by Michael McDonald
Yahoo! Finance
“Surreal doesn’t even begin to describe this moment,” Klarman said in a letter to investors reviewed by Bloomberg News. Investor “psychology is surprisingly ebullient even though business fundamentals are often dreadful,” he added.
The culprit is the Fed, Klarman said in the 16-page letter.
“Investors are being infantilized by the relentless Federal Reserve activity,” said Klarman, who runs hedge fund firm Baupost Group. “It’s as if the Fed considers them foolish children, unable to rationally set the prices of securities so it must intervene. When the market has a tantrum, the benevolent Fed has a soothing yet enabling response.”