To Catch a Falling Knife

Published on
May 15th, 2020
Duration
54 minutes


To Catch a Falling Knife

The Interview ·
Featuring Howard Marks and Raoul Pal

Published on: May 15th, 2020 • Duration: 54 minutes

Howard Marks of Oaktree Capital Management shares with Real Vision co-founder and CEO Raoul Pal his investing framework. He and Raoul explore just how late we are in the credit cycle and look at risks and opportunities that lie ahead. Marks discusses the principles that made him one of the world's greatest investors – discipline, contrarianism, and selectivity – and reflects how these principles serve as guiding stars during this time of unprecedented uncertainty. Marks' specialty is putting capital to work when others have lost their nerve – or, as he describes it, "to catch falling knives" – and he shares with Raoul how he plans on identifying and selecting value at a time when the Fed’s recent actions have clouded the investment landscape by artificially distorting security prices. Filmed on May 12, 2020.

Comments

Transcript

  • MC
    Mike C.
    23 May 2020 @ 13:19
    Unpopular opinion: What if debt will not run rampant ever again because it was a flawed system design & we change the rules of the game? Howard's investing become obsolete.
  • PE
    Paul E.
    22 May 2020 @ 19:36
    "Uncertainty" - Howard Marks. Very good interview, I enjoyed it. The more you read and listen to Howard Marks the easier it is to figure out what he is really saying.
  • ZF
    Zach F.
    20 May 2020 @ 22:24
    Appreciate the interview for sure. Howard lost me at AOC but I recovered enough to take in his investing view. Starting to come around to BTC. Howard, trying to save people from government with more government isn’t going to work. But your heart is in a great place.
  • CM
    Chris M.
    17 May 2020 @ 20:15
    I found this a very boring interview, but I did enjoy the psychological insight. Raoul talks in macro, so it's interesting without specifics by it's very nature. Mr. Marks seems to invest on specifics, with minimal interest in macro, but didn't want to discuss anything actually specific, so he had very little of interest to actually say. In the end - this interview could have been excellent had he been pushed harder on some points, as specifics seem to be where his true talent lies. In the end, I agree, Raoul was perhaps not the best interviewer for Mr. Marks, though I generally do love his videos.
    • NF
      N. F.
      17 May 2020 @ 21:34
      An RV appearance should definitely be more than just an advertising opportunity for Oaktree. Bring the goods!
    • AG
      Adam G.
      18 May 2020 @ 04:56
      Hmmmm. “Capital structure...”. Oak tree must be getting huge redemptions. Hahahahaha
    • KN
      Kenneth N.
      19 May 2020 @ 04:37
      Agreed 100%. Sorry to say, I think Raoul has his own agenda or he just not very well prepared to ask the relevant questions to get Howard to answer. I don't normally watch the videos if Raoul is the one that do the interview. I watched this because of Howard Marks. Btw, just happen that Bloomberg also interviewed Howard today. It is a very good interview. Maybe it is due to Eric is such a seasonal journalist: https://www.youtube.com/watch?v=snZ_thb8F7Q
  • KN
    Kenneth N.
    19 May 2020 @ 03:49
    When Howard was interviewed by Grant Williams a year ago. it was such great interview. I think Grant knows how to ask the questions and how to get the best thoughts out from Howard to share with the audience. Wish Grant is doing the interview this round too.
  • JS
    James S.
    18 May 2020 @ 10:57
    PS. He really mastered the market cycle with the Brookfield sale
  • JS
    James S.
    18 May 2020 @ 10:50
    The first time you hear Howard interviewed you’re in awe. The second, third, fourth times... the story about buying post Lehman becomes very old.
  • MJ
    Michel J.
    18 May 2020 @ 09:33
    thank god for 1.75x speed
  • PB
    Paul B.
    18 May 2020 @ 06:32
    33.40 Big Business has the Fed Ticket.....Small Business is not evening taking on more debt, and Blackrock has its own little Scam going on....It's easy to pick the Bottom and we are not there yet..Oaktree seem to be looking at the Players Backed already . I don't like Venture Capital
  • TY
    Tony Y.
    15 May 2020 @ 23:39
    Very different investment styles. Howard Marks is a classic value investor like Buffett and Klarman. His choice is distressed debt. Security Analysis has a great chapter on this. Value investing is more like the work your CPA would do analyzing a company you may want to purchase. Macro is to make gains from changes in the world. Both work well, but different skill sets are needed. In my opinion, bet size and probabilities are more important in Macro. Value investing the math and understanding discount rates are more important. Margin of safety and Mr Market are important concepts to understand
    • NC
      Neil C.
