If there's one investment guru that can make some sense of craziness in the markets over the last month it's Oaktree Capital Management's Chairman Howard Marks. Oaktree, of course, is the $80 billion alternative investment management firm that filed to go public in June. That should tell you a little something about Marks' outlook for the economy. In his new letter to clients, out tonight, Marks gives his views on what's behind the downturn. The full letter is embedded below, but here's some highlights:
My overall vision continues to be of an airplane rising weakly, perhaps overloaded or with an engine sputtering and thus having difficulty getting above “stall speed.” Its sluggishness constitutes a drag and introduces risk, but predicting deceleration is going too far . . . and not necessary to convince us to remain cautious in deciding on our course of action.
So, as is often the case, the swing we’ve had is more in psychology than in fundamentals. The positives of June are diminished, forgotten or eclipsed, and now investors are preoccupied with the negatives. As usual, the truth probably lies in between.
Thus right now I would be a better buyer, albeit in moderation since fundamentals still pose threats. I feel the prosperity we enjoyed in the final decades of the twentieth century was considerably better than “normal,” and better than we’re likely to see up ahead. I’m not implying a world without growth or otherwise permanently negative. Just one without the prosperity, dynamism or positive feelings of past decades.
Howard Marks on What's Behind the Downturn 09-07-11