Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 606

Howard Marks: the investing game has changed

Howard Marks is closely followed by investors, and for good reason. He’s the Co-Chairman of Oaktree Capital Management, the world’s largest distressed credit investor managing more than US$200 billion. He’s best known for his client letters published since 1990.

Over the past week, Marks appeared on Bloomberg TV and he was both blunt and nuanced - as he was in a follow-up client memo.

In his TV interview, he was blunt about changes wrought by Trump and his tariff policies. He thinks they amount to nothing less than a regime change.

Mark says that we’ve lived in an era of globalisation since World War Two. There’s been open trade, efficient supply chains, and cheap goods:

“I believe that the last 80 years since World War Two have been the best economic period in the history of mankind. And one of the major reasons was the growth of trade.”

Free trade brought significant benefits, including greater productivity, broader access to goods, and lower prices. It helped keep inflation down, which aided central banks, consumers, and investors:

“Worldwide welfare is maximized when every country does the things it does best and cheapest and then sells them to the countries that need them, which do other things and sell them to other people. That’s how trade works ...

… The good news is that Italians make the pasta and the Swiss make the watches. But if we stop world trade, and the Swiss have to make their own pasta and the Italians have to make their own watches … people in both countries will be a little worse off.”

Marks believes the era of free trade is now fading.

In its place is a new world. One where countries are rethinking trade, tariffs are increasing, and domestic production is finding favour, even if it means higher prices for goods.

“Tariffs are an increased cost. Somebody has to pay them.”

This will result in slowing trade, increased inputs and prices, and less efficient supply chains - all of which will hurt economic productivity.

Not prone to big statements, Marks makes one anyway:

“This is the biggest change in the environment that I’ve seen probably in my career.”

How investors should play it

For investors, Marks says old models and playbooks need to be thrown out. Because what’s worked over the past 80 years may not work in future. The new environment demands a different approach.

That approach shouldn’t rely on forecasting. In the past, Marks has been scathing of macroeconomic forecasts, and he now thinks they’re even less useful. He thinks forecasts can’t work in an environment like this because the world is so uncertain. It’s hard to predict what will happen the next day, let alone the next year:

“… the probability that we know what the future is going to look like is lower than ever.”

So what should investors do?

At first glance, Marks isn’t encouraging, suggesting that there’s “no analysis you can do to determine whether today’s asset prices are right for the environment ahead.”

However, he doesn’t just mean today’s environment, but any environment. Put simply, we can’t possibly know whether a market multiple of 20x earnings is appropriate pricing for what’s ahead, or whether that multiple should be higher or lower.

What Marks is saying is that given the enormous changes happening today, and the likelihood of higher prices and inflation, investors need to tread carefully. And more than ever, they should focus on probabilities and price.

He says the market falls should have investors thinking like a shopper at a sale. “Bloomingdale’s just put everything on sale,” he quips. “Prices have come down…It’s on sale. That should encourage people to think about buying.”

Notice that he doesn’t urge investors to buy now, but that they should think about buying assets that have fallen in price, while being conscious of the risks brought by Trump and his tariffs.

Marks does say that he maintains his preference for credit over stocks right now. “The yields on credit are still very healthy,” he notes, pointing out that high-yield US bonds have jumped from 7.2% to nearly 8% yields in just weeks, making those bonds cheaper.

His take on stocks is more cautious: “[US] Stocks have delivered an average of 10% a year for the last hundred years, but not when the P/E ratio was 19.” With valuations where they are today, he thinks expecting historical returns would be a mistake.

Finally, as to whether the US remains a strong place to invest, Marks says that it’s no long a given, especially given its large trade deficits:

“Can the events of the recent days … cause there to be a credit limit? Can they cause a bill to be presented at some point in time? And if the answer to either or both of those questions is yes, that’s a real risk. If people don’t like the [US] dollar, if they don’t like investing in the United States, don’t want to hold an unlimited number of Treasuries, if we just make people mad, and say “the US is still a great credit but I don’t want to hold your debts because look how they’re treating me”, the fiscal situation would be very complicated.”

 

James Gruber is Editor at Firstlinks.

