Yesterday, we posted the full speech by Howard Marks at Barclays Conference. Today, we found a copy the presentation from Marks below is the full document.
What’s driving the markets?
- A great deal of money has been created to stimulate the world’s economies.
- Money has to go someplace.
- The central banks have lowered the return on Treasurys and other safe investments.
- This has caused people to look to risky markets for the returns they crave.
- The returns on risky assets have been good in recent years.
- Default experience has been unusually benign for four years.
- All things equal, psychology becomes more positive after markets rise.
Even though people may not be “thinking bullish,” many are “acting bullish.”
The price for pursuing safety appears high today, and the price for accepting risk has been low of late. This combination encourages risk-taking.
Choosing Your Direction
The U.S. economy is recovering
- Psychology is restrained
- Prices are moderate
- Safety is priced too high to pursue it to the exclusion of risk bearing