The global investor community took note on Tuesday when hedge fund manager Seth Klarman had issued a stern warning indicating that rising global debt and tensions could potentially spur the next global financial crisis.
As reported by CNBC, the warning in Klarman's annual letter to investors (whose co-presenter of CNBC's "Squawk Box", Andrew Ross Sorkin, was reported in the New York Times) caused a sensation at the World Economic Forum in Davos, Switzerland.
Stephen Schwarzman, CEO of Blackstone, told CNBC that Klarman was right to say that global tensions were creating heightened uncertainty in the markets, while Bridgewater Associates' hedge fund manager Ray Dalio was also of that view, saying to CNBC that "the implications of the political conflict in the markets are very deep". . "
So who exactly is Klarman, a relatively unknown figure in the mainstream but considered one of the smartest financiers in the world? As the New York Times once said: "He is the most powerful and influential investor you have probably never heard of."
Klarman, 61, who co-founded the Baupost Group, a Boston-based hedge fund, where he manages an asset worth about $ 32 billion, is known for his "sober and meticulous analysis," according to the Times. He was nicknamed "the next Warren Buffett" because of the similarity of the two men's investment styles and his strong track record. It is even sometimes called "The Boston Oracle", in reference to the famous nickname Buffett.
Just like Buffett, Klarman (who represents $ 1.5 billion according to Forbes) is a value investor, which means that his investment philosophy is to invest money in stocks that are good for him. 39, it considers it undervalued by the rest of the market. In 2015, Klarman wrote a list of the main lessons he learned from following Warren Buffett's career, and he placed the following tip: "buy deals" at the top of the list.
Klarman and Buffett are also known for their risk aversion, as they both fear to borrow money for investments (avoid going into debt if an investment goes south).
Also like Buffett – who bought his first title at age 11 – Klarman has been perfecting his investment techniques since a young age. Klarman bought shares for the first time in his history when he was only 10 years old, he told his alma mater, Harvard Business School, during an interview in 2010.
"I bought a Johnson & Johnson share with birthday money and it was divided by three the next day," Klarman said in the interview. He chose the giant of pharmaceuticals and consumer goods because he used a lot of Band-Aids in his childhood. (According to Tuesday's closing price, a Johnson & Johnson stock share currently costs $ 128.80.)
As a child, Klarman was so enthusiastic about investing in his investment that he even introduced his fifth grade students to his course on buying titles. He had his own stock broker to provide him with the daily price of the shares.
"I've been the owner of stock throughout my childhood.My mother found a stock broker – Max Silverman, a gentleman gentleman who was not afraid of a 10- [to] The 12-year-old calling him for quotes, "said Klarman at Harvard Business School.
"As a child, I was focused on business," adds Klarman in the interview.
Klarman then studied economics at Cornell University before obtaining his MBA from Harvard Business School, where he was a classmate of JPMorgan Chase's future president, Jamie Dimon, in 1982.
After graduating from business school in 1982, Klarman joined his professor, William Poorvu, at Harvard, and three other investors co-founded the Baupost group.
The hedge fund started with an initial capital of $ 27 million (largely provided by Poorvu), which Klarman helped manage despite his relative lack of experience as a recent graduate. But Klarman's solid and consistent results with investments have brought a lot of money back to the group's clients and to himself in the coming decades.
Klarman has been making favorable comparisons with Buffett since at least 1989. That year, Fortune magazine included Klarman in the profile of a handful of young fund managers (Klarman was then 32) and could follow in his footsteps as one of the largest in the world. investors. This article boasted the investment record of young Klarman after improving his portfolio by an average of 20% in 1987.
In 1991, Klarman wrote "Marge of Safety: Investing Strategies for the Savvy Investor", which, exhausted today, sells online for exorbitant amounts and is considered a must-have in Wall. Street.
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Klarman is now president and chief executive officer of Baupost, and the group has been able to bring tens of billions of dollars in profits to its clients, "which include the endowments of Harvard and Yale and some of the most rich of the world "Times.
Now, Klarman has sounded the alarm to the global investor community, thanks to his annual letter to investors.
"These can not continue as if nothing has happened in the face of constant protests, riots, closures and escalating social tensions," writes Klarman in the letter, reports CNBC, which also warned that the growing level of debt contracted by major countries (including the United States) could be planting "the seeds of the next major financial crisis."
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