This page has been archived and commenting is disabled.

Deep Thoughts From Howard Marks On Bonds And Stocks

Tyler Durden's picture




 

In his latest must read letter, Oaktree's Howard Marks focuses on the age old self delusion pattern formation and mean reversion which so often is the cause of ruin of so many investors: "Investors consistently fail to recognize that past above average returns don’t imply future above average returns; rather they’ve  probably borrowed from the future and thus imply below average returns ahead, or even losses. The tendency on the part of investors toward gullibility rather than skepticism is an important reason why styles go to extremes." Yet the High Yield bond manager, is oddly enough, bullish on stocks and bearish on bonds. However, even Marks can't fully bash fixed income - he has now joined those drinking the "HY will outperform IG" kool aid, in no small part dictated by the portfolio allocation of his funds... Just as Pimco will tout Treasurys... Paulson will pimp MGM and "recovery" names...Hugh Hendry  will bash China, etc. Buyer beware... Especially when the one true end-buyer is that 1913 Frankenstein creation - the US central bank.

Full memo - Hemlines and Investment Styles (pdf)

 


Source: Oaktree

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 09/13/2010 - 14:25 | 578872 TraderMark
TraderMark's picture

What's China's true inflation rate?  Indeed, what is China's true anything?  I don't know but whatever they tell us, we can gap this market up overnight.  Boo ya.

BW: What's China's Real Inflation Rate? (What's China Real Anything?)

 

Lydia Wang, a 28-year-old marketing manager in Shanghai, gripes that the shoes and clothing she normally buys are at least 50 percent pricier than in 2009. Wu Sengyun, a 54-year-old retiree living in the coastal city of Ningbo, Zhejiang, says prices of fruit and fish are both up more than 20 percent.

... wonders how a country that grew 10.3 percent last quarter and is seeing upward pressure on wages could register inflation of only a few percentage points

Mon, 09/13/2010 - 14:31 | 578896 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

they lie†

Mon, 09/13/2010 - 14:32 | 578901 Zero Debt
Zero Debt's picture

Property is excluded from CPI in China.

http://english.sina.com/business/p/2010/0121/301220.html

 

Mon, 09/13/2010 - 14:42 | 578932 Bartanist
Bartanist's picture

I'm starting to think that the performance of the the stock market might be best studied and predicted based on the interactions of a junior high social structure and dynamics. The only question one needs to answer is: "who is the queen bee".

Mon, 09/13/2010 - 14:52 | 578953 lobattery
lobattery's picture

Are those million $ shacks built in coastal China counted towards GDP growth?

Mon, 09/13/2010 - 15:02 | 578914 frankTHE COIN
frankTHE COIN's picture

Jim Jones Kool aid for all and when we crash we'll dispense Gov't cheese.

Mon, 09/13/2010 - 14:54 | 578959 HarryWanger
HarryWanger's picture

Valid points on the attractiveness of stocks on an S&P p/e valuation. We aren't going to pop to the moon but upward seems much more likely through Q4 than relative downside. Large caps with nice dividends seems to be the most logical play in this environment.

Mon, 09/13/2010 - 14:58 | 578974 plocequ1
plocequ1's picture

Deep thoughts from Bernanke: Buy stocks. I got ya covered.

Mon, 09/13/2010 - 16:03 | 579150 goldmiddelfinger
goldmiddelfinger's picture

....until I don't

Mon, 09/13/2010 - 15:16 | 579012 Dismal Scientist
Dismal Scientist's picture

Interesting, a bond guy highlighting the relative attractiveness of stocks. I wonder if he has been sampling the product of his namesake's former business:

'Howard Marks (born 13 August 1945 in Kenfig Hill, near Bridgend, Glamorgan, Wales) is a former teacher, drug smuggler and author who achieved notoriety as an international hashish smuggler through high-profile court cases, supposed connections with groups such as the IRA, and the Mafia, and his eventual conviction at the hands of the American Drug Enforcement Administration. At the height of his drug career, he was said to have controlled 10% of the world's hashish trade'

Mon, 09/13/2010 - 15:39 | 579075 Clycntct
Clycntct's picture

Wow I better get my disclaimer out there.

Honest baby I'll pull out.

I didn't.

Mon, 09/13/2010 - 15:17 | 579014 Carl Marks
Carl Marks's picture

Anyone else see the irony in Ben Shalom's buying up the market for the account of the taxpayer? When W proposed stock holdings in SS accounts, the libs screamed. I guess it's OK though when the government owns the markets and can bill the taxpayer for the losses.

Mon, 09/13/2010 - 15:30 | 579046 DavidC
DavidC's picture

If Howard Marks is right, we've a long way to go to mean revert (note this chart is on a LOG scale!).

http://stockcharts.com/charts/historical/djia1900.html

Oh - and take a look at the percentage drop in the 1929-1930 move - people have been talking about the 'crisis' or 'crash' of 2007-2008 - it's NOTHING.

DavidC

Mon, 09/13/2010 - 15:44 | 579090 Clycntct
Clycntct's picture

That chart is not my favorite for the view your looking for.

http://moneycentral.msn.com/investor/charts/chartdl.aspx?Symbol=%24INDU

Mon, 09/13/2010 - 15:59 | 579128 DavidC
DavidC's picture

Not sure of the point you're making there Clycntct, are you saying I'm being too bearish?

Maybe I am, given the stock markets!

DavidC

Mon, 09/27/2010 - 07:42 | 606835 Herry12
Herry12's picture

Thank u, i found this for a long time.
cheap site hosting | windows web hosting | windows vps hosting | ucvhost

Do NOT follow this link or you will be banned from the site!