For several years, investors have been acting bullish (if not thinking bullish) in bonds, bidding up safe instruments, while the interest in equities is still modest, with the potential for more relative value, says Oaktree’s Howard Marks.

Howard Marks

H/T cornerofberkshireandfairfax

Howard Marks video and transcript below

Jason Stipp: Howard, you have a process that you call taking the temperature of the market. This is where you look at things like the attitudes of investors and commentators, headlines, the interest in new issuance, the amount of leverage that’s taken out. When we spoke about a year ago, you said that the mood of the market was moderate. It wasn’t too pessimistic, it wasn’t too optimistic, even though we were facing some European crisis issues. I am interested to check in with you today, given that the market is up about 25% over the trailing 12 months, what’s the temperature of the market now that we’ve seen a continuance of this bull market?

Howard Marks: When we last spoke, by the way, most people when they say “the market,” they mean the stock market. I don’t, because our business is credit. And when I say the market, I am kind of talking about all the markets together, which is challenging, because they are all different. But when we spoke a year ago, I thought that for equities, the market temperature was actually quite cold, interest in them was quite low and had been low for a decade, and they penalized people for a decade, the so-called lost decade. People had lost interest, and I thought they were quite interesting for that reason because they were overlooked, unloved, underowned, and underrepresented in portfolios. Of course, a good deal of that has changed, thanks to the movement over the last year plus, as you described. I think there is still only a modest interest in stocks. I think the stock representation is not back to what it was 12 years ago or 20 years ago or what have you, and I don’t see enormously bullish commentators.

Full transcript