When The Baupost Group’s Seth Klarman was reflecting on 2017 in his year-end review, a document first reported in January 2018; the stock market was racing to new highs. In that letter, Klarman asked numerous questions that today, as market volatility heads to a higher trading range and 300+ point plunges in the Dow Jones Industrial Average have become more commonplace, have additional meaning. His words foreshadowed things to come to various degrees.
The lead up to major market crashes, from the 2001 “Tech Wreck” to the 2008 global financial crisis to present all have commonalities, with one being average investors think they can outsmart the market.
In 2016 and...
