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Be Afraid, Very Afraid

Bleak words from Seth Klarman in his annual letter to investors, which is making the rounds at Davos and spooking the global elite. Don’t know who Klarman is? He’s been called the next Warren Buffet, and like all great investors, he isn’t guided by ideology or fake news.

Why are the rich scared? Because a global recession is coming and nobody knows how severe it will be, or how governments will respond. But these people know everything there is to know about the flow of capital and they can sense when the music is about to stop. And it’s the political chaos that has people like Klarman alarmed: “it can’t be business as usual amid constant protests, riots, shutdowns and escalating social tensions.

That’s right, even billionaires are frightened by what is going on. That’s because their own greed is destroying democracy, the very system that protects their right to make money. History has shown what social unrest can do when people are desperate and it’s not pretty. But bankers and corporate CEOs are too aloof and they don’t believe they have to answer to anyone as long as they are making money. Klarman has a few words for them: “Does anyone really believe that shareholders are the only constituency that matters: not customers, not employees, not the community or the country or Planet Earth?” 

It’s easy to dismiss the gloom and doom as mere ravings, but you have to consider the source. The truth is, we have become too apathetic. We expect markets to keep going higher even when our president is trying to torpedo trade relations with China. But everything is about confidence and optimism, and when that starts to wither it’s probably time to rethink things.










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