Although many investors are delighted with the returns they have been getting on stocks and other financial assets, there could be a brutal correction across financial markets, says billionaire hedge fund manager Seth Klarman, founder of the Baupost Group.

Market gains were overblown in 2013, he said. “Any year in which the S&P 500 jumps 32 percent and the Nasdaq 40 percent, while corporate earnings barely increase, should be a cause for concern, not for further exuberance,” Klarman said in a recent letter to clients that was obtained by the Financial Times.

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