Seth Klarman, the legendary head of the Baupost Group says investors are underplaying risk and not prepared for the end of the QE experiments

Seth Klarman, the legendary head of the Baupost Group says investors are underplaying risk and not prepared for the end of the QE experiments. Any year in which the S&P500 jumps 32% and the Nasdaq 40% while corporate earnings barely increase should be a cause for concern, not further exuberance. On almost any metric, the US equity market is expensive. A sceptic would have to be blind not to see bubbles inflating in junk-bond issuance, credit quality, and yields, not to mention the nosebleed stockmarket valuations of fashionable companies like Netflix and Tesla Motors. On the likely outcome Klarman says: When the markets reverse, everything investors thought they knew will be turned upside down and inside out. 'Buy the dips' will be replaced with 'what was I thinking?' . . .  Anyone who is poorly positioned and ill-prepared will find there's a long way to fall. Few, if any, will escape unscathed.