Howard Marks

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This Is What Happens When The US Treasury Market Is Taken Hostage By "Malfunctioning Algos"





"In some instances, malfunctioning algorithms have interfered with market functioning, inundating trading venues with message traffic or creating sharp, short-lived spikes in prices as a result of other algorithms responding to the initial erroneous order flow."... "If liquidity is as bad as it is now, what’s going to happen when things really get adverse?” said Richard Schlanger, who co-manages about $30 billion in bonds as vice president at Pioneer Investments in Boston.

 
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5 Things To Ponder: Random Musings





"...The negative divergence of the markets from economic strength and momentum are simply warning signs and do not currently suggest becoming grossly underweight equity exposure. However, warning signs exist for a reason, and much like Wyle E. Coyote chasing the Roadrunner, not paying attention to the signs has tended to have rather severe consequences."

 
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Treasury Collateral Shortage Crosses The Atlantic, Makes European Landfall





We're just a little over two weeks into PSPP and signs are already beginning to show that the ECB is effectively breaking the market. "The soaring cost of borrowing government bonds in secured lending markets highlights the distortions caused by the ECB's asset-purchase scheme, which analysts say could clog up Europe's financial system," Reuters notes.

 
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What Would Happen If ETF Holders Sold All At Once? Howard Marks Explains





What would happen, for example, if a large number of holders decided to sell a high yield bond ETF all at once? In theory, the ETF can always be sold. Buyers may be scarce, but there should be some price at which one will materialize.  But we can’t get away from depending on the liquidity of the underlying high yield bonds. The ETF can’t be more liquid than the underlying, and we know the underlying can become highly illiquid.... no investment vehicle should promise more liquidity than is afforded by its underlying assets. Do these recent promises represent real improvements, or merely the seeds for subsequent disappointment?

 
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10 Investment Quotes To Live By





This time is not different. The excesses being built up in the markets today will eventually revert just as they have been at every other peak in market history. The only question, of which no one has the answer to, is exactly when this occurs. With this in mind, there are 10-basic investment rules that have historically kept investors out of trouble over the long term. These are not unique by any means but rather a list of investment rules that in some shape, or form, has been uttered by every great investor in history.

 
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5 Things To Ponder: Variegated Contemplations





Yes, it is that magical week leading up to Christmas and the subsequent low volume push into the new year. It is "magic time" as hopes are high that "Santa Claus" will come to WallStreet. "Ignoring valuation – ignoring risk – is a recipe for disappointment and is the thing that is most likely to lead investors to ruin"

 
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Howard Marks On "The Lessons Of Oil"





"It’s hard to say what the right price is for a commodity like oil . . . and thus when the price is too high or too low. Was it too high at $100-plus, an unsustainable blip? History says no: it was there for 43 consecutive months through this past August. And if it wasn’t too high then, isn’t it laughably low today? The answer is that you just can’t say. Ditto for whether the response of the  price of oil to the changes in fundamentals has been appropriate, excessive or insufficient. And if you can’t be confident about what the right price is, then you can’t be definite about financial decisions regarding oil." - Howard Marks

 
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10 Legendary Investment Rules From Legendary Investors





As an investor, it is simply your job to step away from your "emotions" for a moment and look objectively at the market around you. Is it currently dominated by "greed" or "fear?"  Your long-term returns will depend greatly not only on how you answer that question, but to manage the inherent risk.  “The investor’s chief problem – and even his worst enemy – is likely to be himself.” - Benjamin Graham

 
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Risky Business - The Most & Least 'Uncertain' Industries In America





Day after day, the status-quo hugging, momentum-chasing talking heads that infest the world of investing will pile their clients' money into 'what is working' with little regard for 'value', risk (as defined by Howard Marks), or business uncertainty. Precious metals are sliding so 'sell' anything related to the precious metals industry. Biotech and software are surging so buy it all with both hands and feet... However, as the following two charts from Harvard Business Review suggest that strategy is in fact the absolute 'riskiest' approach to managing money as they break down the most (and least) uncertain industries in America.

 
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5 Things To Ponder: "Bear-ly" Extant





"It is a bad sign for the market when all the bears give up. If no-one is left to be converted, it usually means no-one is left to buy.” The extraordinarily low level of "bearish" outlooks combined with extreme levels of complacency within the financial markets has historically been a "poor cocktail" for future investment success.

 
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John Hussman's "Exit Rule For Bubbles"





History teaches clear lessons about how this episode will end – namely with a decline that wipes out years and years of prior market returns. The fact that few investors – in aggregate – will get out is simply a matter of arithmetic and equilibrium. The best that investors can hope for is that someone else will be found to hold the bag, but that requires success at what I’ll call the Exit Rule for Bubbles: you only get out if you panic before everyone else does. Look at it as a game of musical chairs with a progressively contracting number of greater fools.

 
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Oaktree's Howard Marks Explains The Difference Between Volatility And Risk





Volatility is the academic's choice for defining and measuring risk; but Oaktree Capital's Howard Marks warns Bloomberg TV's Stephanie Ruhle that "while volatility is quantifiable and machinable... it falls far short as 'the' definition of investment risk." In fact, he berates, "I don't think most investors fear volatility. In fact, I've never heard anyone say, 'The prospective return isn't high enough to warrant bearing all that volatility.' What they fear is the possibility of permanent loss." With $91 billion under management, perhaps it's worth listening to (and reading) his perspective: "In brief, if riskier investments could be counted on to produce higher returns, they wouldn’t be riskier. Misplaced reliance on the benefits of risk bearing has led investors to some very unpleasant surprises."

 
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5 Things To Ponder: Perspicacious Observations





This past week has seen the market repeatedly attempt new "all-time" highs only to be found wanting. There has been plenty of headline data for the "bulls" to feast on from the ECB announcing a program to buy bonds, surging ISM data and improvement in productivity. However, the underlying data has kept the "bears" in the game with new orders and employment showing weakness, unit labor costs shrinking and the realization that the ECB's plans are likely be ineffectual.

 
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