Another day, another dire warning about financial market complacency and asset valuations unmoored from reality.
“With so much stimulus being deployed, 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,” wrote renowned value investor Seth Klarman in a recent letter to clients of his hedge fund. “But as with frogs in water that is slowly being heated to a boil, investors are being conditioned not to recognise the danger.”
The metaphors are getting starker. Mr Klarman’s broadside, reported by the Financial Times, came shortly after Jeremy Grantham – another famed value investor – cautioned that market participants once again find themselves “waiting for the last dance and, eventually, for the music to stop”.