• hedgeless_horseman
    07/11/2014 - 16:58
    No signal lights, bank alarms, stores are being robbed for anything of value. You move to your trunk and get you Bug Out bag and start heading home, the best way you know.

Oaktree

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Howard Marks: "Dare To Look Wrong, It's Not Supposed To Be Easy"





Echoing Charlie Munger, Oaktree's Howard Marks warns today's institutional and retail investors that "everything that’s important in investing is counterintuitive, and everything that’s obvious is wrong." These words seem critically important at a time when the world and his pet rabbit is a self-proclaimed stock-picking export. Be "uncomfortably idiosyncratic," Marks advises, noting thaty most great investments begin in discomfort as "non-conformists don’t enjoy the warmth that comes with being at the center of the herd." Dare to be different is his message, "dare to be wrong," or as Charlie Munger told him, "it’s not supposed to be easy. Anyone who finds it easy is stupid." While Marks philosophically adds that "being too far ahead of your time is indistinguishable from being wrong," he warns the lulled masses that "you can’t take the same actions as everyone else and expect to outperform."

 
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Buy-To-Rent Is Officially Dead In California





We’ve chronicled the saga of “buy-to-rent” for well over a year now. From some of its most exuberant phases to its now epic retreat (investment firm property purchases are now down 70% year-to-date). It seems as if the pullback of private equity and hedge funds from this asset class is even more brutal in certain regions, with Blackstone now reporting its purchases in California down a staggering 90% this year. Not to worry, we're quite certain unemployed and deeply indebted recent college graduates will soon pick up the slack due to the anticipated resurgence of subprime lending.

 
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5 Things To Ponder: Serious Stuff





As Bill Clinton once famously stated; "What is....is" and while the current market "IS" within a bullish trend currently, it doesn't mean that this will always be the case.  This is why, as investors, we must modify Clinton's line to: "What is...is...until it isn't."  That thought is the foundation of this weekend's "Things To Ponder."  In order to recognize when market dynamics have changed for the worse, we must be aware of the risks that are currently mounting.

 
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Howard Marks: "In The End, The Devil Always Wins"





"If I ask you what’s the risk in investing, you would answer the risk of losing money. But there actually are two risks in investing: One is to lose money and the other is to miss opportunity. You can eliminate either one, but you can’t eliminate both at the same time. So the question is how you’re going to position yourself versus these two risks: straight down the middle, more aggressive or more defensive. I think of it like a comedy movie where a guy is considering some activity. On his right shoulder is sitting an angel in a white robe. He says: «No, don’t do it! It’s not prudent, it’s not a good idea, it’s not proper and you’ll get in trouble». On the other shoulder is the devil in a red robe with his pitchfork. He whispers: «Do it, you’ll get rich». In the end, the devil usually wins. Caution, maturity and doing the right thing are old-fashioned ideas. And when they do battle against the desire to get rich, other than in panic times the desire to get rich usually wins. That’s why bubbles are created and frauds like Bernie Madoff get money." - Howard Marks

 
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5 Things To Ponder This Weekend: Beer Goggles, Fires And Luck





With the market more bullishly positioned, more euphoric, and more levered than almost any time in history, it is perhaps worth "pondering" what some of the risks to this optimism could be...

 
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Howard Marks' Views On When Markets Will Be Efficient (Hint: Never)





People often ask me about the inefficient markets of tomorrow. Think about it: that’s an oxymoron. It’s like asking, “What is there that hasn’t been discovered yet?” The markets are greatly changed from 25, 35 or 45 years ago. The bottom line today is that there’s little that people don’t know about, understand and embrace. How, then, do I expect to find inefficiency? My answer is that while few markets demonstrate great structural inefficiency today, many exhibit a great deal of cyclical inefficiency from time to time. Just five years ago, there were lots of things people wouldn’t touch with a ten-foot pole, and as a result they offered absurdly high returns. Most of those opportunities are gone today, but I’m sure they’ll be back the next time investors turn tail and run. Markets will be permanently efficient when investors are permanently objective and unemotional. In other words, never. Unless that unlikely day comes, skill and luck will both continue to play very important roles.

 
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Guest Post:15 Signs That We Are Near The Peak Of The Stock Market Bubble





Even if you don't have a Nobel Prize, it should be glaringly apparent to anyone with half a brain - the financial markets have been soaring while the overall economy has been stagnating. Despite assurances from the mainstream media and the Federal Reserve that everything is just fine, many Americans are beginning to realize that we have seen this movie before.  We saw it during the dotcom bubble, and we saw it during the lead up to the horrible financial crisis of 2008.  So precisely when will the bubble burst this time?  Nobody knows for sure, but without a doubt this irrational financial bubble will burst at some point.  Remember, a bubble is always the biggest right before it bursts, and the following are 15 signs that we are near the peak of an absolutely massive stock market bubble...