      18 May 2020 @ 01:11
      True comment. Value guys are long only and the good ones (Buffett and Marks) will just patiently wait for their pitch to buy stocks or distressed debt. Macro guys like Drukk will go long or short in size in anything but not for the long-term. At all. Finally, Izzy once told me "well, I like to make a lot of money all the time" lolll
  • LM
    Luke M.
    18 May 2020 @ 01:04
    Tough day at the office Raoul. Howard doesn’t give much away.
  • JH
    Jesse H.
    15 May 2020 @ 15:09
    Raoul - thank you. You are ever the gentleman, and a humble and diplomatic interviewer, even when the substance of the interviewee’s views is clearly lacking.
    • DS
      David S.
      16 May 2020 @ 07:58
      Both strategy and tactics were given that allowed Mr. Marks to make money through many business cycles. It may be the listener that lacks substance. At least 7 and counting. DLS
    • SB
      Steve B.
      17 May 2020 @ 17:36
      To the average investor (of which i am one), Marks inclination to offer direct investment advice is restrained because 1. Marks investment funds are larger in size than avg (and he has wider access) and 2. He agreed with Raoul that the sample size of our current confluence of events is one. Im no Edward Gibbon but it doesnt take a scientist to realize that never before have world markets been so interconnected; both through links of financial debt and human vulnerability to "force majeure" events. The generosity (or added value to this sub) of information Marks provides is in his willingness to offer a more nuanced version of information hes already unlaid in his book, Mastering the Market Cycle.
  • TS
    Theodoros S.
    17 May 2020 @ 15:38
    It takes time and no one knows.
  • BJ
    Brandon J.
    16 May 2020 @ 19:08
    This guy is the human manifestation of the most boring textbook I ever read.
    • AC
      Andrew C.
      17 May 2020 @ 04:15
      Which is precisely how you want to be investing !
    • KB
      Keith B.
      17 May 2020 @ 05:54
      Apart from a hobby amount in shitcoin trading for fun, of course
    • AR
      Anthony R.
      17 May 2020 @ 14:16
      ..... and what does that have to do with the accuracy and value of what he has to say.....?
  • DP
    David P.
    17 May 2020 @ 09:20
    After watching this video, what i can say about Mr Marks and how acutely he seems to have a sense of what he knows and what he doesn't know. If i had to take away something from that video, that would be it.
  • SH
    Si H.
    17 May 2020 @ 07:47
    This interview is superb! Thank you RV.
  • AC
    Andrew C.
    17 May 2020 @ 07:11
    I would have to agree with commenters below; perhaps the wrong interviewer for Mr Marks. Marks - as he admits - isn’t a macro guy. Mr Pal seemed to keep trying to push the conversation to where Mr Marks didn’t want to comment nor commit. I believe Oaktree has positions in tankers, from when they were distressed a couple of years back (STNG, as I understand). A question on how he is managing these types of positions as the general market gyrates would have been great. Or even, how does he actually evaluate opportunities in companies like the airlines or cruise ships (or which others?) which are really distressed at the moment, given the FED intervention? We could have then picked up something from Mr Mark’s area of expertise.
  • tr
    tom r.
    16 May 2020 @ 22:55
    Just wasted an hour of my life listening to broadly general feelings that make me no money. Marks is simply not an articulate guy with specific opportunities Real Vision subscribers are looking for. Am I wrong in assuming we are looking for a cut above specific ways to invest in undervalued companies? I am getting very tired of listening to interviews like this.
    • KB
      Keith B.
      17 May 2020 @ 05:51
      If you give a man a fish......
  • VW
    Voytek W.
    17 May 2020 @ 05:40
    I fail to understand how smart people like Howards can be so biased, naive, and uneducated about the whole corona virus. Yes, people in Sweden who died are clearly worse off, but (1) they were probably going to die soon anyways, (2) if it’s government’s job to prevent deaths of all people at any cost why don’t we ban (a) cars (b) sugar (c) alcohol (d) forks, etc, etc. And sure Sweden suffered economic setback, but so many small business owners did not loose everything because of the lockdown - but I see how this point might be hard to appreciate for an elite hedge fund manager in his Ivory Tower.
  • SH
    Sean H.
