Legendary value investor Seth Klarman would like to inform you that he will not be taken in by the market’s recent short-term rallies. As you know, he only invests on fundamentals.
The rest of Wall Street, on the other hand, is welcome to run willy-nilly following the market’s volatile ups and down if they like.
But they can’t say he didn’t warn them.
According to a letter, which is available on Zero Hedge, Klarman said he was willing to miss major rallies that could be attibutable to non-fundamental metrics, such as money flows or government intervention. He argued that the risks in playing in this type of market was worth the rewards.
Klarman goes on to say that the good news that sends the market up for a few days (if we’re lucky) is grounded on fleeting phenomena which quickly ends at even the hint of bad data from Europe or changing government policies. The country and the economy, however, have changed little.
In his letter, Klarman suggested that the government was essentially encouraging speculation in the markets, creating conditions suitable for short-term traders.
So, if you like to ride the short-term wave, feel free to ignore this public service announcement. If you’re in it for the long haul, though, consider this practical information for your every day life.