Gen Re’s Gilbert Says Fed Sets Up Stocks for a Decline – Bloomberg 12-03-13

Salient to Investors:

John Gilbert  at General Re-New England Asset Mgmt, a unit of Berkshire Hathaway, said:

  • Fed policy has lifted stocks but has created systemic risk in the world financial system for which they take little responsibility, because what happens outside the US is not their assignment. A slowdown in Asia contributed to Russia’s default in 1998 and triggered the Long Term Capital Management meltdown, which in turn disrupted stock markets.
  • Twitter is an example of euphoria as it is valued at over $20 billion without having reported a profit and gravity wins in time. (The average estimate of Twitter underwriters Goldman Sachs, Deutsche Bank, JPMorgan Chase and Bank of America predicts Twitter will trade around $43 a year from now. )
  • Low interest rates have led companies in emerging-markets to borrow in dollars – leverage at Asia ex-Japan corporations is at the highest level since the late 1990s financial crisis there. Weakening currencies in Russia, Brazil and other nations this year may be a sign of trouble ahead.

Laurence D. Fink at BlackRock said in November that the Fed’s bond-buying program could be creating a bubble. David Einhorn said the Fed stimulus is like eating too many jelly doughnuts.

Read the full article at http://www.bloomberg.com/news/2013-12-03/gen-re-s-gilbert-says-fed-sets-up-stocks-for-a-decline.html

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