Oaktree Capital Management

The last 20 months have taught us to question everything. What is the future of work? Can American democracy survive? Will Baby Boomers keep consuming more than their fair share? And what comes after “trillion”? Howard Marks’s latest memo examines paradigm shifts that could reshape the economy, markets and the world for many years to come.

Howard Marks doesn’t make bets on economic predictions. That’s especially true now when the biggest wildcard is inflation – a phenomenon no one fully understands. But just because something is unknowable doesn’t mean it’s unimportant. That’s why Howard has devoted his latest memo to a topic he largely disavows: macro forecasting.

Last year featured a jaw-dropping list of extremes, from a once-in-a-century pandemic to record-breaking market moves. Howard Marks writes in his latest memo about approaching the investment environment left in 2020’s wake – one generating many questions and no easy answers.

The dichotomy of “value” and “growth” investing has become a sharp stylistic divide. But is it helpful? Howard Marks writes in his latest memo how he views the art and science of value investing, especially in the increasingly efficient and complex world we face today.

In his latest memo, Howard Marks walks readers through the unusual characteristics of this year’s economy; the impact of Covid-related monetary and fiscal policy actions, including low interest rates, on today’s markets; and the possible ramifications of the Fed/Treasury’s rescue efforts. What does it all mean for investors who face an environment marked by some of the lowest prospective returns in history?

Several months into the Covid-19 era, Howard Marks takes a step back to consider the global health crisis, the economic fallout and the U.S.’s response to date. He also shines light on how one might – or might not – view the current circumstances in the framework of a market cycle.

U.S. stocks have managed a remarkable advance in the past several weeks as optimism outweighed concerns about the economic recovery and worsening Covid-19 cases. Has this been appropriate or irrational? Howard Marks shares his thoughts on the recent rally in asset prices in his latest memo.

It is imperative that all Americans see recent events around racial inequality as a call for action and work to ensure equality for people of color. In his latest memo, Howard Marks shares his thoughts and pledges to heed this call.

True expertise is scarce and limited in scope. Howard Marks’s Uncertainty II — a postscript to his recent memo Uncertainty — explains why we should be careful about the “experts” we listen to and the weight we assign to their pronouncements.

In investing, uncertainty is a given – how we deal with it will be critical. Read Howard Marks’s latest memo, in which he discusses the value of understanding the limitations of our foresight and “investing scared.”

Read Howard Marks's latest memo, in which he discusses the notion of making informed guesses regarding the future and shares his questions about re-opening the U.S. economy and the latest Federal Reserve moves to help the economy combat the coronavirus.

The most important thing for an investor is to set the right balance between offense and defense. Today Howard Marks no longer feels defense should be favored. Find out why in his latest memo, Calibrating, in which he describes the importance of positioning portfolios in response to the environment.

How should investors think about the economy and asset values when faced with unprecedented uncertainty surrounding the effects of the coronavirus and a complete absence of guidance from analogies to the past? Read Howard Marks’s latest memo, in which he lays out the views of both the optimist and the worrier.

After giving our clients a few days to digest it, we’d like to share this memo from Thursday with all of our readers. We hope you’ll find it helpful.

Many questions – and few answers – surround the coronavirus epidemic and its implications for financial markets. Read Howard Marks’s latest memo, in which he shares his own questions, guesses, observations and inferences to help make sense of the potential impact of the virus on global economies and markets.

What really is a bet? How does one make decisions under uncertainty and with imperfect information? In his latest memo, Howard Marks weaves his own life story to discuss the process of thinking in bets, parses the world of gambling, and draws parallels between investing and games of chance.

Negative interest rates are nothing short of a mystery; they’re likely to throw off whatever we knew about the financial world and how things worked in the past. With more than $17 trillion of global debt trading at nominal yields below zero — and about double when considering inflation — this phenomenon has prompted differing perspectives about its purpose and consequences. Howard Marks offers his in this memo, in which he discusses why negative rates have become prevalent, what implications they might have, whether they will reach the U.S., and what investors can do as they navigate these uncharted waters.

Expectation that the Federal Reserve will cut interest rates has been a primary factor driving investor sentiment and actions in recent months. It should be noted, though, that the considerations and actions of the Fed are part of a complex ecosystem that has financial, political and behavioral components that come with considerable uncertainty.

In good times, we often see the notion "this time it's different" work its way into the marketplace as investors seek to rationalize higher asset prices and continued upward movement. Today this sentiment is expressed in contexts ranging from questioning the prospect of a recession altogether to supporting the high valuations of tech companies despite their current profitless state. In his latest memo, Howard Marks discusses the outlook for nine such theories. It would truly have to be different this time around for them to hold.

A few weeks ago, we were pleased to announce a partnership with Brookfield Asset Management that created an alternative investment manager with one of the broadest slates of strategies and greatest asset totals. And what question did I get? “Will there still be memos?” Well, here’s your answer.

The purpose of this memo is to describe what happens when political behavior collides with economic reality, as illustrated in one area where the government is taking steps – tariffs – and another in which debate among politicians is heating up – restrictions on the capitalist system.

The idea for this memo came from the seven worst words in the investment world: “too much money chasing too few deals.”

This memo covers three ways in which securities markets seem to be moving toward reducing the role of people: (a) index investing and other forms of passive investing, (b) quantitative and algorithmic investing, and © artificial intelligence and machine learning.

This memo covers three ways in which securities markets seem to be moving toward reducing the role of people: (a) index investing and other forms of passive investing, (b) quantitative and algorithmic investing, and © artificial intelligence and machine learning.

Travel to clients abroad and preoccupation with my coming book on cycles (final draft submitted just the other day) have combined to keep me from writing a memo since September, but fortunately not from thinking. Thus I have ideas to set down on two significant subjects: the market environment and the new tax law. Further, I’m highly motivated to do so, since if I skip a few months, people start writing in, “Are you sick?”

“There They Go Again . . . Again” of July 26 has generated the most response in the 28 years I’ve been writing memos, with comments coming from Oaktree clients, other readers, the print media and TV. I also understand my comments regarding digital currencies have been the subject of extensive – and critical – comments on social media, but my primitiveness in this regard has kept me from seeing them. The responses and the time that has elapsed have given me the opportunity to listen, learn and think. Thus I’ve decided to share some of those reflections here.

I’m in the process of writing another book, going into great depth regarding one of the most important things discussed in my book The Most Important Thing: cycles, their causes, and what to do about them. It will be out next year, but this memo will give you a preview regarding one of the most important cyclical phenomena.

In my 2016 year-end review, which went only to clients, I included a discussion of the use of subscription lines by closed-end funds in areas such as private equity, real estate, distressed debt and private credit. It’s my impression that their use has become fairly pervasive in recent years, and in response to clients’ requests and market trends, Oaktree has utilized subscription lines in some of its newer funds.

The opinions of experts concerning the future are accorded great weight . . . but they’re still just opinions. Experts may be right more often than the rest of us, but they’re unlikely to be right all the time, or anything close to it. This year’s election season gave us plenty of opportunities to see expert opinion in action. I’ll start this memo by reflecting on them.

While people search the market’s behavior for logic, there really doesn’t have to be any. In “On the Couch,” I mentioned that sometimes the market interprets everything positively, and sometimes it interprets everything negatively. The market often fails to act rationally in the short run, primarily because of the role played by people in determining its course. Thus two key observations can be made based on last week’s developments.

I’m starting this memo a week before Election Day. I promise to try to stay away from the merits of the candidates and the question of who will win, and instead confine myself to the important messages that we should take away from the election and the actions we should push for as a result. The outcome of tomorrow’s election won’t change these things as far as I’m concerned.