Howard Marks: there's sanity in stocks

Distressed debt investor and author Howard Marks thinks US stocks have further to run.

960-Marks-634
Howard Marks,founder, Oaktree Capital Management

"I don't think the stockmarket is delirious," distressed debt investor and author Howard Marks tells Dan Weil of The Wall Street Journal. "Valuations aren't terribly high." And even though the US is now well into its "longest recovery on record", it's also been "the slowest since World War II. That suggests not so many excesses have built up".

But when it comes to debt, and government spending in particular,Marks is less sanguine."It's worrisome that the government is applying stimulus in the 11th yearof economic recovery, running a massive deficit and adding so much tothe national debt, yetno one seems to be worried." That's not to say that something bad will definitely happen, but overspending can have consequences, notes Marks.

Running a budget deficit in order "to build a port or bridge" with a high "internal rate of return" seemslogical. But that's not where government spending tends to go. "If you look at societies running hyperinflation, you don't want to live in them. Large budget deficits can lead to that... I've always been told that you can'tprint an infinite amount of money without something going wrong."

That said, for all the low interest rates and quantitative easing we've experienced so far, inflation has yet to jump. This, notes Marks, is "very mysterious... it makes me wonder whether the orthodoxy is wrong. As the saying goes, It isn't what you don't know that gets you into trouble. It's what you know for sure that just isn't so'."

Recommended

Great frauds in history: the Pigeon King’s Ponzi scheme
People

Great frauds in history: the Pigeon King’s Ponzi scheme

Pigeon-fancier Arlan Galbraith claimed to have created a new breed of elite racing pigeon, but his Ponzi scheme defrauded investors of over £200m.
23 Sep 2020
Terence Conran: the man who banished the spam fritter
People

Terence Conran: the man who banished the spam fritter

Terence Conran, who has died aged 88, introduced a country of grey houses and colourless mackintoshes to the dolce vita. He instigated a revolution in…
22 Sep 2020
James Anderson: investors must pay "high multiples" for tech stocks
Tech stocks

James Anderson: investors must pay "high multiples" for tech stocks

Investors must be willing to pay “unreasonable prices” for high-tech growth stocks to take advantage of the huge potential returns that these companie…
14 Sep 2020
Daniel Loeb: fiery activist goes on a buying spree
People

Daniel Loeb: fiery activist goes on a buying spree

Daniel Loeb is known as a sharp-tongued investor who buys stakes in companies and then shakes them up. But the pandemic caught him flat-footed and he …
14 Sep 2020

Most Popular

Oil producers are back at their Covid-19 lows – is it time to buy?
Oil

Oil producers are back at their Covid-19 lows – is it time to buy?

With demand for oil hammered by Covid-19 and talk of “peak oil demand”, there are lots of good reasons to be bearish on oil producers. So, asks John S…
22 Sep 2020
Why you should stuff your end-of-pandemic portfolio with Chinese stocks
China stockmarkets

Why you should stuff your end-of-pandemic portfolio with Chinese stocks

For an end-of-pandemic portfolio, you need assets that can cope with today’s volatility. And that, says Merryn Somerset Webb, means Chinese stocks.
14 Sep 2020
IAG's share price is ready for take-off - here's how to play it
Trading

IAG's share price is ready for take-off - here's how to play it

The owner of British Airways has had a turbulent year, but is now worth a punt. Matthew Partridge explains the best way to play it.
8 Sep 2020