Howard Marks of $OAK latest Memo 'On Uncertain Ground'

The latest from Howard Marks of Oaktree:

The world seems more uncertain today than at any other time in my life.  That’s a simple sentence but one with significant implications.  And it’s not just me.  Here’s what The New York Times said on August 12 in an article about John Bogle, the founder of Vanguard:

“It’s urgent that people wake up,” he says.  This is the worst time for investors that he has ever seen – and after 60 years in the business, that’s saying a lot. . . .  “The economy has clouds hovering over it,” Mr. Bogle says.  “And the financial system has been damaged.  The risk of a black-swan event – of something unlikely but apocalyptic – is small, but it’s real.”

I’m going to devote this memo to the uncertainty in the world and the investment environment and then offer my take on the appropriate strategy response.  This will require me to touch on a large number of topics, but I will try to dwell less than usual on each of them.  If after reading this memo you find yourself hungry for more, you might go back to “What Worries Me” (August 28, 2008) and “The Long View” (January 9, 2009).



The Macro-Economic Setting

It’s my belief that we’re going to see relatively sluggish economic growth in the U.S. for a prolonged period of time.  My expectations for other developed nations, given their specific issues, are even less positive.  (This is a good time for my typical reminder that I am not an economist, and far from all of my observations would be supported by that fraternity.  And please note that one of the key tenets of Oaktree’s investment philosophy dictates that our investing will not be governed by macro forecasts.  We say it’s one thing to have an opinion on the macro, but something very different to act as if it’s correct.  I urge you to consider adopting a similar attitude toward all macro forecasts, especially mine.)

Full document can be found here.