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howard marks. 16 minutes.


  • Is he talking about his Sea Change memo?
  • edited December 2022
    WABAC said:

    Is he talking about his Sea Change memo?

    I’ll save folks a few thousand words of reading. The ”sea change” comes at the very end of Mark’s memo:

    “We’ve gone from the low-return world of 2009-21 to a full-return world, and it may become more so in the near term. Investors can now potentially get solid returns from credit instruments, meaning they no longer have to rely as heavily on riskier investments to achieve their overall return targets. Lenders and bargain hunters face much better prospects in this changed environment than they did in 2009-21. And importantly, if you grant that the environment is and may continue to be very different from what it was over the last 13 years – and most of the last 40 years – it should follow that the investment strategies that worked best over those periods may not be the ones that outperform in the years ahead. That’s the sea change I’m talking about.”

    Love Mark’s thinking. @Crash’s 15-20 minute video is well worth the time. In a nutshell, Marks looks for whatever appears “cheap” at the moment. (I affectionately term this practice “dumpster diving”).

    I thought the memo kind of boring. Blame that on my short attention span. But generally I’m one who comprehends things better verbally than in writing. I treasure Mark’s book “The Most Important Thing” - the audible version of which I’ve listened to a number of times.

    Back to basics, Mark’s “sea change” rests on his perception we’ve moved from an environment of ultra-low interest rates to a more moderate range of 3-4% on investment grade paper. The ramifications of this are too widespread to cover here. But, seemingly, investors will be inclined to to shun riskier assets now that decent returns are available with safer ones.

    Not much new here. Working on a new sleeve in the allocation model which will include a 5-10% allocation called “La-La Land” - essentially high volatility funds like GUG (that I own) which employ options strategies, tons of leverage and charge exorbitant fees.:)
  • @hank, love your phrasing
    In a nutshell, Marks looks for whatever appears “cheap” at the moment. (I affectionately term this practice “dumpster diving”).
    His strategy did not fare well at Vanguard as I recall and Vanguard dissolved the relationship with Howard Marks. What is your recollection on his VG fund?
  • edited December 2022
    Thanks @Sven. Good read. I don’t know what to think. But I think Marks would be the first to say his approach isn’t for everyone. Apparently VG didn’t see the merit. Likely his fund had relatively high expenses. Different strokes for different folks. “Lots of ways to skin a cat” as @rono used to say.

    As most know, Oaktree caters more to larger more affluent investors. Probably takes more risks than most retail investors should (or want to) endure. To me Marks makes eminent sense, but only if you have patience and a long enough time horizon. I confess I no longer have that long a time horizon. But still can learn from his teachings.
  • @hank, Back then I did not appreciate Marks’s unique strategy with his VG fund, and I chose other managers including Michael Price and later David Giruox. Even though they are not Apple to Apple comparison, the end results worked out for me. Long investment horizon is a luxury that many of us don’t have. Thank you for sharing your perspective.
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