Howard Marks: Market Overvalued, But No Bubble

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Howard Marks: Market Overvalued, But No Bubble

Oaktree Capital Management chairman Howard Marks recently had an interview with Christoph Gisiger of Finanz und Wirtschaft, (h/t Zero Hedge), telling Gisiger that the market is on the high side of fair, but doesn’t look like a bubble, and that there should be enough new investors falling in love with the market to fuel this bull run for a while longer.

“Let’s think about a pendulum: It swings from too rich to too cheap, but it never swings halfway and stops. And it never swings halfway and goes back to where it came from,” said Howard Marks.

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He explains that people pile into the stock market when it’s on the upswing, and then jump ship when prices start falling, fueling the trend they are reacting to in both cases. Between 1960 and the 1990s equities went up and up as more segments of the US population got involved in the market, and then fell dramatically afterward first with the dot com crash and then with the financial crisis. The stock market’s reputation is only now recovering, and Marks think the trend has a ways to run (though his analogy demands that it will eventually crash again).

He also points out that the current S&P 500 (INDEXSP:.INX) PE is above recent averages, obviously, but the historical average is 16x, so while stocks might not be cheap he doesn’t think there is reason to be worried about a bubble.

Great investors are unemotional: Howard Marks

In the long term, he recommends th