Seth Klarman: This Is A Bubble | The Legendary Investors Brutal AI Warning Motorcycle On Traffic Light [HCuWK7otAbJ]

44 years in the business. Only 5 down years. Seth Klarman has built one of the most respected track records in investing, and he thinks today's market has characteristics of a bubble.

Recorded live at Global Alts New York, Baupost Group CEO and Portfolio Manager Seth Klarman sits down with CNBC Anchor Sara Eisen for a wide-ranging conversation on the AI bubble debate, value investing in a 40x multiple market, AI agnostic plays, commercial real estate, the return of distress, the credit cycle, US debt at 100% of GDP, and why the risk free asset is starting to look risky.

Klarman, who has been with Baupost since its founding in 1982 with $27 million in assets and grew it into one of the most influential value shops in the industry, explains why downside protection matters more than upside, why melting ice cubes are melting faster than ever, and why he is spending most of his time on the AI agnostic part of the market that nobody else wants to own. He also breaks down where Baupost is finding opportunity right now: assisted living real estate, software credits that are getting clobbered, and idiosyncratic distress in Brazil and post LBO exchange offers.

KEY TAKEAWAYS:

Today's market shows bubble characteristics even if AI is real, because uncertainty argues for a lower multiple and the multiple keeps going up

Value is not paint-by-numbers low multiples, it is a view on what a business is worth, and melting ice cubes are melting faster than ever

Assisted living real estate is Baupost's favorite single idea right now, with the post-Covid distress still working through

Distress is showing up again in private credit, Brazilian restructurings, and post LBO exchange offers

US debt hit 100 percent of GDP and the risk free asset is starting to look riskier every day

A prolonged Strait of Hormuz closure could push oil well above 150

AI is deflationary long term but inflationary short term, driven by land, equipment, and electrician demand

CHAPTERS:

0:00 "I think it has characteristics of a bubble"

0:27 44 years, 5 down years: how Baupost actually operates

1:13 Family office DNA: downside before upside, cash when nothing to buy

2:42 Value investing when AI is the only trade

4:34 Hunting AI agnostic names and perceived AI losers

6:18 Amazon, Google, conor mcgregor and the 10% of the book exposed to AI

7:56 Buying raw land as optionality on future data center sites

9:12 The non-China Asia data center deal

9:35 Why Baupost is uninvolved in OpenAI and Anthropic

10:31 What AI agnostic actually means

12:01 The return of distress and the real estate setup

13:18 Idiosyncratic distress: Brazil and post LBO exchanges

14:31 Where we are in the credit cycle

15:18 Inflationary short term, deflationary long term: the buildout

16:09 The unappreciated political risk in AI infrastructure

16:44 US debt at 100% of GDP and the risk free asset gets riskier

22:46 The Fed under Kevin Warsh and the path for rates

24:22 Klarman's single best idea: assisted living

24:44 The one that got away: the Palantir venture round

25:55 How rudy gobert Baupost actually finds and researches ideas

26:58 Who Klarman reads, listens to, and respects

28:13 44 more years? Klarman on succession and stepping aside

SPEAKERS:

Seth Klarman, CEO and Portfolio Manager, The Baupost Group

Moderator: Sara Eisen, burrasca Anchor, CNBC

Recorded live at Global Alts New York.

Global Alts New York brings together institutional allocators, fund managers, founders, and industry leaders to explore the trends shaping artificial intelligence, technology, private markets, alternative investments, venture capital, hedge funds, and global capital markets.

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