 
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Howard Marks: "Markets Are Riskier Than At Any Time Since The Depths Of The 2008/9 Crisis"





In Feb 2007, Oaktree Capital's Howard Marks wrote 'The Race to the Bottom', providing a timely warning about the capital market behavior that ultimately led to the mortgage meltdown of 2007 and the crisis of 2008 as he worried about "carelessness-induced behavior." In the pre-crisis years, as described in his 2007 memo, the race to the bottom manifested itself in a number of ways, and as Marks notes, "now we’re seeing another upswing in risky behavior." Simply put, Marks warns, "when people start to posit that fundamentals don’t matter and momentum will carry the day, it’s an omen we must heed," adding that "the riskiest thing in the investment world is the belief that there’s no risk."

 
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Frontrunning: November 15





  • China to Ease One-Child Policy (WSJ), China announces major economic and social reforms (Reuters)
  • Consumers line up for launch of PlayStation 4 (USAToday)
  • Trust frays between Obama, Democrats (Politico)
  • Yellen Stands by Fed Strategy  (Hilsenrath)
  • Hero to zero? Philippine president feels typhoon backlash (Reuters)
  • Brussels warns Spain and Italy on budgets (FT)
  • Moody’s Downgrades Four U.S. Banks on Federal Support Review  (BBG)
  • CIA's Financial Spying Bags Data on Americans (WSJ)
  • Germany Digs In Against Risk Sharing in EU Bank-Failure Plan (BBG)
  • Bill Gates wants Norway's $800 billion fund to spend more in Africa, Asia (RTRS)
 
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Dan Loeb's Third Point Returns 10% Of Capital Amid "Concerns About The Global Economy"





It seemed as if this morning's exuberant run into US equities would never stop but it would appear that comments from none other than Dan Loeb has (for now) put an end to the exuberance. With fundamentals collapsing, and even Cramer's "Cult stocks" tumbling, today's rally was yet another blindlingly obvious insight into the fact that this market is entirely artificial and Third Point's Dan Loeb, worried about the global economy, has reduced his exposure to equities. Furthermore, he plans to return 10% of capital to investors. Not exactly the wealth-effect enhancing, confidence-inspiring action that the Fed hoped for...

 
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Housing "Recovery" Endgame Escalates





Och-Ziff were perhaps a little early but used the last 10 months to unwind their real estate and exit the landlord business as the hedge-fund sponsored echo-bubble in housing rolled over into the mainstream. "American-Homes-4-Rent"'s IPO suggested a scramble to exit. With 60% of home purchases now being cash-only (explains the ongoing and massive layoffs in the mortgage business not just due to rate-driven weakening of demand), it is therefore a concern when one of the biggest funds playing in this space - OakTree Capital - announces plan to exit the buy-to-rent trade - selling roughly 500 fully-leased homes. As Reuters notes, it is yet another indication that early investors are looking to cash-out on the "recovery" in U.S. housing prices. Who will be left holding the bag this time?

 
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"There’s No Free Market In Money Today" And Other Observations By Howard Marks





"When things are going well people become greedy and enthusiastic, and when times are troubled, people become fearful and reticent. That’s just the wrong thing to do. Another mistake that people often make is that they compare themselves with others who are making more money than they are and conclude that they should emulate the others’ actions ... after they’ve worked. This is the source of the herd behaviour that so often gets them into trouble... As long as human nature is part of the investment environment, which it always will be, we’ll experience bubbles and crashes.... People talk about the wisdom of the free market – of the invisible hand – but there’s no free market in money today. Interest rates are not natural. They are where they are because the governments have set them at that level. Free markets optimise the allocation of resources in the long run, and administered markets distort the allocation of resources. This is not a good thing..." - Howard Marks

 
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Housing Bubble Pop Alert: Colony Pulls IPO On "Market Conditions", Blue Mountain Rushes To Cash Out Of Own-To-Rent





Here is a simple way to test if the last year of housing market gains have been due to a real, fundamental, consumer-led recovery, or nothing but the latest iteration of the Fed's money bubble machine manifesting itself in the place of least du jour resistance - houses: Assume rising interest rates.

 
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