    15 May 2020 @ 16:48
    RP Appreciate it as always. There is an art to making a constructive comment without sounding belligerent. Clearly some of your subscribers are good at it and clearly some are not. I appreciate the good interviews and the not so good ones. The good written reports and the bad ones. They all provide insight if you are open to seeing them. While Marks is not as dynamic as others in terms of his delivery he certainly is an intellect worth respecting. Keep up the excellent work.
    • rr
      rlw r.
      17 May 2020 @ 04:54
      Yep, excellent observation
  • MM
    Michael M.
    17 May 2020 @ 04:02
    Every time I make the mistake of tuning in to an interview with Howard Marks I am disappointed. Never again. All very philosophical, never gives a specific view or action on anything, sits on the fence, and loves quotes. Lots of nothingness. Why be interviewed when you have nothing to say or offer? Thanks Raoul for doing what you could - not sure if you gained anything from Mr Marks?
  • HC
    Hiu C.
    15 May 2020 @ 18:51
    Is there a bug with the Real Vison app? It has been starting the video right at the middle for the past week. Reset the password in case my account was hacked didn’t help.
    • hb
      hussien b.
      15 May 2020 @ 19:34
      Same
    • JC
      Jonathan C.
      15 May 2020 @ 19:39
      Same here. Must be a bad update.
    • KA
      Kevin A.
      15 May 2020 @ 20:05
      For what it is worth, I was having tons of issues with RV videos for months. My problems were resolved when I switched from Chrome to Safari. I wasted a lot of time before I figured this out and now I have not had any problems.
    • RP
      Rodolfo P.
      15 May 2020 @ 21:11
      same with me
    • CC
      Craig C.
      15 May 2020 @ 23:53
      Apple TV also starts midway through videos Firefox is ok
    • NI
      Nate I.
      16 May 2020 @ 00:30
      Same. IOS 13.4.1 with the latest RV app.
    • SS
      Shanthi S.
      16 May 2020 @ 07:51
      The app is completely useless and gets worse with every update. I just watch RV in my duck duck go browser on the iPhone. Clunky, but it works.
    • JW
      JAAP W.
      17 May 2020 @ 02:41
      Same
  • DT
    David T.
    16 May 2020 @ 20:10
    Not very interesting even though Raul tried, but Howard was talking like he was on CNBC.
  • AR
    Alexander R.
    15 May 2020 @ 16:30
    For Everyone who cmplain : you should understand that is is very difficult to enjoy the chapter 39, if you did not read the the previous 38 chapters of the book Please red Mr Marks books and see how he view the world. I think he gave clear answers : the market is expensive, not a good value, price mechanism is distorted, this is unprecedented time with a lot of uncertainty. So remain defensive, otherwise you are taking extra risk for witch you will not be compensated
    • WM
      Will M.
      16 May 2020 @ 17:05
      Well said Alexander.
  • db
    deon b.
    15 May 2020 @ 15:46
    I truly worry about this guy based on his discussion about his knowledge of the virus and his believe in a vaccine.
    • WM
      Will M.
      16 May 2020 @ 17:04
      Deon, I don't think his clients will be worried at all. I can only assume you have more knowledge than the majority here on the virus topic.
  • ND
    Nitul D.
    15 May 2020 @ 14:33
    Personally, I felt that Howard Marks, as legendary he is, did not add much value in specifics, apart from the usual which I already know. The only viewpoint he added which caught my attention was that he did not expect a "major" deleveraging for the debt in the economy (towards the last part of the interview)
    • JC
      Juan C.
      15 May 2020 @ 15:32
      Agree. I have seen many interviews of Mr Marks, where you usually hear lots of investment philosophy but little real insights.
    • EO
      Elena O.
      16 May 2020 @ 10:53
      yes. I noticed this part too. That he does not think there will be a major deleveraging/debt deflation as what R thinks....I tend to agree with him...I think this round most debt will flow from corporates to sovereigns...and sovereigns will obviously inflate it away...
    • WM
      Will M.
      16 May 2020 @ 17:01
      I think the fact that he said he does not expect any major deleveraging was pretty major myself. Not sure I agree with everything going on and I am much more with Raoul's persuasive arguments. Cleary Howard Marks is not of that opinion.
  • NR
    Nathan R.
    15 May 2020 @ 13:35
    People are complaining about listening to Howard Marks??? Pearls before swine. I’ll watch this twice to make certain I hear and then meditate on the nuance to see what I can glean for application. You make your real money in down markets by avoiding loss. Thank you to Raoul for making this possible.