 

15 Comments
Kevin
April 14, 2025

On Larry Fink last week.I saw the obvious,does Blackrock have a podcast,they do.Only just over a week to see the obvious,I surprised myself there at the speed I saw it.
From April last year ,he discusses retirement,how he sees things etc. He points out what I saw 2 decades ago perhaps.That last pay cheque,then you retire.The govt can't fund you as the demographic time bomb hits.So replace earned income ( wages) with investment income ( dividends etc,and pensions to kick in when you reach that age).

He isn't a fan of the financial industry,press etc.Garbage was the word mentioned.That led me to a different podcast ( behind the numbers? forgotten already). A person from a low background worked his way up and spent a good number of years working at Blackrock.

He made his name from reading an annual report. That one person that reads note 29 clause D,and brings down a whole company.The company was Maxwell corporation .A newspaper baron in the UK that "fell" off the back of his superyacht.If my memory is correct he brought down Alan Bond , pointing out he was trading insolvent.My memory could be wrong though. Note 29 stated that the entire profit made by Maxwell ,( Mirror group newspapers I think) was due to gains on foreign exchange.That would be impossible. The usual shoot the messenger,discredit the messenger etc. Threaten the messenger,you will never work again,the normal life things.As a very junior analyst doing a bit of detective work his employer stood behind him and backed him.He made mention of other people pointing out the corporate cowboys of the 1980s and 90s, those people never worked again.

Middle of last week I checked the Blackrock share price.Around $950, from an IPO price of $14.Keep it simple ,the shares have never been split.A good example of compounding so people can spend a lifetime saying "you can't do that".
I'll have to explore that podcast a bit more.I might be able to remember it by thinking of the Norges investment bank podcast.How Norway funds their pensions with a sovereign wealth fund.

Meanwhile I suppose we can crack on with all the govt has to do is take money off somebody else and give it to me.I deserve my fair share. Or ,what's mine is mine,and what's yours is mine.

Peter Care
April 14, 2025

Having read Howard’s 2 books (The most important thing, Mastering the market cycle), I have great respect for him. It says something that Warren Buffet not only reads his memos. but volunteered to write the forward to his first book.
When Howard says this time is different, it really is, but that does not mean it is time to panic. Howard is still investing in distressed debt (His fund Oaktree’’s specialty), you just need to show more caution and likely demand a larger margin of safety.

Howard also presents at Wharton every year and copies of his talk and the Q&A can be viewed on youtube.

It is worthwhile following this man.


Deep Value
April 14, 2025

You do not know if he is any good at his investment craft. Why? Because he has no track record and does not manage money.

If you listen to him over the past two decades (!), he is continuously cautious (outside a blip in 2008-2000).
Anyone can be cautious if you do not have to manage real capital. He writes monthly newsletters for his firm.

So interesting that people espouse thinking for themselves in investing, and at the same time glom on to a figure like Marks . . . . . because others blindly glom on to him.

Abel
April 11, 2025

Normally I remain sceptic when the usual "This time is different" remark is uttered whenever we have a major financial crisis. However, as Howard Marks says, this time the rules are being changed. Even if the old rules are brought back in 4 years time, the world is not going to wait. The world will adapt. The damage is already done. Even if the tariffs are discarded, the uncertainty will be there.

I watched this video which speculates on what Trump's advisers may want to achieve: https://www.youtube.com/watch?v=1ts5wJ6OfzA

Will it come to be? No idea. As Howard Marks says, even though we know things have changed, it is extremely hard to know what actions we should take.

Neil
April 11, 2025

I have a huge amount of respect for Howard. I wonder though whether he is a little too US-centric in this piece (assuming James has contextualised his memo correctly).

It seems to me that, assuming the tariffs do in fact ultimately apply as broadly as the underlying thesis on which Howard based his remarks, the US is dealing itself out of the global trading system, but that this does not mean that other countries around the world won't trade BETWEEN themselves.

To use Howard’s Switzerland/Italy analogy, how does tariffs being applied to Italian imports and Swiss imports into the US have any effect on Italy selling pasta to the Swiss or the Swiss selling watches to the Italians. All I see is the outcomes ultimately being US citizens get poorer (through higher inflation / interest rates) and more (free) trading between non-US countries.

Liam
April 11, 2025

It's the knock on effects. Country X can no longer sell as much product to US, so dump their surplus stock to Country Y's market at cheaper prices. Local produces in Country Y can't compete in their own local market, complain to their local MP, and in response Country Y implements protectionist policies to help keep their home grown products competitive.

