As we wait for the markets to re-open post Sandy (do we call her a superstorm or a hurricane?), I wanted to follow-up on a posting I made a month or two ago with David Einhorn comparing quantitative easing to jelly donuts.
Well, a couple of other names are also not fans, value investors Warren Buffett and Seth Klarman. WEB was on CNBC last week and stated that he would certainly listen to Ben Bernanke about the rationale for qe3, but stated that is not likely an approach he would have used. His sound bite was something like "the fed can always use it's balance sheet to buy as many of whatever securities it wants to buy, but they will find it more difficult to sell those securities down the road." That is really the crux, when the fed tries to sell these MBS or treasury notes that pay 2 or 3% interest for the next thirty years and real rates have finally re nflated to five or six percent, there will not be many buyers, except at a steep discount. Not sure who is benefitting from this approach, but I am sure it isn't helping savers like me.
Klarman was also spot on. I have included his letter to shareholders here: ()sethklarmanblog.blogspot.com/).
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