    • JH
      Jesse H.
      15 May 2020 @ 15:07
      Nobody is complaining about listening to him. I think people are simply calling out the lack of substance or depth (or yes, nuance) in his views. I listened carefully, and all I came away with was that Raoul had a well-thought out probabilistic framework based on a wealth of knowledge and experience, while Howard - the distressed debt billionaire - had no macro views and seemingly limited to no ability to think outside of his own market niche. My two cents, anyway.
    • DS
      David S.
      16 May 2020 @ 08:29
      Jesse H. - Mr. Marks stated that he is not a macro strategist. Mr. Marks was on for his knowledge in a field that he made money in year in and year out. Not everyone is a macro trader, or should they be. Federer and Nadal compete with totally different styles, both are champions. DLS
    • WM
      Will M.
      16 May 2020 @ 16:58
      Jesse, perhaps thats why Marks is so good at what he does, ...he sticks to his niche and makes his clients money.
  • WM
    Will M.
    16 May 2020 @ 16:24
    Good interview. Howard carries with him a huge amount of experience. I read Howard's market letter and enjoy his thoughtful analysis and commentary. He comes across strongly as a highly contemplative individual who really pays attention to making money for his clients and doing his level best to avoid losing them money. I read several comments below about his lack of recommendations or failure to answer questions and can't quite agree with them. As I have mentioned similarly before, would you rather have you money with someone like Howard Marks and Oaktree Capital with steady and great returns? Or go with the entertaining, if a little egotistic, Hugh Hendry whose fund and strategies failed? I thought this was a very good interview with a highly successful investor. Nobody KNOWS whats going to happen next, its all just a probability distribution. Howards comments were sound and very informative.
  • dw
    douglas w.
    15 May 2020 @ 08:44
    What do you call an online music festival with Howard Marks as the headlining band? Snoozapalooza. This interview was incredibly deflationary...to my brain. I even think Raoul needed some toothpicks to keep his eyes open. He kept saying "interesting" which I took as "bloody hell this bloke isn't saying anything". The nail in the coffin is when Howard confessed he doesn't care about Macro. That's it! tar and feather this guy. RV still rocks and you guys nail it 99% of the time, but honestly I get more everyday out of the daily briefings then an interview like this. jmho, still luv u guys and gals.
    • PV
      Peter V.
      15 May 2020 @ 10:50
      I give huge credit to Realvision for having this interview (Marks is very highly regarded). But I completely agree that when listening to him for 30+ minutes you kind have a feeling that he is totally overrated. I must admit that I did not learn much if anything at all.
    • DS
      David S.
      16 May 2020 @ 08:52
      If anything, Mr. Marks is underrated. Mr. Marks makes his money on looking finding value in the balance sheet and income statement statements on individual investments. His style perfectly fits how he invests and how he has made money for years. Mr. Pal's style is entirely different and reflects perfectly how he invests in macro. Both make money. I think we all have been in lockdown too long. DLS
    • EO
      Elena O.
      16 May 2020 @ 10:44
      agree...was quite boring and I had to switch out...seems like HM is a bit lost...
    • TP
      Timothy P.
      16 May 2020 @ 14:15
      I agree Marks cadence was glacial, but perhaps he's one of those guys that does better writing a newsletter than doing an interview. It did seem at a few points Raoul had to "pull teeth" to get him to respond to his questions.
  • EL
    Erik L.
    15 May 2020 @ 09:02
    Please please please skip the intros. Thank you.
    • PU
      Peter U.
      15 May 2020 @ 12:25
      I agree. They are horrible and forced. Just stop.
    • Md
      Matthew d.
      15 May 2020 @ 12:27
      Yeah they're not necessary and not as important as they are for the daily briefing
    • PU
      Peter U.
      15 May 2020 @ 12:27
      These intro guys have as much experience as my labrador but my labrador pulls it off better!
    • LO
      Luke O.
      15 May 2020 @ 16:00
      And the outros, I have heard the hundreds of times now and just so annoying. No cats in the video! wow
    • DP
      Duane P.
      16 May 2020 @ 03:18
      I agree in general though I have to say the intros for the daily briefings a very good.
    • DS
      David S.
      16 May 2020 @ 08:43
      You can easily fast forward through the intros if you wish. Talent needs to be developed. It does not just happen. Let It Be! DLS
    • DJ
      D J.
