The Ledger
Every statement that passed quotation and attribution checks. Mix any filter with any other: certainty 1/5, debate potential 5/5, or both at once.
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Howard Marks: Waiting for market bottoms is cover for inaction
“Oak Tree rejects the concept of waiting for the bottom. It's impossible, intellectually, to know when you're at the bottom. And I think that terms like, don't catch a falling knife, and wait for the bottom, are cover for inaction during crisis.”
Marks: A period of market distress will occur by 2025
“The bull market is 11 years old. If there's not one in the next five years, that means we'll have gone 16, which would be a record by a wide margin. So my guess is that in the next five years, we'll have a period of distress, and my hope is that Oak Tree will …”
Howard Marks: Central bank interventions prevented a 2020 global depression
“With that disclaimer out of the way, first of all, nine months ago, a global depression was absolutely a possibility. With the, most of the developed countries Certainly outside of Asia, shutting down their whole economies in order to limit contacts and bend t…”
Howard Marks: Tech automation threatens long-term employment for manual laborers
“Longer term, I worry about employment, mainly because of the stuff Bill does. You know, his companies are replacing labor with computing power, to over-exaggerate. I worry about where people whose main asset is a strong back are going to get jobs in the longer…”
Marks: Record-low interest rates justify historical peak stock P/E ratios
“The lower the interest rates, the higher the asset price is justified. We have the lowest interest rates in history. That justifies, for example, the highest P.E. Ratios in history.”
Marks: COVID-19 downturn is not driven by a credit bubble
“This time around, we are not coming off a bubble. The banks are much less leveraged. And there's no analog as deficient in substance as the subprime mortgage.”
Marks: The US ran a $1T deficit during prosperity due to 2017 tax bill
“And thanks to the Trump tax bill that was signed in December of 17, we were already running a trillion dollar deficit in times of prosperity.”
Marks: United States national debt will never be repaid
“So the point is we're going to be going through the next years saddled with an enormous national debt that we'll never repay.”
Marks: Swift Government Actions Significantly Reduced Risk of a Global Depression
“My partner, Bruce Garsh, and I, talking, I would say, middle of last week, were afraid of a meaningful probability of a depression, with millions losing their jobs and businesses shuttered for long periods of time. Now, I think, with the government having done…”
Howard Marks: Market bargains vanish once uncertainty is resolved
“It is my opinion that when the knife is falling, it's terrifying. Buyers get great value. And when the knife stops falling and the dust settles and the uncertainty is resolved, the bargains are gone.”
Howard Marks: Europe Will Outperform US in Navigating COVID Crisis
“The U.S. Has a better underlying rate of growth and more economic vitality. On the other hand, I think that the U.S. Lacks the national leadership, which might be required to get us through this. My guess is that the, well, in this little instance here, I'm go…”
Marks: The market is in an advanced, elevated cycle stage
“I do think that we are in the upper advancing part of the cycle. You know, we've been in, it's been a long economic expansion, a long bull market, in both cases, the longest in history. Valuations of stocks are higher than usual. Interest rates and yield sprea…”
Marks: Investors should reduce risk and take chips off the table
“I don't think we're in a massive bubble. I don't think this thing is gonna collapse anytime soon, but I do think that there is more risk than usual, which means that you should be more cautious than usual. I'm not saying that we're not going higher. I'm not sa…”
Marks: FOMO and greed dominate early 2020 markets
“That's when you get the best bargains, and that is not a very good description of today. Today, people are eager to invest. Fear of missing out seems to have taken over from fear of losing money. People are risk tolerant. They're greedy. They're optimistic. Th…”
Howard Marks: Macro predictions shouldn't drive investment decisions
“Macro predictions are very hard to make, and I don't think either of us bases our investment decisions on macro forecasts. That's not a way to have a good batting average.”
Howard Marks: Economists are now disregarding the Phillips Curve
“So now I think the Phillips curve is being disregarded.”
Howard Marks: Strong economic recovery will follow COVID-19 herd immunity
“I personally believe that when we get to herd immunity, And when the number of cases falls, you know, radically, by which I mean, I guess, you know, a few hundred a day or so, I think that we'll have a very good recovery in the economy and in employment.”
Marks: Oaktree's distressed debt returns won't match past crisis levels
“We think our returns will be very attractive relative to the low overall level of interest rates, but nothing like in the past.”
Marks: Market trouble occurs when investors believe no price too high
“When people start saying no price too high, then the world tends to get in trouble, as they have several times in my life.”
Howard Marks: 2019 market conditions left economy vulnerable to pandemic shock
“And I think that the market conditions in 19, twenty-nineteen and the prior years made us vulnerable to an economic shock like the pandemic produced.”
Marks: High-Yield Bonds Have Been Central to 40 Years of Finance
“In 78, I was asked to start a high-yield bond fund, and high-yield bonds have been the, shall we say, epicenter, although it's an advised word today, for almost everything that's happened, interestingly, in finance in the last 40 years.”
Howard Marks rejects Modern Monetary Theory's view that national debt doesn't matter
“And there's a theory called modern monetary theory that it doesn't matter, which I find that hard to accept.”
