Oaktree Capital founder Howard Marks is a boldfaced name on Wall Street, equally well known for his firm’s performance as for his lengthy investor letters that he periodically publishes free online to reach the widest possible audience.
In the intervening months, Marks once again was proved correct, reminding his audience why Warren Buffett once described his memos as “must reads” for anybody interested in markets. Old-school, bear market Before the pandemic relief hysteria took hold, Marks argues that the most recent true bull market was the dot-com boom of the late 1990s-early 2000s. Although stocks rallied during the run-up to the Great Financial Crisis, the market of those days moved only gradually, and it lacked the distinctive tone of unbridled optimism.
With this in mind, Marks delved into what he described as the three stages of a bull market: during the first phase, a handful of forward-looking investors bet that things will get better. During the second, more investors realize that underlying improvement is actually under way. And in the final stage, virtually all investors believe that the recent period of frothy returns will continue forever.
This time around, the “super stock” theme was complicated by the advent of cryptocurrencies, which introduced a new wrinkle to the old dynamic by magnifying investors’ hysteria as millions chased the nigh unprecedented returns that the original crypto investors had enjoyed. The advent of zero-fee brokerage accounts ushered in by Robinhood Markets Inc. HOOD and others was another innovation that set this market apart, Marks said.
Little late for that, Howard