Howard Marks: "Pain Is Coming"

Tyler Durden's picture

Just over a month ago we wrote in depth that while many of the supposed smartest men in the room believe we are set for a muddle-through economy that will 'maintain' asset values with no tail-risk expectation, we believed there are only 'painful' ways out of this crisis. Furthermore, we noted (and BCG agreed) that a tax-the-wealthy (and the wealth explicitly) haircut is coming. Today, the venerable Howard Marks of Oaktree, has his own inimitable take on the issue of taxing - and, just like us, sees that "Whatever action is taken now, it will not be pain-free. The unpayable debts run up in the past will have to be dealt with.". Marks sees three (simple and obvious) possibilities for our future:the promises will have to be scaled back, the tax burden will have to grow, and/or the deficits will have to be permitted to increase.

HM_OakTree_All Very Taxing

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Vergeltung's picture

Pain, bitchezz!


MountainMan's picture

Interviewer: "What's your prediction for the fight?"

Clubber Lang: "My prediction? Pain."

Rainman's picture

Pain has already begun. Po folk can't buy fried chicken with their SNAP cards


rockraider3's picture

Oh crap, there goes lunch.

jdelano's picture

ot--are we now faking birth rate decreases so unemployment looks better? 

CPL's picture

We have been for 15 years.  The unemployment doesn't include anyone over the age of 65, students, university students, anyone part time in school, working under four hours a week, those on disability or welfare, accepting third part unemployment insurance, on a government training program.


Basically there are 300 million people in the US.  Only 45 million have full time work.  The rest aren't counted.  Ever wonder how with 200 million people between the age of 19-64 that 9 million people under employed turns into 9.1%.


It doesn't.  They cheery pick the categories to show a better picture.  Didn't you take statistics in University?  That all it is, how to lie with numbers.



Spastica Rex's picture

There are lies, there are damn lies, and there are statistics.

The root word is "statist."

c'mon man's picture

Dick Bove + CNBC phone interview this morning = LMAO

Elmer Fudd's picture

"the promises will have to be scaled back, the tax burden will have to grow, and/or the deficits will have to be permitted to increase."

"Come on Bud, its my birthday, tell me something I dont know.""

CPL's picture

What complete drivel.


It's an advertisement for Oaktree is this relevant?

EscapeKey's picture

It's not. It's basically a long piece supposed to convince you that raising taxes on the top 1% is outrageous and unfair.

They claim it's about 3 other topics, but except for the introduction, they're hardly mentioned.

Cry me a fucking river. I don't mind someone telling me why they pay enough taxes as it is, but don't dress it up as if it's got a more noble objective.

Oh, and despite being a conservative, I also object to the use of "higher rate of taxation" as it commonly is used, this piece included. "Taxation" is NOT "Income taxation".

CPL's picture

Oh I see the arguement for tax adjustments on different tax brackets.


Do you know what the tax brackets were prior to the Central Bank being established in the US was and why we have income tax in the western world?


I know that it won't surprise you that the taxes collected half goes to just interest...interest that is less than a single percent.  Let your mind chew on that idea for a second and you should start to feel the cold go up your spine once the conclusion sets in.


Doesn't matter what the taxation rate is.  Never did.  This is systemic.  Like changing the air in your tires because your engine light is on.  This is how dumb things are.  Greed and lies run it all now, have been for 30 years.


Beside why would rising income tax help?  So far all the rising taxes historically haven't solved any problems.  Being Canuck I can tell you about GST.


GST was "invented" to pay off all of Canada's national debt in ten years...20 years ago.  In that time, the government slushed the entire employment insurance pot, some of the pensions and ALL of the GST.


They even reinvented it.  Called it HST instead of GST.  Whole thing is so fucking stupid.  BTW Canada still has an awful debt ratio masked by downloading costs to provincial and municipal levels.  That's how we hide our problems.  Shit flows down hill and get completely ignored.


EscapeKey's picture

That wasn't my point. My point was to call a spade a spade, or you're downright attempting to deceive. This article has nothing to do with "solutions", it's someone whingeing about potentially having to face tax hikes.

