howard marks Markets

An Aggrieved Howard Marks Warns Fed Action Risks Creating ‘A Fake, Potemkin Market’

Another incredulous "legend", robbed of an opportunity to make (more) millions.

Howard Marks was a "very active buyer" in March, when the world was falling apart. But Jerome Powell screwed things up for him. See, it's harder to get bargains in distressed debt when the benefactors with the printing presses are determined to make debt not distressed again (apologies for the MAGA reference). Marks has penned more than a half-dozen memos since the onset of the crisis. His latest, released last week, was a misguided attempt to wax philosophical about indeterminacy in the face of unprecedented circumstances. Before that, he spilled gallons of digital ink oscillating from cautious to gung-ho and back again, before finally settling on a wholly generic "moral hazard" argument for why the Fed's corporate credit facilities are perilous. During an interview with Bloomberg's “Front Row”, Howard reiterated his reservations about the central bank's interventions. "Those of us in the markets believe that stocks and bonds are selling at prices they wouldn’t sell at if the Fed were not the dominant force", he said. "So if the Fed were to recede, we would all take over as buyers, but I don’t think at these levels". At least he's honest about it. The bottom line
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11 comments on “An Aggrieved Howard Marks Warns Fed Action Risks Creating ‘A Fake, Potemkin Market’

  1. runamok says:

    This is a reason why I’m ok with real estate in my local market maybe taking a 10% hit, or something like this, but not a 30%, or 40% hit. The oligopolists would come in and by X-dozens of homes if a 30-40% hit. But, it’s “too expensive” for them if the hit is only 10%.

    Re Marks, the recent interview on Real Vision was dull. He was evasive and really, I got the impression he only cares about himself.

    Personally, I have found Marks’ recent notes to be almost unitelligble without a codex (such as HReport). Good riddance to the likes of Marks and Buffet. I wish they would retire, leaving the world for the next generation to take up.

  2. George says:

    This post was an explanation of subjective reality that takes a lot of patience to accept , if you grew up during the middle of the last century and your life experience contradict it’s content….Glad it was written and I had a chance to try to alter some of my own ideology by reading it…Thanks H….

  3. Dana says:

    Top 1% Makes Mockery Of Bottom 50%

    Recession Increases Downward Mobility in Retirement: Middle Earners Hit From Both Sides

    An additional 3.1 million older workers & their families will fall into poverty due to the crisis.

    https://www.economicpolicyresearch.org/jobs-report/recession-increases-downward-mobility-in-retirement-middle-earners-hit-from-both-sides

  4. They will get their chance, just not now.

  5. Major Fomo says:

    Preach. Many of these investment managers are suspiciously quiet about the Fed interfering with free markets when they are riding their way up on leverage, stock buybacks, etc.

  6. AVW says:

    since when did the excuse that something ‘was no fault of their own’ mean the govt/Fed should backstop or prevent negative outcomes? where does this end? ‘i got a flat tire on the highway today, not my fault…whos gonna pay for this?’.

    when the fed supplies well below market cost capital it destroys the value of labor. individuals accumulate capital by spending less than they earn, saving money/labor value. WHY SAVE to take advantage of periods where demand for capital is high and one can get a good return on it? the actions of fed/govt/fha/ freddie/corporations the past 20 years has demonstrated the best way individuals should behave is to spend as much as possible, accumulate debt and when theres a problem, look for bailouts/handouts/forgiveness –rinse and repeat. the core element that has made capitalism so successful –creative destruction– has been or is trying to be, eliminated along with the business cycle.

  7. jyl says:

    When I was a new analyst, the Tech Bubble inflated and then blew up. I realized that the most veteran, experienced portfolio managers in my firm were nearly as clueless as everyone else. Outperformance in rare, extreme, and unprecedented periods has more to do with investment approach and instinct, than with number of years under one’s belt.

  8. calh0025 says:

    The Fed is ultimately in no position to fix systemic issues in our economy, all it can do is put fingers in the dike, albeit a lot of fingers… maybe infinite fingers. The issues that need addressing ultimately need policy fixes. Even the present crisis can only be moderated ultimately with policy fixes. Otherwise there is a massive wave of evictions coming with millions of homeless families in the next few months. As this crisis is not even close to ending that will only swell continually for months and years. Imagine a reality where 10+% of America is homeless in 6 months. It’s far from unlikely and that’s an upswing of 50x from present and it is only really the beginning as these temporary unemployment situations become permanent. As for the predators who just want a juicy price to buy human carrion at… they can eat it.

  9. Vadym says:

    It’s all about quantity vs quality of people. You (not H – asking an abstract person with power) really want to help, to save people from poverty and death? Well you might just succeed all right and population will keep growing, but by eliminating fear of death from a human you also make sure they stay stupid and unprepared for life’s challenges.

    Death is a essential force that drives change.

    I would rather live in a society of lesser population, but higher standards. But I guess these days, and in USA specificity, the policy is to grow quantity of “economic elements”.

    I agree with AVW, that Fed destroys basic principles of price discovery of labor and capital cost, discourages saving – and these principles are more important than saving any specific business or person.

    But like it or not, that is the reality – and we, investors and traders, have to adapt to it.

    The taste of a feeling, that value of capital you saved over 20 years of career is going to be destroyed in a few easy clicks by Fed, is on a level to become vomiting.

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