Nate G
April 14, 2025

Great explanation!

Phil Pogson
April 10, 2025

Howard is approaching 80 and has been in the finance scene all his working life. Apparently, Warren Buffet stops what he is doing when one of Howard's memos appears in his inbox and he reads it and always learns something worthwhile. There might be a lesson there.

lyn
April 13, 2025

Wish Firstlinks had provision for a thumb up or thumb down to like or dislike rather just a reply. L

Deep Value
April 13, 2025

Why do people care what Marks has to say? Really.

Unlike Warren Buffett, Marks has not managed a portfolio for more than 25 years!
That's right . . . . he is a critic of the boxing match, but is definitely not in the ring.

Also, in his prior portfolio management duties from decades ago, he was a fixed income (bond) manager.
Not equities.
Fixed income has a totally different way to looking at risk/reward.

Once again, why does anyone care what this guy thinks about the stock markets?!?!

Josh
April 10, 2025

Yes, Russell…I would say there’s few who understand the US monetary system as well as Howard Marks. That doesn’t mean Howard is always right.
But if you’re going to assert that Howard Marks doesn’t understand, then it would certainly be helpful if you could explain what Marks is getting wrong. Warmest.

Paul R
April 10, 2025

I reckon he does, Russell. So, please enlighten us...

Russell
April 10, 2025

Howard Marks shows he does not understand the US monetary system. He's not the only one, mind.

Paul
April 10, 2025

Please explain.

Chris Davis
April 11, 2025

ha ha ha, oh wait,,, your serious..... ha ha ha

 

Leave a Comment:

RELATED ARTICLES

Howard Marks and his 'Latest Thinking'

Corporate bond opportunities in today’s market

Tariffs are a smokescreen to Trump's real endgame

banner

Most viewed in recent weeks

Australian house prices close in on world record

Sydney is set to become the world’s most expensive city for housing over the next 12 months, a new report shows. Our other major cities aren’t far behind unless there are major changes to improve housing affordability.

The case for the $3 million super tax

The Government's proposed tax has copped a lot of flack though I think it's a reasonable approach to improve the long-term sustainability of superannuation and the retirement income system. Here’s why.

Tariffs are a smokescreen to Trump's real endgame

Behind market volatility and tariff threats lies a deeper strategy. Trump’s real goal isn’t trade reform but managing America's massive debts, preserving bond market confidence, and preparing for potential QE.

The super tax and the defined benefits scandal

Australia's superannuation inequities date back to poor decisions made by Parliament two decades ago. If super for the wealthy needs resetting, so too does the defined benefits schemes for our public servants.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Getting rich vs staying rich

Strategies to get rich versus stay rich are markedly different. Here is a look at the five main ways to get rich, including through work, business, investing and luck, as well as those that preserve wealth.

Latest Updates

SMSF strategies

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Superannuation

The huge cost of super tax concessions

The current net annual cost of superannuation tax subsidies is around $40 billion, growing to more than $110 billion by 2060. These subsidies have always been bad policy, representing a waste of taxpayers' money.

Planning

How to avoid inheritance fights

Inspired by the papal conclave, this explores how families can avoid post-death drama through honest conversations, better planning, and trial runs - so there are no surprises when it really matters.

Superannuation

Super contribution splitting

Super contribution splitting allows couples to divide before-tax contributions to super between spouses, maximizing savings. It’s not for everyone, but in the right circumstances, it can be a smart strategy worth exploring.

Economy

Trump vs Powell: Who will blink first?

The US economy faces an unprecedented clash in leadership styles, but the President and Fed Chair could both take a lesson from the other. Not least because the fiscal and monetary authorities need to work together.

Gold

Credit cuts, rising risks, and the case for gold

Shares trade at steep valuations despite higher risks of a recession. Amid doubts that a 60/40 portfolio can still provide enough protection through times of market stress, gold's record shines bright.

Investment strategies

Buffett acolyte warns passive investors of mediocre future returns

While Chris Bloomstan doesn't have the track record of his hero, it's impressive nonetheless. And he's recently warned that today has uncanny resemblances to the 1990s tech bubble and US returns are likely to be disappointing.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.