures over time, especially when the economy begins to recover, he said.

Baupost has built a "sizable position" in low-cost inflation protection for the next three to five years, he noted.

And this further down:

Baupost's Klarman has been buying corporate debt offering yields of as much as 30%. The firm is also seeing some opportunities to invest in real estate, through the debt of distressed companies, he added.

"The seeds of recovery and eventually of substantial profit are sown amidst the carnage," he wrote. "The world is not ending."

Comments

[Anon]

What do you think the low-cost inflation hedge is?

[Dennis]

Low cost inflation hedge? My question exactly. Short 30 year Treasury futures?

[John]

He doesn't disclose. I'll make that the next post. Stay tuned.

[Ethan Bloch]

As so many people are saying, when governments all over the world print crap tons of money, you've gotta be stupid not to expect a period of inflation --or-- as Jim Rogers stated "an inflationary holocaust".