      16 May 2020 @ 09:09
      Concur
  • CJ
    Charles J.
    15 May 2020 @ 23:19
    The two of you speak such different languages. Global Macro and Traditional Value. One of my favorite things about investing is how many different ways there are to skin the cat, but I'm not sure I've ever seen it juxtaposed as clearly as in this interview. The two of you are absolutely brilliant, but the way you think about investing and the world is so different. Raoul is all about the big picture and trying to predict the next move while Howard is so uncomfortable with drawing any conclusions about the future and prefers to think about risk and value on a company specific or individual credit basis. If you're a regular reader of Howard you know he doesn't like to get out of his lane. Kind of a versatility vs. specificity thing. Fascinating.
    • WF
      Wesley F.
      16 May 2020 @ 09:03
      I completely agree. The interview felt almost jarring given the two very different styles and philosophies. On one level, I wish that Raoul had taken off the macro hat and interviewed Marks on Marks' terms, but on another level it really was fascinating to see the different styles play out. Marks still has general thoughts on macro, such as that he thinks any recovery will be more drawn out and difficult than people expect, though even he admits this is his conservative bias. Here he is fully in agreement with Raoul. The difference is that Raoul's style is to dive into that general macro style in significant detail and develop an investing framework off of that. In contrast, Marks sticks with his bottom up approach, but just uses his generalized macro view to tell him when (in a fundamentally contrarian sense) he needs to lean more a bit more aggressively or conservatively. Seeing that jarring contrast helps us as investors to broaden our perspective and not always look at the markers through the same lens.
  • TZ
    Tibor Z.
    15 May 2020 @ 13:09
    I would be okay with video conversation like this as long as it reflects RV's pricing! You could make a completely online platform like, lowering your expense and make subscriptions more appealing, affordable for newcomers. While doing the interviews I would set up good quality cameras on both sides, cut it, edit it and that one to upload on RV. It would increase the audio and video quality significantly!
    • LK
      Lauri K.
      15 May 2020 @ 14:00
      These are because studio interviews are not possible currently.
    • LO
      Luke O.
      15 May 2020 @ 15:57
      They have provided RV effectively for free at times! Its crazy cheap for what they provide.
    • DS
      David S.
      16 May 2020 @ 08:35
      It is the content that I am after. The Coronavirus forced new format is giving us access to more great interviews and Daily Briefings. I like the fact that the dogs drop by to say Hi. It keeps the markets in perspective. DLS
  • TP
    Timothy P.
    15 May 2020 @ 13:53
    I've been studying the structure of declines for over ten years and have some conclusions, but honestly I'm a bit "meh" at sharing them here since my last cold-shoulder interaction with Raoul. To be honest, thinking about dropping down to the minimal tier since my enthusiasm for this platform is at new lows. Perhaps other guests will rekindle my interest, but who can say. RV Bear Market? Seems so, at this juncture.
    • DS
      David S.
      16 May 2020 @ 08:23
      Timothy P - Sorry, I am not sure about your prior discussion with Mr. Pal. What interview? I would like to review it. Not to pass judgement but just to understand. I use the comment format as a way of putting my views in writing. The comments of others can help with my perspective. When I review my old comments, sometimes I do not still see the world the same. Keep on commenting. Thanks, DLS
  • VS
    Victor S.
    15 May 2020 @ 16:03
    I think, despite this being a great interview, people are 'meh' because they want immediate yes/no or up/down answers. People may say that Howard Marks has a lack of substance - but what I got is that he only reacts to what is proven and sure (from his judgment), and nothing on what he does not know about. As he said, "investing, is the process of positioning capital to benefit from future events," in this case, the current situation that we are in is a totally new one for everyone; even for Raoul (no disrespect). If we all can combine Raoul's brilliant macro insights and apply it with Howard's approach, then at least we will not be losing money in this 'uncertain' market. To catch a falling knife you just have to catch 'em all - as Howard did by buying for the 15 weeks until it hit the bottom in 2008. He is more focused on not losing money rather than making a lot (I mean, yes we all do), which is not an argument of being right or wrong, but this rather gives him the ability to play the game for the long-term. This was a great interview to reshape my attitude towards investing - thinking on the broader picture but acting with a 'slowly but surely' stance.
    • DS
      David S.
      16 May 2020 @ 08:01
      Well said. DLS
  • DF
    David F.