Howard Marks: Above-Average Returns Require Resisting Crowd Psychology
“What that means, Harry, is that if you operate emotionally or psychologically, like the average person, you will have average results, which for the most part means buying high and selling low. In order to be an above average investor among all the various req…”
Howard Marks: Successful Investing Requires Operating Without Foreknowledge
“The important misconception is always the same, which is that it's possible sitting here to know what the future holds. We have to invest despite the absence of foreknowledge, not in reliance of foreknowledge.”
Marks: Asset prices reflect fundamentals combined with investor optimism
“If I could know only one thing, I would think I'd want to know how much optimism there is in the price. You know, prices are not the result of investment fundamentals. They're a result of the combination of fundamentals and psychology. And, you know, the highe…”
Marks: Investors should be aggressive when others are terrified
“When others are fearless and risk oblivious and aggressive, we should be terrified. When others are terrified, we should be aggressive.”
Marks: Brookfield's Canadian culture lacks the ego of New York finance
“They have a positive culture, a lot like ours, informal, casual, respectful. I say that the beautiful thing is that they're Canadians, not New Yorkers. So there's not an excess of ego or testosterone, no sharp elbows, no competitiveness.”
Marks: Oaktree missed top returns from 2016 to 2018 due to caution
“Several years ago, so we turned somewhat cautious several years ago, and clearly that was not needed. And the highest returns in the last few years, and certainly the last, well, certainly 1617, 18, the highest returns went to the people who took the most risk…”
Marks: Fed will not raise rates until inflation exceeds 2%
“Until we get, you know, growth above two and a half or three, and until, certainly until we get inflation above two percent, I don't think you'll be seeing any increases in Fed funds rate coming from the central bank.”
Marks: Rising inflation forces markets to demand positive real interest rates
“If you get inflation at three percent a year, nobody wants to lend money out at one percent a year, because what they're doing is locking in a two percent a year loss of purchasing power. And the market would demand positive real rates.”
Howard Marks: Post-2008 recovery was slowest in post-war history
“But our government's been running deficits since the global financial crisis, And this was the slowest recovery in post-war history, and it didn't kindle any inflation.”
Howard Marks: US unemployment hit 50-year low without driving inflation
“And, you know, as of January, the unemployment rate in this country was three and a half percent, the lowest in 50 years, and still no inflation.”
Marks: Outsized returns come from doing what other investors refuse to do
“You make the big money when you do the things that other people are unwilling to do.”
Marks: Economic growth will slow down due to deglobalization
“Well, I think, number one, that economic growth slows down.”
Howard Marks: Investors cannot predict direction, but must know cycle positioning
“We don't know where we're going, but we should know where we are.”
Marks: The Fed and US government will exhaust all non-traditional economic stimulus tools
“There are other things that the Fed and the government can do, and they'll do them all to try to bring the economy back.”
Marks: Oaktree Navigates Crises by Investing in Senior Debt of Viable Companies
“I think for Oaktree, Harry, all we try to do is figure out what companies will stay in business, some idea of what they're worth, and then invest in them on a senior level. And if investing in what we think are viable companies in senior debt, if that doesn't …”
Marks: US Public Market Valuations Dropped 35% Before Private Markets Adjusted
“In the US, we have had that effect. As before today, I don't know where the market closed today, but it was up substantially, like, eight or so percent when I last looked. Before today, I think the market was down about 35%, so I wouldn't agree with your premi…”
Marks: Risk positioning should be a speedometer, not a binary choice
“Now, people always wanted me to say, buy or sell, in or out, and those judgments are too black and white. It should be more nuanced. Where on the speedometer between zero and a hundred should you be today?”
Marks: Outsized returns come from taking risk when others refuse
“So you make the big money as an investor for taking risk when others won't.”
Marks: Intellectual humility means accepting the other person could be right
“One of the most important characteristics for any of us in our lives is Intellectual humility. And it's very simple what that means. It means the other guy could be right.”
Marks: Brookfield spent $5 billion to acquire 60% of Oaktree Capital
“They spent five billion dollars to own 60% of Oak Tree.”
Marks: Oaktree found asset bargains during two-week window in March 2020
“In March, the middle two weeks of March, the ninth to the 23rd, were very productive for us in terms of producing bargains.”
Marks: Historical average P/E is 16 versus 26-27 in 2021
“So when you look and you see that the average P.E. Ratio in the post-war period has been 16, and today we're in the 26 or seven region.”
Marks: Supposedly invincible Nifty 50 giants eventually collapsed or lost dominance
“Kodak and Polaroid lost their market. IBM and Xerox got killed by competitors. AIG went bankrupt in the global financial crisis.”
Marks: US interest rates at 1.5% limited Fed rate cut capacity entering COVID
“Well, the problem is that in this instance, the interest rates at the beginning of the problem were one and a half percent. So clearly if it's one and a half, you can't cut by five.”
Howard Marks: Oaktree's closed-end funds allow aggressive crisis investing
“So the great thing about Oak Tree's position is that a good bit of our assets are in closed end funds where the clients can't withdraw. They've committed money to us. We have it for up to 10 years, and we can do what we think is smart without having to worry a…”