This morning on Sky News (I'm in the UK, and hate BBC News because it's essentially a Labour spokesorgan), they had a segment on how much the Germans LOVE the Euro, and how they think it should be saved, regardless of cost. Well, it just so happens I have family in Germany, and their take on the German opinion of the Eurozone is the diametrically opposite; they are tired of bailing everyone else out. Yet, the Murdoch Empire decided it was best for their corporate interests to brainwash the public into believing the exact opposite.

It's fine and dandy we all criticise the corporate media for telling lies. But everyone should be subjected to the same scrutiny, Howard Marks included.

High Plains Drifter's picture

taxation is unconstitutional. but why quibble over such  a small matter..........

slewie the pi-rat's picture


it presents 3 false dichotomies, tho!

Corn1945's picture

The piece has a lot of conjecture, but not a lot of math. I've never seen anything that says the deficit can be closed with tax increases. In fact, I've seen models that say you can take every dollar wealthy people have and it would only reduce the deficit for a year or so.

The author makes a good point in that people can vote themselves benefits. In an increasingly poor society, the poor can vote to take money from the middle class and wealthy. This eventually leads to a totally impoverished society.

The burden of fixing this should rest with the Baby Boomer generation who failed to adequately reform entitlement programs and goverment spending in general.


Spastica Rex's picture

Maybe there's just not enough "stuff" available to support a nation of "middle class" people who own 5,000 square foot homes, four cars, custom motorcycles, power boats, snow mobiles, private tutoring and four year degrees for their children, golf, skiing, never ending kitchen remodels, cruise vacations, world travel, etc.

I'm probably just being pessimistic.

DosZap's picture

Spastica Rex

You a Communist?.

Everything you said is hog shit.IF the person, people who worked, and paid for all those things did so without debt.Then more power to them.This class warfare shit is PC Marxist BS.

People are not guaranteed a equal paycheck, but an equal chance.

That's Capitalism. What your blathering about is spite, and jealousy.And basically Marxist.

You work/ed?, what would you say to someone who told you YOU spent it wrong, and your debt free?.Are WE all of a sudden not allowed to own property?, I mean OWN it, not charge it, and pay installments for 40yrs.

What stake do you, or I have in another's fruits of labor?, and their choice of what they purchased with it????ZEFKINRO.

Until it comes out of your pocket, you sit in the corner and mind your own business.


Spastica Rex's picture

Wow, you're tightly wound.

No, I'm not suggesting anyone take anything away from anybody. I'm suggesting that maybe there isn't enough stuff out there so that everyone in the USA who thinks they're "middle class" can have the lifestyle outlined above.

God bless the child that's got his own.

Oh, and fuck off.

phasor's picture

I've seen models that say that government policies can determine the relative percentage of poor, middle class and weathly plus the growth rate of the overall economy.

How governments spend their income (tax dollars) is what it's about. The government can be business friendly and labor friendly and grow the economy.

LawsofPhysics's picture

What?  State the obvious and pimp your firm?  Fuck off.

Tsar Pointless's picture

I haven't got time for the pain

I haven't got room for the pain

I haven't the need for the pain

CvlDobd's picture

Props to the CRM bears today.

realitybiter's picture

The cuts will never happen because the folks that wrote the unrealistic entitlements are, shocker, unrealistic.  Hence, they always will believe that somehow they will be made whole.  Even when their employer is broke. 

Pressed, ask them how, given their total contribution to their retirement plan was $150k, then  How will this yield $75k er year, forever?  Have you looked at the last 10 years of your overpaid moneymanagers returns?  Details, details, lets keep the unrealism going.  It is more cuts to my EARNED retirement!  They will scream like spoiled, uneducated children, claiming no accountability for a flawed, fraudulent system.

And they will be as successful as Madoff customers in getting made whole.


Taxes raised?  Yeah right.  Just like California is currently experiencing.  They raised taxes yet receipts are down.  shocker.  Most every productive state has nearly 50% taxation when you calculate all taxes.  And that is the limit.  Beyond that, folks get creative (as in not work or work elsewhere)....the only people that think this will work are people that don't earn money or the super rich who also never earned money.

Oh, I know, raise the cap gains tax!  Oooops 40% tax on losses is not a cap gains tax.  darn.  I hate this logic crap.




Show em whats behind door number 3 Monty!!!!

A brand new retirement package priced in brand new currency!  Two cans of spam a day!  Unfortunately everyone else will be subjected to the currency drain....long spam?