    15 May 2020 @ 15:50
    there are comments below regarding the lack of "substance" in Mr. Mark's remarks. But, there is the rub. How do you have "substance" regarding a once in a lifetime situation and in trying to chart a course that is exploding into uncharted territory? What Mr Marks offers is a lot of experience and an unemotional reaction to crisis and a belief that this too will end and I can make money in any situation. I'll bet his investors appreciate his stability.
    • DS
      David S.
      16 May 2020 @ 07:51
      Well said and good use of Hamlet. DLS
  • DP
    Duane P.
    16 May 2020 @ 03:16
    I think the flaw with this interview was just a clash of investing styles, a macro guy interviewing a distressed investor. These are two very different ways of investing. Almost complete opposites, top down vs bottom up. At one point Raoul asked a really good question and Marks straight up said, "I'm not a macro guy, so I don't know." Honestly, I prefer the macro discussions but it doesn't always have to be that. You don't ask a musician what paintings are inspiring him right now, if you want to really understand his/her mindset. Distressed debt, which I have experience in, is a very get-your-hands-dirty, non-standardized, chaotic, on the ground, nuanced business. I think someone who was more attuned to that world could have really squeezed out what's going on in the mind of Marks. To be fair, Marks doesn't come across as the most gregarious individual, which makes it hard for the interviewer, but that just goes more to my case of really needing someone who's familiar with this space to really squeeze the content out of him.
  • KR
    Kevin R.
    15 May 2020 @ 21:11
    What I got from this, is there is no one answer to making money for your retirement portfolio in the future. The only thing that made sense is to invest in big companies because they have less chance for failure in the years to come. Using dollar cost averaging will help to this.
    • TS
      Thomas S.
      16 May 2020 @ 03:00
      Not big companies like GE
  • TT
    Tungsheng T.
    16 May 2020 @ 01:42
    Smearing
  • sk
    saner k.
    15 May 2020 @ 20:53
    the interview could be better, the guest looks like he is reluctant to give some specific information. " we are all over the world" he says.. i was expecting some more specific about his investments and strategies.
    • CY
      C Y.
      15 May 2020 @ 22:29
      To be fair, what we learn from someone of Mr. Marks calibre is how to approach investing in uncertainties, rather than what specific credits he picks. Besides, distressed debt is not something retail investors can replicate in any case, and the bulk of the upside usually involves capital restructuring.
    • CD
      Carl D.
      16 May 2020 @ 01:15
      I bet he's worried about creating sensational headlines so he's choosing words very carefully
  • Po
    Pedro o.
    16 May 2020 @ 00:36
    Legend. For me, the best investor of all time.
  • NR
    Nelson R.
    16 May 2020 @ 00:34
    Pal: How were you thinking coming into the end of the cycle right before Covid19 Marks: I thought there were full to high asset prices and investors engaging in pro-risk behavior in order to try to extract high returns in a low return world. Two months and $3 Trillion later that is exactly what we have again.
  • SG
    Shu G.
    15 May 2020 @ 22:21
    Great interview to get Howard Marks perspective. My take away is that the Fed has taken away the bargains so far and it makes it harder to find a value investment due to the jacked-up price. Therefore, be defensive and moving up the asset structure and wait for the Fed to miss saving or not fast enough to save those "falling angels" and then turn aggressive.
  • DS
    David S.
    15 May 2020 @ 21:20
    Excellent and enjoyable interview. I like Mr. Marks’ approach to investing. As horrible as the pandemic is, it may be the only thing to reset the world's financial markets back to common sense. Who would have believed that politicians of dissimilar countries, dissimilar cultures, and dissimilar budgetary processes could set up a fiat currency based on proximity without a sovereign? Billions of dollars were made in the dystopian financial markets where valuation of net present values became meaningless – radically increasing the difference between rich and poor. Billions of dollars will be lost as we return to a more normal world of finance. Billions of people’s lives will change. How much of a university's budget is spent on educating students and how much on a thousand other things? How many students borrowed fortunes just to party for four more years. Even car rental companies know that you need to be around 25 to have some idea of consequence. There are no real rates of interest, only market rates – daily supply and demand. Real rates were invented as an excellent negotiating tactics to include consumer inflation into consumer's wages. If we get 10% CPI deflation, how many people will want their wages reduced by 10%. Even market rates are distorted by government interventions all over the world. Look at the Japanese bond market. The pandemic is a horrible way to revalue all values. Vietnam locked down quickly, tested rapidly and track each case. Vietnam has 313 cases and zero deaths. The numbers may or may not be perfect, but the magnitude is in the ballpark. Vietnam reacted rapidly because they a collective memory of other Asian outbreaks. I hope the West can do the same in the next pandemic – there will be one. Some of us will make it through this pandemic and the market rationalization. I wish all you best of luck. DLS
  • JC
    Jack C.
