Discussing the current market environment, and where opportunities exist, with Oaktree Capital Group LLC (NYSE:OAK) Chairman Howard Marks. “Europe is probably better than the U.S.,” he says.
Howard Marks: Moderate economic recovery
i think what’s driving things is the low rate of interest as mandated by the central banks. if you can only get 1% or 2% on high yield treasuries, something else looks good at 6%, stocks at something, and normally the expectations of everything else would be higher. does that mean if those interest rates start to move up because conditions are normalizing this is the end of the game going into 2013? that’s extreme to say the end of the game. i think that every — all judgments in the investment markets are relative. if this pays this, this should pay that, et cetera. i think everybody expects higher interest rates. though moved up since bernanke talked about tapering. they may move further but i don’t think a great deal more when it actually happens. and i think that, you know, have you to be balanced now. there’s nothing which is cryingly cheap today like it was a year and a half ago which means today you have to build some caution into the things you’re doing. you can’t be aggressive today and not mindful. i imagine the distressed opportunities you are famous for is much fewer between than in the past. given what you just laid out, where are you buying? where do you see opportunities? can you be as specific as possible? i would love to be specific so you and all your watchers could emulate us, in fact, step in front of us but i’m probably not going to do that. there are things to do in credit far and few between. europe is basically probably better than the u.s. pockets around the world. shipping is an area. you know, the average viewer can’t invest in a ship. basically private investments are higher to invest in because the public can’t invest in them and drive them up. it’s a challenging period. as you say, not much in distress. we have a moderate economic recovery, low interest rates and accommodative capital markets. these are not the circumstances that give rise to opportunities in distress. so, again, i say, my intro the last couple of years at oaktree has been move forward but can caution. we’re not so terrified we’re afraid to move forward but we insist on caution in the equation because today is not the time for aggression. it’s not the time for mindless