Do You Really Want to Bet Against Howard Marks?

The optimism that permeated equity markets last week when U.S. stocks posted their biggest gains since the 1930s has once again given way to a feeling of despair, with the S&P 500 Index falling 6% over the course of two days. Yes, moves by fiscal and monetary authorities have shored up the all-important “plumbing” of the financial markets, but that is looking more and more like an act of triage than a catalyst to recovery. No one at this point in the pandemic crisis can confidently say how deep and long-lasting the coming recession will be, and that’s keeping markets stuck in their own form of purgatory.

The conundrum facing investors was underscored by a pair of developments out of JPMorgan Chase & Co. this week. At the same time the biggest U.S. bank’s research department was pronouncing that most risk assets — a universe that typically includes stocks — have seen their lows, its asset management division was cautioning investors against rushing to buy. In all fairness to JPMorgan, it’s not uncommon for different parts of the same financial firms to having opposing views. And contrasting views are what makes markets happen. But to cut through the noise, it’s often best to seek out the best and brightest, and in that regard, few on Wall Street compare with the legendary Howard Marks, whose Oaktree Capital Group LLC oversees about $125 billion. In a career that extends all the way back to the 1960s, Marks has seen it all — from the Vietnam War to the oil embargo of the 1970s, rampant inflation, double-digit interest rates, 1987’s Black Monday crash, catastrophic terrorist attacks on the U.S., a financial crisis and seven recessions. If that’s not impressive enough, consider that Warren Buffett once said that "when I see memos from Howard Marks in my mail, they're the first thing I open and read.” So, what did his latest memo released late Tuesday say? In essence, stay cautious.