    15 May 2020 @ 11:24
    Raoul asked good questions. When Howard was just talking in high level theoretical terms, Raoul asked him to elucidate what he meant in practitioners terms wrt specific investment decisions. You can tell that Bruce Karsh is the main investment decision maker at Oaktree, and Howard is the public face of the firm.
    • KA
      Kevin A.
      15 May 2020 @ 20:17
      About 1999 or 2000, we (sellside HY/distressed traders) were having a one-on-one meeting with TCW and Bruce showed up (they were in the same building and were cozy given he used to work there) with a notebook in hand. He asked us a lot of questions about what we thought and what we were seeing in the market. We were in our mid 20s without much experience but we did see flows. It always made an impression on me how humble he was and how he felt he could still see value in talking to us. In contrast, around the same time, one of my colleagues got kicked out of the PIMCO office (he was seeing Mohammed or Bill, I cannot remember) for wasting their time which was followed by a salesperson getting a tongue lashing by M or B. My colleague has gone on to run a successful hedge fund. Their humility in approaching markets at Oaktree is something to be admired and no matter how many times I hear Mark speak, I am reminded to not get cocky with markets even if the message is repetitive.
  • PG
    P G.
    15 May 2020 @ 18:23
    It would have been so interesting to have the intervention with Howard Marks.
    • MT
      Mark T.
      15 May 2020 @ 18:52
      Why, is he an alcoholic? :-) You mean intersection.
  • SW
    Suzanne W.
    15 May 2020 @ 18:37
    Wow, what a great guest and interview! I learned so much.
  • RJ
    Russ J.
    15 May 2020 @ 18:20
    I thought that was an excellent discussion. Thoughtful analysis of the current markets and a great peek into Oaktree's philosophy and capital allocation given the situation we are in. His focus and thoughtfulness on Probabilities and not bombastic predictions is wise and it is refreshing to hear a humble approach to the markets from a truly succesful investor. Great nuggets of investing wisdom as well. i.e. "I think it our job to catch a falling knife", "You should not determine your actions based on a belief that you will or will not get better buying opportunities. " there are a number of ways to be defensive without just selling," Calibrate. Seems simple, but so many think its all or nothing.
  • sc
    sung c.
    15 May 2020 @ 18:06
    Listening to Mr. Marks is akin to fishing for trout. 1) just as one must approach a lying trout quietly and patiently in order to garner a take, one must listen quietly and patiently to garner the best nuggets of what Mr. Marks is putting forth,
  • TH
    Truman H.
    15 May 2020 @ 16:44
    Marks on older folks contributing to "herd immunity:" They probably would object to dying." Love the zero-percent humidity wit.
  • NK
    Nick K.
    15 May 2020 @ 16:29
    Hey Raoul/RV, any chance of getting Sam Zell on the theme or getting him to contribute to the Risk assessments and supply/demand discussion. He has had a good mix of Developed and EM exposures across enough assets that his in put would be very valuable against the backdrop of Howatd's and other opinions, financial or real assets... If possible that would be great for our community.
  • DF
    David F.
    15 May 2020 @ 15:41
    unemotional cold hard logic. i respect his humility and acknowledgment that there is a lot we don't know and some of Raoul's questions that do not have answers. I also have the impression that Mr Marks does not stay up at night worried about his investments.
  • DA
    David A.
    15 May 2020 @ 15:40
    For anyone interested, related to Howard's remarks on opportunities with businesses that are derivatives of the oil market, below is a link to a deal they recently did (crude oil transportation and storage company): https://www.businesswire.com/news/home/20200420005264/en/NuStar-Energy-L.P.-Enters-750-Million-Unsecured
  • EK
    Edward K.
    15 May 2020 @ 15:33
    Plain speaking at its best.
  • js
    john s.
    15 May 2020 @ 13:54
    Can someone explain the more debt you have the higher the ROE? Because your issuing less equity and more, the denominator is smaller in the ROE equation?
    • LK
      Lauri K.
      15 May 2020 @ 14:13
      Not sure what the question was but equity risk increases with debt and thus increases the equity return requirement.
