![]() © Copyright 2020: Lombardi Publishing Corporation. As Kenny Rogers once said, “You gotta know when to hold ’em, know when to fold ’em…”Īs Howard Marks proclaims, it’s getting quite close to do the latter. Years of gains (if you bought earlier this decade) will get flushed down the toilet. When the big fracture does occur, many bagholders will get stranded at the market top. And there’s no question that doing so has served investors well.īut as the endgame approaches, this mentality becomes increasingly risky. No matter how much you think you’re ready for it, investors have been conditioned to buy (or hold through) the dip. Many investors believe they can exit the market first and avoid the big pain to come. Once the next financial crisis 2017 (or beyond) starts, it already too late to avoid a big portion of the losses. But he would rather be a few months too early than a few months too late. Marks’s next financial crisis prediction is not about timing. This is a situation that never ends well. Rate-bearing assets don’t provide much yield, so investors have gone all in on riskier assets. Not only because it isn’t sustainable, but because the markets aren’t “free.” Asset-intrinsic values are at levels being driven by liquidity rather than fundamental factors. These are only being overlooked because of the tidal wave of liquidity flowing from world central banks.īut it is, in effect, a false paradigm. ![]() Most stock market participants will be familiar with them. Marks delves into the particulars of each area, but the bullet points tell the story. (Source: “ There They Go Again… Again,” Oaktree Capital Management L.P., July 26, 2017.) Extremely low prospective future returns.secular economic growth, Central Bank policies, interest rates etc.) an unusual amount of uncertainties surrounding macro economic policies (i.e.Howard Marks predictions of caution are focused on four noteworthy aspects of current market conditions, all of which don’t bode well for stocks going forward. Legendary Investor Howard Marks Issues a Dire Warning for Markets But how many of those company are around or relevant today?Įxactly. In it, Bezos talked about forging important, business-changing relationships with the likes of America Online, Yahoo!, Excite, Netscape, GeoCities, AltaVista, and Prodigy. Marks hammers home this point by referencing Jeff Bezos’s 1997 letter to, Inc. History tells us clearly that no industry can fend off challengers and maintain market positioning forever. ![]() The so-called “Nifty-Fifty” stocks in the 1960s Tech stock in the late 1990s (only a few leaders are around today) bank stocks in the late 2000s. History is littered with spurts of unfettered optimism that eventually went bust. This leads to a virtuous cycle where investors purchase these “super stocks” at any price, believing their dominance will carry on forever.īut just because the tech leaders dominate their respective space now, doesn’t mean it will continue. This is manifesting itself in sky-high valuations seen in the technology leaders, where investors assume their leading position will never be challenged. More specifically, Marks sees the unshakable “this time is different” mentality taking over Wall Street.
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