Legendary investor Howard Marks cautions investors in latest memo
Howard Marks, co-chairman of Oaktree Capital (OAK), penned a memo out on Wednesday urging investors to proceed with caution.
Marks notes that the end of the current bull market may not come today or soon but that risks are elevated and investors may be ignoring them.
“My observations are always indicative, not predictive … an eventual increase in risk aversion – should happen, but they don’t have to happen. And they certainly don’t have to happen soon,” said Marks.
Marks contends the point that bull markets seem to focus on a few stocks as “the greatest.”
He mentions the FAANG’s as the current bull market’s “anointed stocks.” The acronym FAANG is used to describe the current “super stocks”: Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Google (GOOG). In his 22 page memo, Marks says, “I’m not saying the FAANGs aren’t great, or that they’ll suffer such a fate. Just that their elevated status today is a sign of the kind of investor optimism for which we must be on the lookout.”
Marks also turns his sights on digital currencies. “Some businesses accept Bitcoin as payment. Some buyers want to own Ether because it can be used to pay for computing power on the Ethereum network. Some people are eager to speculate on digital currency for profit. Others want to put a little money into these to-date-profitable phenomena rather than run the risk of missing out. But they’re not real!,” Marks explained.
Mark’s ends his discussion by pointing out that the four components of today’s market, “high uncertainty, low prospective returns, high prices and pro-risk behavior – are indisputable.”
Because of this #Marks says this may be a good time to curtail investments, however he points out that large institutional investors do not have the option to stop investing, especially “especially true when the return on cash is as low as it is today.”
To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners. We offer stock picks, option picks, daily stock upgrades, stock downgrades, and earnings reports that are delivered to your email.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.