As the billionaire BeauPost founder told an audience at a Harvard Business School event on Monday morning, he doesn't see the value in cryptocurrencies yet.
But he's buying the hype around artificial intelligence, or at least the impact the technology could have on society. Claman said he was approaching it “with eyes wide open, with great humility, and with a sense that significant change is on the horizon,” according to a transcript of his remarks obtained by Business Insider. Baupost declined further comment.
But he believes the rapidly growing industry cannot be left alone. Klarman called on regulators and CEOs to “not let things spiral out of control.” Mass unemployment caused by advances in AI “will sink the economy,” he warned.
From an investment perspective, this means that, thanks to AI, he is evaluating every underpriced company for signs of irreversible obsolescence.
“Maybe it's inefficient pricing, but maybe it's worth doing. So we're just making sure that's the center of the conversation,” Klarman said.
On stage with Annabelle Ware, a former Beaupost analyst now in Harvard's MBA program, he told the audience that inefficiencies are now better found in the private market anyway. Told.
Opportunities in credit and real estate are emerging thanks to rising interest rates and the ripple effects of the pandemic. Klarman told the audience over the weekend about an opportunity his real estate team brought to the table for an empty warehouse to be sold for “a third” below list price.
“Real estate in general has been fruitful, not only in the purchase of buildings, but also in the purchase of debt-ridden real estate companies, particularly in Europe and Asia,” he said.
Still, the buying up by true value investors that Klarman and his ilk have been yearning for hasn't happened yet. From Klarman's perspective, this has to do with governments intervening in markets more than ever before.
Asked how his views on investing have changed since he wrote his best-selling book “Margin of Safety” more than 30 years ago, he said government intervention was at the top of his list.
“It's as if we've outlawed failure, or at least economic failure,” he says.
“That leads to a build-up of moral hazard. If no one thinks something could go wrong, they get bailed out, so they take a tremendous risk.”
He said the price of intervention is to “prevent really serious downsides from happening.”
“It helps that we're the world's reserve currency, that we only have debt in dollars, that we can create it almost unlimitedly, and that's where we'll be five to 10 years from now. It may or may not be in the future,” he said. .
“So we're in unprecedented territory. There could be some opportunities for investors, and maybe the dip is really a buying opportunity. But it's also, at the very least, a reflexive dip buying opportunity. It also raises the anxiety that there could be a future conditioned by… It's not going to be such a great idea.”