DosZap's picture


Dude, you have a CLUE how many folks with pensions are left?.Not a hell of a lot, and the one's that do, are by and large GOVERNMENT.

The rest of the Boomer's are IRA,401k,(if they were fortunate to have a job with a company large enough to OFFER either).

The majority are SS recips,try living in a home paying utils/taxes/repairs, you bought and paid for over  20 -30yrs, on 3k a month if your lucky.

Then add trans, gasoline, and food, medical.

I never was lucky enough to work for a company that offered gratis PENSIONS,or participating plans.

That pay 25-50-75-100% of your working days as retirement income.(who BTW, are fkd,because they are underfunded by Trillions.).


Only the ELITE get the plans your talking about.( or live up north, and worked for a Muni,with a Union).

OutLookingIn's picture

Talk, talk, talk!

Howard uses up eighteen pages worth of words! More talk. Just what the country needs. NOT!

Facta Non Verba. Deeds not words.

This crisis has been talked to death many times over. Time is now past for action.

What little time thats left is quickly running out.

As usual we do it the hard way. Then say never again, only to turn around and do it again! = Insanity.

The only logical explanation. Its a crazy world getting crazier by the day! Guns. Gold. Food. 

Rich V's picture

The problem for the USA is we have dug such a deep hole, a $1.5 trillion yearly fed deficit, huge unfunded liabilities (SS, Medicare etc.) that there is no way to bring it back to a resemblance of fiscal solvency without more pain than ANY politician is willing to be seen voting for. You can shuffle the tax increase and spending cut mix any way you want but it will not be sellable to the general public. The pain is coming and it would be better for all if a rational plan was instituted to manage it but that won’t happen. Lets face it, when was the last time our politicians were willing to destroy their political careers to do what was right for the country?

The coming crisis will not be met with a rational plan, it will be a panic driven knee jerk reaction with a big dose of blame game grandstanding. What comes after that is what I fear the most.

Barbarians_R_Us's picture

I think you are correct in that political choices today are NOT for the good of the county, but for the good of the votes they can bring. But rather than blame the politicians for this (not letting them totally off the hook however) take it one step deeper. Why is this? Tragically it is the ignorance, laziness, uncooperative, immature, short-sighted American public that see's -or is forced to see-  only Red and only Blue in every issue. The challenge for those of us who can rationalize and critically-think beyond the retchings of the MSM puppets is to somehow "Occupy" the minds of those who can't.

TeresaE's picture

Why does NO ONE ever mention the federal pensions and health promises?

Why don't people realize that the dollar amount is nearly as large for the federal employees as for the REST OF THE COUNTRY?

I'm sick to death of the meme of SS/Med being the killer, when federal employees and defense is completely verbotten.

This country couldn't fix a hole in a field with an entire cement plant and 40 engineers.

Simply amazing.

When we choose to ignore reality, we choose to help in spreading the disease.

DosZap's picture

TeresaE ., nailed it, want to see high $$$$$$$$$$$$$ PENSIONS?, look no farther.

Take the 10sq miles in D.C. and put a pen to it.

Government employees surpassed private employees by 60% to 40% a few years back.(20% more in no producing sector jobs,with 40% carrying the rest.)

Except for the Vets,who get next to ZILCH.

And except for the vets, who gave more than any of us $$$$wise.

These Fed emps produced nothing for it.40hrs a week,an office and a computer.

masterinchancery's picture

A clueless moron at work.  Deficits have to increase?  Deficits can be closed with tax increases(increasing private debt)? Empirical evidence going all the way back to the 30s says absolutely wrong.

Ace Ventura's picture

No doubt. Every stinkin' bobble-dome 'expert' is clamoring that we must 'all' take the pain, and that yes, higher taxes....errrr, revenue increases will have to be part of the equation, along with cuts in various programs and reductions in spending.

Color me jaded, or a pessimist if you will.......but which of those three (spending cuts, entitlement reform, and higher taxes) will be the only one enforced? Do I need to say it?

The problem was never a 'not enough taxes' issue, but a 'we want the ability to spend whatever we want' problem. It's like telling your boss that the reason you got yourself millions in because you weren't paid enough. Therefore, boss needs to experience some pain by raising your salary so you can get out of debt.....promise! For real this time!

rambler6421's picture

No sh** bitchez!

