howard marks

In July, Oaktree Capital founder Howard Marks issued a warning shot to investors in a wide-ranging memo.

The overarching point: Markets are overheated, risks are going ignored, and we’re generally starting to see some bull-market foolishness. 

Not everybody agreed, and he earned a healthy dose of blowback from some corners of the investment world. 

Marks is back with a rejoinder. In a memo released Thursday, he took aim at some of his critics, defending and clarifying some of his initial statements. 

Two of the claims he took issue with: 

  • “The story from Howard Marks is ‘it’s time to get out.'”
  • “He’s right in the concept but wrong to execute right now.”

These statements misinterpret the point Marks was making in his memo, he said. He wasn’t prescribing a market exit, nor was he saying investors should take action this very moment — nor would he ever make such prescriptions. 

“There are two things I would never say when referring to the market: ‘get out’ and ‘it’s time,'” Marks wrote in the memo. “I’m not that smart, and I’m never that sure.”

“The media like to hear people say “get in” or “get out,” but most of the time the correct action is somewhere in between,” Marks continued.

“Calibration,” is the key word for Marks, and he’s arguing that some investors are not allocating their capital in tune with the amount of risk that exists. 

When the relationship between an asset’s price and its intrinsic value diverges, as Marks has observed, people need to exert more caution. He doesn’t see that happening right now, and says “people should probably be taking less risk today than they did three, five or seven years ago.”

“Not ‘out,’ but ‘less risk’ and ‘more caution,'” he added. 

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