Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 92

Howard Marks on the unpredictability of commodity prices

Howard Marks of Oaktree Capital Management gave Cuffelinks exclusive permission to reproduce this presentation on risk in September 2014, following a meeting with Chris Cuffe.

He spoke at the Goldman Sachs Financial Services Conference in New York on 9 December 2014 to update his views. Oaktree Capital is a major distressed-debt investor, and Marks told the conference that he is buying bonds of energy companies as the oil price falls. High-yield bonds of energy companies have fallen by about 12% in the last few months, although he acknowledged that some leveraged companies will struggle to service their debt.

At the New York conference, Marks said:

"Six months ago, you wouldn’t have said there are opportunities to invest in the energy industry. It looked like a booming industry. Today, there clearly are, and they may get better from our standpoint ... I pretty much tend to the big picture. And I think that the most important single question that any fund manager or portfolio strategist has to answer at any point in time is whether to be on offense or defense and how aggressive, how defensive. And I believe that if you get that question right, then you don’t have to get security selection and selection of strategies and managers exactly right. And vice versa, if you get that wrong all the security selection you do in the world isn’t going to help you, probably. So, I tend to spend my time on the big picture. And while one of the tenets of our philosophy is that you can’t see the future, we believe that by judging from what’s going on around us at the present time we can make some appropriate adjustments.”

As Marks said in his previous presentation on risk, he prefers to stay out of positions with a higher likelihood of unforeseen risk. “The world can adjust to the things it can think about, but there’s always the possibility of the unforeseen. And I’m the dead-set against the efficacy of forecasting. And if you need any evidence, think back six months. Where were the people who predicted that oil would go down 40%? I would imagine that oil was $110 and the bulls said it would go to $112, and the bears said it would go to $108, where are the people who said it could go down 40%? We shouldn’t think we know what’s going to happen in the future. Mark Twain said, “It’s not what you don’t know that gets you into trouble; it’s what you know for certain that just ain’t true" ... I put out a memo on gold about this time in 2010, and I said there’s nothing intelligent that can be said about the price of gold. And you can’t predict the price level of a good that does not produce income. And I think it’s true in gold and I think it’s true in oil. And what’s a low price for oil? What’s a high price for oil? Who knows? Why was oil at $110 six months ago? And aren’t those reasons still true today, with it at $60? And the people who at $110 said, oh, I missed my chance to buy oil at $100. I’m kicking myself. I hope it gets backs there. Have they bought oil at $65? The answer is, no, because there’s no place you can get comfort on the price of a commodity, in my opinion."

 

Comments taken from a transcript of the talk. This extract is for general information purposes only and does not address any investor's personal circumstances.

 

  •   12 December 2014
  •      
  •   

 

Leave a Comment:

banner

Most viewed in recent weeks

How cutting the CGT discount could help rebalance housing market

A more rational taxation system that supports home ownership but discourages asset speculation could provide greater financial support to first home buyers.

3 ways to fix Australia’s affordability crisis

Our cost-of-living pressures go beyond the RBA: surging house prices, excessive migration, and expanding government programs, including the NDIS, are fuelling inflation, demanding bold, structural solutions.

Is there a better way to reform the CGT discount?

The capital gains tax discount is under review, but debate should go beyond its size. Its original purpose, design flaws and distortions suggest Australia could adopt a better, more targeted approach.

Want your loved ones to inherit your super? You can’t afford to skip this one step

One in five Australians die before retirement and most have not set up their super properly so their loved ones can benefit from all their hard work and savings. 

Welcome to Firstlinks Edition 648 with weekend update

This is my last edition as Editor of Firstlinks. I’m moving onto a new role though the newsletter will remain in good hands until my permanent replacement is found.

  • 5 February 2026

Super is catching up, but ageing is a triple-threat

An ageing Australia is shifting the superannuation system’s focus from accumulation to the lifecycle of retirement. While these pressures have been anticipated for decades, they are now converging at scale and driving widespread industry change.

Latest Updates

Economy

Has Australia wasted the last 30 years?

The 20 years after Peter Costello left Treasury have been deemed wasted...by Peter Costello. The missed opportunities for Australia began long before.  

Retirement

Navigating the next stage of life in retirement

Retirement planning is more than just saving enough money. Long-term care needs, housing choices, and social networks are just as critical for a happy and enjoyable life.

Strategy

Showcasing your value in the age of AI shortcuts

Knowledge is becoming commoditized in the age of artificial intelligence but experience, taste, and judgement are still at a premium.

Planning

Financial advice as the pathway to economic security

Financial advice can lead to improved financial literacy, a healthier super balance and a higher standard of living in retirement. Is now the time to give yourself the gift of financial advice?

Economy

The overlooked driver of energy inflation

The impact of energy policy on inflation in Australia is often overlooked. Transitioning to renewable energy can lead to inflated costs that affect the entire economy and productivity growth.

Economy

A 2026 rotation story: Europe’s undervalued small caps

In 2026, Europe is poised for a 'Goldilocks' scenario with cooling inflation and lower rates, driven by fiscal stimulus. Small caps offer an attractive entry point before capital rotation.

Investment strategies

What we do when things go up (a lot)

Recent price spikes, particularly gold's surge, trigger behavioral responses like availability bias, storytelling, extrapolation, and FOMO, which create self-reinforcing feedback loops influencing investor sentiment and market trends.

Sponsors

Alliances

© 2026 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.