Howard Marks On Uncertainty And The Fallacy Of 'Risk-On / Risk-Off' Investing

Tyler Durden's picture

Oaktree's Howard Marks is mildly more positive than normal - due mainly to his belief that most people are not uber-bullish - but his latest letter expounds in succinct detail on all the risks that await us (notwithstanding nominal price eruptions courtesy of QuEnfinity). Critically, he notes:

These days we hear little about anything other than macro considerations. Thus investors believe more than ever [as security movements are highly correlated] that the route to investment success lies in correct judgments about the macro future - giving rise to 'risk-on, risk-off' investing.


Playing the market in the short-term based on macro forecasts is one of the many things in investing that could add greatly to results if it could be done right... but it can't, certainly not consistently!

Summing up: "The world seems more uncertain today than at any other time in my life."


Full letter below:

On Uncertain Ground

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Id fight Gandhi's picture

We're all fucked, thank you all, goodnight.

elams1894's picture

Sorry QE wha? huh?  Lauren could have been talking about how great the latest episode of Grey's Anatomy was and I would have been like... yeah, thats so cool...

SpykerSpeed's picture

It's only uncertain if you're a complete Dumbledore.  Anyone with a brain can see they should stay away from the markets and stay away from the ballot box right now.  It's not worth your time or risk.  Just stack precious metals, and live someplace with low crime where people aren't going to come steal your shit when the financial collapse happens.  Get a gun and a month supply of food & water.  Then buy your iTrinkets and party with friends.  Being prepared doesn't mean you can't enjoy the ride over the cliff.

Cult_of_Reason's picture

* 6 Chinese Ships Entered Japan's Territorial Waters Near Disputed Senkaku Islands


Risk On!

(It will take a while for the algos to figure out that the wrong risk is on, the risk of war)

LetThemEatRand's picture

Normalcy bias is a concept that I expect will be discussed much in the years to come (as in, how did everyone fail to see this coming?).

Everybodys All American's picture

Bernanke is a financial nightmare to every man women and child in America. This guy continually allows Congress and this president to not come to grips with the country's deficit spending. When are the rest of you going to wake up?

Cult_of_Reason's picture

This is a classic crony capitalism trickle-down Fed monetary policy (regressive redistribution to Wall Street banksters, promoting income inequality, and rigged manipulated markets).

Everybodys All American's picture

No. This is debt servitude. You and I have been enslaved. It can never end now and I quite frankly think Bernanke is a psychopath and must be stopped before he destroys the country.

Cult_of_Reason's picture

You need to realize that the special interest groups completely own and control our government. Wall Street banksters completely own and control the Fed (Goldman Sacks economist Jan Hatzius this morning on Bloomberg TV said exactly what the Fed will announce, he already knew the details of the announcement in advance).

You and I (all of us) are "the public (sheeples) that needs to be educated about the benefits of QE" (aka brainwashed with MSM propaganda). Bernake does not give a shit about us because he knows we have no power to do anything to him (even Ron Paul, a congressman, cannot do anything to Bernanke).

roadsnbridges's picture

What is 'macro'?

Let alone 'micro'.

Just BTFD, STFR.  Hourly.

Why doesn't the Kenyan announce his golf games?

Massholio's picture

I now realize ZH is a government plant. The goal is to make anyone with a hope for a more sensible future so discouraged they put an entry and an exit wound throught their skull.This gives the Orkin Man less work to do. If you buy gold it will be confiscated = you are fucked. If you hold on to the currency of the realm to buy food you = also fucked. Ben wil print your currency into worthlessness while making it illegal (violence against you and your family)l to hold gold. so long, thanks for all the fish!

roadsnbridges's picture

Good thought, but Stellar Wind isn't up til Sept.  -  oh, sht.

fonzannoon's picture

I wonder if all the guys like Jim Rogers who said the dollar os doomed, but was long the dollar, got the fuck out today.....

roadsnbridges's picture

Can't wait for the next hedge fund report meeself.

e-man's picture

I'm sure everything will be fine.  The TSA is about to ratify their union contract and then we will all be safer.

roadsnbridges's picture

Sorry, meant to give you a greenie, but had to puke.

e-man's picture

I'm betting the first order of business for the union will be changing those stupid blue colored TSA shirts to a more authoritative shade of brown.


Hmmm, 5 black Escalades just pulled up in front of my house, I wonder what they

roadsnbridges's picture

Amazes me how ignorant RP morons are of the Tea Party.

Their bad.

and stupidity

ziggy59's picture

Isnt this the guy that recently bought the nyc appartment of late steven ross widow courtney ross for 52.5 million

gonetogalt's picture

"Entitlements are the biggest problem, Social Security, Medicare, Medicaid"

Enter the 750 million rounds to be dispersed through every alphabet agency from the Post Office to the Forest Service.  Folks are so worried these rounds will be fired by Federal Officers, anyone ever think that this ammo (and probably weapons to fire same) will be passed out through the back doors of these agencies by low level employees to friends and associates? (Think gangbangers, ect.)Just takes the right social catalist to get it moving.  Think class warfare, AKA Obama rhetoric.  Boomers and their surviving parents are the most entitled and most expensive class of citizens to maintain, so many one time death benefits are a cheap alternative compared to years of SSI, VA and medical spending.  Nice thing, when the thing goes far enough the preppers, survivalists, goldbugs, ect still standing welcome full martial law.  No problem getting things finally under control, .40 S&W and 9mm won't bother body armoured troops, and no small caliber high velocity ammo is included in this purchase, as far as I know.

Just thinking of the worst... 

Dr. Engali's picture

That's a very interesting scenerio you paint their. I always looked at like the government wanted to have ammo at strategic locations, but I never looked at it from that perspective. Thanks for your post.

buzzsaw99's picture


chump666's picture

volatility is going to be brutal coming months. 

zorba THE GREEK's picture

Yea though I walk through the valley of uncertainty, I shall fear no

evil, for Gold is with me. My silver and platinum comfort me. 

Stanley Lord's picture

No longer impressed by Howard.

 Go back and read his writings before 2007, he was bullish as far as the eye could see, after 2008 still bullish, only now he is seeing reality and realizing his past stock picking success had nothing to do with fundamentals but a distorted Fed fueled market.

 It is dawning on him his career is over because the front running is over.



barroter's picture

Only forecasting I know of that's predictable is this.  In fall it'll get cooler, winter, even more so. In Spring it warms up.  Wall St was always a bet, perhaps an educated one when ttimes were dulll and boring, but still a bet. Today? Good luck.

Yen Cross's picture

Risk /Reward  (Tyler) Personally, I like 2:1 on a m-5 chart.

edmondantes's picture

Keynesian rubbish... all prices are distorted and manipulated... hence the focus on "Macro" ... how can one form a sensible opinion about any investment when rates are at zero and hyperinflation is on the horizon... it is pathetic that nonentities like this has have hundreds of billions to invest

edmondantes's picture

Keynesian rubbish... all prices are distorted and manipulated... hence the focus on "Macro" ... how can one form a sensible opinion about any investment when rates are at zero and hyperinflation is on the horizon... it is pathetic that nonentities like this has have hundreds of billions to invest