RV Blog RV Classics — Issue #5

RV Classics — Issue #5

RV Classics

This Week…

We’re taking it back to a prescient conversation with the market cycle master himself, Howard Marks. The legendary co-founder of Oaktree Capital Management sat with Real Vision’s Grant Williams to share how he navigates markets successfully in a world dominated by moral hazard and political polarization.

Four years later, it seems like Howard might have been peering into his crystal ball.

The business cycle is shifting, risk assets are in the process of correcting, and uncertainty is at an all-time high. As Howard is keen to point out, “nothing is a sure bet,” but we hope this flashback will help you better understand how to deal with whatever comes next.

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This is RV Classics, a monthly newsletter where we pull the best from the Real Vision vault. We’ve spent the last 8 years learning from some of the greatest investors of our time, and we’ve got thousands of hours of analysis to show for it. Well, now it’s time to dig into the most thought-provoking, relevant insights. 

Consider these our tales from the crypt — the greatest hits handpicked by Raoul Pal to help you learn how past cycles are shaping the world today.

Real Vision Classics Newsletter

A decade of the best financial interviews, compressed into a 5-minute read.

The Highlight Reel

  1. When to Flip Contrarian:
    According to Howard, it’s important for investors to recognize when the broader market becomes too optimistic. “When too many people have too much money and they’re too eager to put it out, the bidding goes too far and the winner of that auction is actually a loser,” he says.

  2. Cycles Rhyme:
    “I’ve seen a lot of cycles, and cycles do tend to rhyme,” says Howard. “When we start seeing the heated part of an up cycle, it’s a good time to take defensive action.” Howard emphasizes that his experience has enabled him to not be afraid of being wrong, and to make aggressive portfolio moves when he sees a familiar cycle shaping up.

  3. Zero Certainty…
    And that’s OK. It’s impossible for any investor to ever know what’s coming next, and Marks believes that the best skill an investor can have is the patience to wait until their thesis is confirmed. “Being too far ahead of your time is indistinguishable from being wrong,” he says. “Overpriced and going down tomorrow are not synonymous… Something can become more overpriced and that’s how you go from a bull market to a bubble.”
  4. Self-Inflicted:
    According to Howard, the Federal Reserve has created moral hazard in the economy by repeatedly bailing out markets. “What we now have is the tail wagging the dog,” says Howard. “The tail is finance, the dog is [the economy].” This attempt to prevent market fluctuations and recessions remains an ongoing issue today. “You’re changing the game to benefit the betters,” he says.

  5. Capitalism Under Threat:
    A big picture cycle that Howard points out is the shifting political landscape in America and how capitalism is under threat. With growth slowing, the wealth gap widening, and automation on the rise, Howard says that a wave of populism should be expected. These days, it sure looks like he was right — and Howard believes that’s the biggest problem facing the U.S. in the next few decades.

Watch Now

Beware the paywall: This video is available to Real Vision Essential members and above.

Not a member yet? Right this way…

The Market Cycle Master — Legendary investor Howard Marks, co-founder and co-chairman of Oaktree Capital Management, explains how he invests successfully.

Thanks for reading. In our next issue, we’ll flashback to one of the defining videos of Real Vision’s early history. We won’t tip our hand just yet, but if you want to see how Real Vision became what it is today, you should enjoy Issue 6.

When you have a moment, let us know what you think of RV Classics. Just email us at essential@realvision.com.

Real Vision Classics Newsletter

A decade of the best financial interviews, compressed into a 5-minute read.

RELATED CATEGORIES: Investing, Learning, Market Analysis