SDRII's picture

Junker says heavily indebted countries should not try to dictate to the Eurozone - ransqwk

Chump's picture

No more of these silly articles that don't include a timeframe.  "Pain is coming."  No shit.  In other news, the sun will blow the fuck up and all life on Earth will be obliterated.  It's the "when" that's important.  Without that you're making a prediction that can never be proven wrong.

oleander garch's picture

The other option, of course, is to stop paying the debt; to write it off; or to write it down.  No dough for Fannie, Freddie or the MBS pool at the Fed.  No dough for holders of student loans.  No guarantee of bailouts for unfunded derivatives such as the AIG transaction.

Since the proceeds of the debt payments goes to the top one tenth of 1% who are the truly Galt deserving breakers of the boundaries of space, time and conventional morality, that will not happen.

However, we will need to find some more 'technocrats' like Tim G., Mario M and the like to make sure the debt burden continues to grow on everyone else so that the truly deserving get paid. It will be a dangerous job in a well armed nation.  

twotraps's picture

Great article and comments.  I really don't think Anyone knows the bottom line.  That would require agreed upon, accurate records, good luck with that.  We hear the words 'raise taxes' and we hear 'big bad deficit' and think.....hmmm, you mean use more tax money to pay off the debt??


The govt has been running a Giant Pretend Account.  Its not like the accountability the rest of us live by, where real consequences exist.   Whats the difference between the govt posted stats and Sino-Forest?? can you check on it?  As a person watching this whole debacle wonderin how to protect what I have, I constantly come back to 'value'.   In order to continue our path of spending and printing then value must eventually suffer.

common_sense's picture

Pain for everybody??  hummm... I dont think so...

Zer0henge's picture

The only pain I see coming is more falderoll from alcoholic gold bug gurus and silver wastoids.  If we could get info without the falderoll and invective against rich people, who we all aspire to be with our gold and silver riches, things would be much more pleasant.

hunglow's picture

I'd rather feel the pain then nothing at all......I think.

algol_dog's picture



- Words of wisdom in these times ...


Quinvarius's picture

Debt default does not mean deflation.  A lot of people are going to be surprised to find out what happens when all the money that was created when loans were made becomes free-range cash with no ties left to debt payments.  That is the problem with fiat debt backed currency.  You lose the debt and it is the same thing as a gold backed currency going off of gold, but 10x worse.  The fact that banks use the debt as an asset doesn't matter one bit.  Someone already has the money, and the debt only mattered to that particular bank.  The more banks that fall like dominos, the more inflation there will be.  Fiat is damned if you do, damned if you don't.  Stocks might fall, but prices asset will begin to rise very fast.

Libertarian777's picture

it always depends on how one defines 'taxes' that the 'rich' pay.

Often they are comparing income tax rates (which is the only thing lower income people pay if at all) against capital gains taxes (which the rich are wont to pay).

But shouldn't the question be why is there an income tax at all? Ron Paul's the only person asking this question.

But how do we pay for schools people ask. Well that's why you pay property tax.

How do we pay for police and fire you ask? well that's why we pay state and local taxes.

But how will we pay for roads? well that's why we have a gasoline tax.

What about the 'common defense'? well corporate taxes more than cover the cost of the pentagon even given its 'expeditionary' nature (offensive nature, vs 'defense').

so all legitimate roles of government are covered by other (non-income) taxes.

So what about social security and medicare? well we pay a tax for that too. Ah ha... but the tax doesn't cover all its expenditures you say? well.. THAT's why its called a PONZI scheme. There are no returns, and no assets, and the only way you can get anything out is to take from others. At least Bernie Madoff's scheme was voluntary, when the government gets involved you're COERCED into the ponzi.

I think RP has a good point. You have to distinguish the bilionaire Steve Job types in the world, who shouldn't be taxed more just because they're successful, from the Fannie Mae / freddie mac / countrywide / BAC executives who get multimillion dollar bonuses for doing a crap job and requiring a taxpayer funded bailout. If those companies were allowed to sink, there would be no money for the executives to get paid, they could stand in line with all the other creditors.

