Latest memo from Howard Marks: There They Go Again...Again

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#1
His latest post:

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Some of the memos I’m happiest about having written came at times when bullish trends went too far, risk aversion disappeared and bubbles inflated.  The first and best example is probably “bubble.com,” which raised questions about Internet and e-commerce stocks on the first business day of 2000.  As I tell it, after ten years without a single response, that one made my memo writing an overnight success. 
 
Another was “The Race to the Bottom” (February 2007), which talked about the mindless shouldering of risk that takes place when investors are eager to put money to work.  Both of those memos raised doubts about investment trends that soon turned out to have been big mistakes.
[...]
https://www.oaktreecapital.com/insights/...arks-memos
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#2
Embrace the coming bubble....

...I have been around during 1993 bubble, dotcom bubble, global credit bubble....now not that bubbly yet...except in crypto-currencies

as said, sell progressively into the bubble...
"... but quitting while you're ahead is not the same as quitting." - Quote from the movie American Gangster
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#3
(28-07-2017, 10:08 AM)gzbkel Wrote: His latest post:

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Some of the memos I’m happiest about having written came at times when bullish trends went too far, risk aversion disappeared and bubbles inflated.  The first and best example is probably “bubble.com,” which raised questions about Internet and e-commerce stocks on the first business day of 2000.  As I tell it, after ten years without a single response, that one made my memo writing an overnight success. 
 
Another was “The Race to the Bottom” (February 2007), which talked about the mindless shouldering of risk that takes place when investors are eager to put money to work.  Both of those memos raised doubts about investment trends that soon turned out to have been big mistakes.
[...]
https://www.oaktreecapital.com/insights/...arks-memos

Thanks for the post. I'm currently 40-45% in cash (and musing about liquidating more, or transferring into less risky assets),  because I for see little upside and risk of a large downside.

I like this quote below at the bottom.

Raghuran Rajan (at that time, an IMF economist) issued a warning in this paper in 2005 (http://www.nber.org/papers/w11728), and even presented it at Bretton Woods in 2007, where he was basically laughed at. One of the things implied was the idea that money managers HAVE to take positions in the market because they are rewarded for *relative risk* (due to how they are compensated), not absolute risk.

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We Agree, But . . .
Andrew told me about a conversation he had recently with some fund managers, in which he went over a lot of what I’m discussing here.  Given today’s conditions, their response started predictably: “We agree, but . . .”
                                            
We hear a lot of that these days:
 
  • We agree, but the things we’re doing offer higher returns than the rest.
  • We agree, but cash isn’t an option when it returns nearly nothing.
  • We agree, but we can’t take the risk of being out of the market.
  • We agree, but there’s no alternative.
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#4
(28-07-2017, 10:47 AM)tanjm Wrote:
  • We agree, but the things we’re doing offer higher returns than the rest.
  • We agree, but cash isn’t an option when it returns nearly nothing.
  • We agree, but we can’t take the risk of being out of the market.
  • We agree, but there’s no alternative.
==================

Well, generally it is quite trued isn't it?
I am not sure in what circumstances will the interest rate be increased to maybe 5%?
Need a good dose of imagination and out-of-the-world acumen.
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#5
hi yeokiwi,
There is definitely a dose of truth! Unless it is outright fraud, all market inefficiencies have various doses of truth - whether is it the basis for the narrative in the first place, or how it eventually turns out. Mr Market is made up of highly intelligent folks, more intelligent n informed than either u or me - so how can it be untrue??!! Smile

IMO (or actually HM's opinion), the only difference is where the asymmetry lies then. We only can make money if we consciously n generally stay on the correct side of the assymetric risk/reward curve.
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#6
(28-07-2017, 01:14 PM)yeokiwi Wrote:
(28-07-2017, 10:47 AM)tanjm Wrote:
  • We agree, but the things we’re doing offer higher returns than the rest.
  • We agree, but cash isn’t an option when it returns nearly nothing.
  • We agree, but we can’t take the risk of being out of the market.
  • We agree, but there’s no alternative.
==================

Well, generally it is quite trued isn't it?
I am not sure in what circumstances will the interest rate be increased to maybe 5%?
Need a good dose of imagination and out-of-the-world acumen.

You may have missed the point I think. The idea is that most professional money managers always have to stay in the market because they are rewarded on relative risk, not absolute risk. Even if the market looks over valued, for example, they can't just go to cash (except in a small way).

This implicitly means that there is a tendency to over pay for risky assets even when rationality may say otherwise, hence the cycle of boom and bust.
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#7
After 23 pages of saying how it is a bad time to be investing, he ends by saying that Oaktree will "move forward but with caution." For all he has put forth, I am expecting him to go all cash.

If he is truly convinced of his arguments, the poor risk/return environment, etc, why not liquidate all investments and return cash to clients? As an asset manager, he admits that he does not have the option to not invest. As retail investors, there is no pressure for us to swing the bat. I have not made any new purchases since the year started.

I agree with most of his arguments, specifically that people are taking more risk for lower returns, and that valuations are high. But in the Singapore market, equities are fairly valued, so I'm willing to stay a little longer...
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#8
http://mobile.abc.net.au/news/2017-05-31...fmredir=sm

This is one asset manager that talks the talk and walks the walk.

IMHO history has shown we never know when is the peak, so maybe a cash heavy portfolio is better at this stage as markets are all getting toppy, so any further upside can be benefitted from, and any sudden downside will not find the investor out of ammunition.

Currently already around 65% cash. Haven't bought anything in the past quarter.


Sent from my MotoG3 using Tapatalk
Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com
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#9
So far i am only interested in selling because when the Sh** hits the fan, i think none can escape.

Even capmalltrb3.08%210220 shouldn't be affected.

i have sold 80K in 3 tranche @ avg price of 1.04 since then.

All bought @ IPO
WB:-

1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.

Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.

NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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#10
i have also sold Keppel D. C. Reits also in two or three tranche. 1@1.20 and 1@1.24.

Most probably will be selling FLIT in 2 tranche soon if the market holds.

These two stocks were IPO too.
WB:-

1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.

Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.

NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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