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Howard Marks: 2018 Delivering Alpha

CNBC’s Scott Wapner speaks with Oaktree Co-Chairman Howard Marks at the 2018 Delivering Alpha conference about the stock market cycle, how long the bull market can last and what is going to happen when growth drops off.

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Howard Marks: 2018 Delivering Alpha

Howard Marks: Delivering Alpha 2018

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Transcript

Thank you for being here Howard. Always a great time to catch up with you especially now. Kind of our midyear report. Maybe we should call it on where we are in the markets and we've heard from some great and insightful people already today here. But most recently others who have weighed in on the markets and I'd like to get sort of your temperature take the temperature on where we are Gugenheim. Alan Schwartz said this week we're in the eighth or ninth inning of the bull market. But there are tremendous storm clouds on the horizon. Jeffrey Gundlach who I'm figuring you know well we're getting closer to a recession he said looking at the spread between the two year and the 10 year Larry Fink noted the narrow breadth in the market as being maybe concerning. What do you see.

You know ever since the global crisis which means 10 years people have been asking me what inning are we in. And now I would say we're in the eighth inning. I agree with that. However. We have to notice that we this isn't baseball and we don't know how many innings there will be. We could go next extra. Exactly. And and so if it was a nine and a game we'd know what that means. But there could be 11 there could be 14 of course when you get to this point in the cycle. People start pushing out their horizons you know when it's been going on for five years they say Well I think we could make it three more wins going on for 10 years. They think I could make it five more. Which is counterintuitive. And people are doing that now. That. Shows optimism that it's somewhat dangerous.

I mean Jamie Diamond not that long ago said we're in the sixth inning. Warren Buffett seemed to agree with him. What do they see that you don't. Well first of all the economic recovery we're really.

Driving blind now we're in the tenth year of an economic recovery and the record for since the World War is 10 years. So will we beat the record. It looks like we will.

But is there something about 10 years which calls this thing to a close I could say well maybe you know you throw history out the window and we've just extended the cycle because of tax reform regs coming off and other things that are going on fundamentally around the world that are pretty positive. Exactly. But.

I have just finished a book on cycles called Mastering the Market Cycle and it's it's going to the printers. And one of the things it says is that is that extended bull markets are usually greeted by forewords. It's different this time. And you know. In every extended cycle that I've seen in my 50 years. When you are in the later stages people started coming up with rationalizations for why it's not going to end. And of course usually it turns out not to be any different. So we'll see. It certainly I heard David a minute ago.

And you know he said he doesn't see a recession Nishio certainly a slowdown he said or next year.

I don't see him either. But you know when you're when you're talking about. Being in that 10th year or 11th year of recovery and that tenth year of a bull market. How much do you want to put your chips out on the table or do you want to take a few off.

That's really the key question you said in January quote and it certainly got a lot of fodder the easy money has been made. Now the market's changed a little bit since then valuations have come in. Earnings certainly look strong. Do you still think this is the market more attractive today than it was in January when you wrote that.

It is more attractive because the earnings estimates have gone up a lot. You know if you went back let's say eight months ago before the tax bill was passed we were talking about.