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Deep Thoughts From Howard Marks On Bonds And Stocks
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
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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.
they lie†
Property is excluded from CPI in China.
http://english.sina.com/business/p/2010/0121/301220.html
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".
Are those million $ shacks built in coastal China counted towards GDP growth?
Jim Jones Kool aid for all and when we crash we'll dispense Gov't cheese.
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.
Deep thoughts from Bernanke: Buy stocks. I got ya covered.
....until I don't
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'
Wow I better get my disclaimer out there.
Honest baby I'll pull out.
I didn't.
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.
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
That chart is not my favorite for the view your looking for.
http://moneycentral.msn.com/investor/charts/chartdl.aspx?Symbol=%24INDU
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
Thank u, i found this for a long time.
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