Seth_Klarman_Views_(24_pgs) June 2013

I’ve been meaning to read this for a while – I can’t remember where I came across this or who I owe credit to for originally posting this but thank you.  This is probably the best piece I’ve read all summer, maybe all year.

For this blog post I originally started jotting down excerpts from this speech that resonated with me.  I quickly realized that I was writing down everything – literally re-transcribing the entire speech.  I would have copied and pasted the whole thing for you, dear reader, but this appears to be a scanned copy of a printed document.

Anyway, give it a read – don’t be daunted by the 24 pages, it’s actually a very quick read and it is well worth your time.


It’s amazing the things a low interest rate environment will make you do… including lend money to Italy and Spain for ten years at ~4%.

WSJ: European Bonds Are Defying Gravity


The bond markets and the economies of Europe’s struggling countries tell two very different stories this year: One is rallying; the other, sinking.

Bulls say the ECB’s intervention has significantly reduced the risk that Italy or Spain could default on its debts. Nick Gartside, international chief investment officer for fixed income at J.P. Morgan Asset Management, says the ECB’s pledges “provide a sort of cloak of certainty and a very important foundation.”

Others are less sanguine. “The markets are overestimating the capacity of the European Central Bank to intervene in case of need,” said Roberto Perotti, an economist at Bocconi University in Milan. He argues that Italy is essentially too big to save, even by the ECB, if it ran seriously aground.

And Italy’s weak economy raises its risk: Without economic growth, it is difficult to contain Italy’s huge public debt—the second-largest as a proportion of GDP in the euro zone, after Greece.