    • CS
      C S.
      15 May 2020 @ 14:26
      More debt increases leverage. Its like buying a house whose value rises from $100k to $200k. If you have a 50% mortgage, else a 95% mortgage, the return on your equity (either $50k -> a double, or $5k-> 20x return) can be vastly different. As can your risk.
    • SS
      Stan S.
      15 May 2020 @ 15:18
      Yes, assuming the use of debt results in earnings.
    • SM
      Stephen M.
      15 May 2020 @ 15:18
      If you think of a balance sheet. Assets - liabilities = equity. If you add more liabilities (debt) the equity is reduced and thus your return on this part increases. Ex: Net profit= 50 Equity= 500 ROE= 10% More liabilities/less equity. Net profit still= 50 Equity now= 200 ROE= 25% I think?.
  • TM
    Thomas M.
    15 May 2020 @ 13:19
    Hi Raoul, great video. Next time, you may consider shutting off the email notifications on the computer :)
  • Md
    Matthew d.
    15 May 2020 @ 12:36
    Enjoyed the interview and love the fact that RV got him on, but to be honest I kind of felt that Howard was a little cagey so personally didn't get as much as I'd hoped from this...
    • sk
      samuel k.
      15 May 2020 @ 13:18
      Yeah. Not much being said
  • JC
    John C.
    15 May 2020 @ 12:20
    Tremendous to have Mr. Marks on in this maelstrom. Top notch content. Can't wait for the blog add-on. Hopefully I'll be contributor.
  • KD
    Kelley D.
    15 May 2020 @ 12:04
    Ever since Groucho got caught up in the Florida land bubble of the 1920's..the Marks have afterwords always proceeded with caution...
  • RD
    Robert D.
    15 May 2020 @ 11:39
    Hi Raoul, phenomenal interview and well done. Just a quick thought, I think that you can get out more from Howard by asking how he constructs his portfolio looking from a bottom-up basis, he is more focus on a company by company agenda. I think that more question should be asked about the creditworthiness of the debt portfolio that Oaktree currently has, like how he said they had some opportunities in the derivatives of the oil space. How exactly did he assess that process in selecting those company, what sort of risk premium/cost of capital and risk assessments did he affix on companies of different sectors such as restaurants vs hotels vs airlines vs bookings vs oil upper and downstream industries to find value. His focus is bottom-up creditworthiness, P&L, Balance Sheet and Cash Flow. There is a lot more value you can get out of him from there, to assess the business cycle from the micro basis. Hopefully, you guys can talk to him again soon.
  • GC
    George C.
    15 May 2020 @ 11:23
    If you're unfamiliar with Marks, it's worth a watch. If you are familiar, there is nothing new here.
  • ME
    Michael E.
    15 May 2020 @ 09:56
    I didn’t learn too much. Howard should run for a Senate seat. A great middle of the road politician.....
  • MC
    Michael C.
    15 May 2020 @ 09:20
    Great to get the perspectives from an expert in credit markets. Investing in credit is about recycling capital (bonds mature, capital is returned and then recycled into new opportunities). This perspective helps put context around Howards answers on the macro themes. Thanks Raoul.
  • JW
    John W.
    15 May 2020 @ 08:55
    The quality of the questions determines the quality of the answers. You ask good questions Raoul. Thanks!
  • VT
    Vincent T.
    15 May 2020 @ 06:12
    "We should be catching the falling knife because we don't know when is the bottom" - Interesting, contrarian statement. Would have loved if they had also discussed position sizing, entry/exits and risk management, whilst trying to catch a falling knife.
    • CC
      Cornelius C.
      15 May 2020 @ 08:38
      He will tell you to bu his book
  • PV
    Peter V.
    15 May 2020 @ 07:27
    Great interview. Howard Marks is highly regarded but tbh to me he does not seem that knowledgeable. Should a credit investor not know more about what drives nominal and real rates?
  • PB
    Pieter B.
    15 May 2020 @ 07:04
    Fantastic conversation! I particularly liked the comments on falling knives and the sample size of 1 or even lower (BOE calling it the worst crisis)
  • NJ
    Nimitt J.
    15 May 2020 @ 06:07
    Awesome talk. thank you. How does retail customer manage to tide thru such times? special situation mutual funds ? Change of asset allocation results in tax liabilities implications as well. Are there global funds which we can leverage esp. from a retirement fund perspective.