It sickens me when all these 'rich' are supposedly 'marching on DC'. Its such a political ploy. Put your damn money where your mouth is. If the rich think they are not taxed enough, they can freely send money to the US Treasury. You don't need pomp and circumstance to do it, just mail a fucking cheque of 90% of your net worth and shutup already. You're encouraging the government to raise taxes, which severly removes the incentive for the productive people in this country to work harder to reach that next income level. Why slave away for 12-16 hour days in your small business if all it means is the government takes the upside (through tax) but you take the downside risk of losing everything if you make a mistake.

michael_engineer's picture

Howard --

This is a much better explanation of why change is coming that might bring pains in ways :

And it might help you to have deeper insight as to what might be fair.


jmc8888's picture

All 3 dead end and wrong.


The real way is the 4th way.  Glass-Steagall the fraudulent and odious debt out of existance.  Push other debt back onto the banksters that have it, and let them collapse. 


But of course, when one wants to keep the banksters controlling everything, then the first three would be a piss poor attempt to do so.



Don't tax for fraud

Don't cut for fraud

Don't print for fraud

Don't sell your assets for fraud (like gold, etc)




IT"S FRAUD.  We've been DEFRAUDED.  Allowing these bs debts to even be on ledgers is a CRIME.



Are we so stupid, we forget that this is possible? Or just too corrupted?  Ah yes, corrupted.  Howard Marks just can't think outside the monetarist box.  Which means he's worthless in REALITY.

Glass-Steagall, not fascist Austrio-Keynesian Monetarism. (monetarism IS anti-american).

faustian bargain's picture

Here's my modest proposal.

Let's end the Fed, and then tax the hell out of all Fed members, officials, owners, shareholders, and those of the Primary Dealers.

While we're at it, let's tax the hell out of all present and former members of all three branches of the government who voted in favor of, or otherwise supported, pro-big-government spending programs (most especially, military adventurism, Medicare, and Social Security).

And then, once that fails to work, let's tax the hell out of everyone who voted for all those people.

And only then, after all the leeches and deadbeats are destitute, let's have a debt jubilee so the rest of us can get on with life.


...anyway let's at least do that first thing. Herman Cain can go take a leap.

onebir's picture

"The proportion of income going to higher earners has risen dramatically, whether because of a) the rising importance of education ... or b) the movement of work offshore..."

What about:

c) the conversion of corporate management from stewardship of shareholders assets into a mechanism for rent extraction by corporate elites and

d) the conversion of finance, via lobbying and regulatory capture, from a public utility (the drains and sewer pipes necessary in a money-using economy) into another rent extraction machine for the financial elite.

Not least cos (a) and (b) don't seem to particularly fit with most of the income growth over almost 30 years going to the top 1% (as Mr Marks observes a couple of paras later): these factors would also have benefitted the middle class, and as higher education has become more widespread, intelligent/hardworking/lucky ex-members of the working class.

Given how much damage the financial sector has done the real economy, the banker taking time off to do painting may have been socially optimal...

(Perhaps less so back when the UK had such high tax rates, pre-deregulation.)

jonnyoption's picture

Mathematical deception.... However you turn it, capitalism, socialism, communism or any other ism out there utilized to define the leadership in any society, there will always be winners and loosers. By using various mathematical misinformations you will disarm the sceptics of letting the winners contribute to the society at large. Same as greed, which we have loads of in our profession...... In the end, the poor man is hurting and in order to avert deep social unrest, just paying some higher taxes when you make a shitload of cash shouldn't really be a problem when faced with the alternative - a gang of angry out of work protesters burning down your house or pouring sugar in tank on your Bentley......


Tell you what - I'll take the seven figure income and a 40 percent tax bill all fucking day long rather than 80 grand a year with a 4 percent or less tax bill. Great solution - let's trade incomes and tax rates, wealthy bitchez! That'll give you all some perspective on what you can bring home and live on for a seven day week 12 hours per day job. Keep printing, Ben - inflation will kill more people than all the wars put together when they can't afford the basic necessities of food, heat, and shelter. Congress legislated tax cuts. Well, that ain't working so good either right now. Land of the free, home of the brave, is going to turn in to survival of the fittest. All of the income in the world, and a tax rate of zero won't help the extreme privileged then - or anyone else. If you participated in fucking the whole country into the toilet for some status symbols and perks your life expectancy is going to make a fruit fly look like an octogenarian when the shit finally hits the fan for real. Just sayin'

onebir's picture

+1 for octogenerian fruit fly reference. :)