Howard Marks used one of the iconic quotes of the financial crisis to highlight what’s wrong with markets today

howard marks

Howard Marks, billionaire investor and founder of Oaktree Capital Management, knows these good times can’t last forever. 

In his latest ‘Oaktree memo’ to clients on Wednesday, Marks recalled an iconic pre-crisis quote from then-Citigroup CEO Chuck Prince.

“When the music stops, in terms of liquidity, things will be complicated,” Prince said in 2007. “But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”

Marks says this quote is just as relevant today, 10 years later, as it was then. Investors know there is risk, but until then they have no choice but to keep investing.

“Today I think most investors know the good times will end someday, as Prince did,” writes Marks. “But for now they feel they, too, have no choice but to dance … in other words, there’ll be a time for caution, just not today.”

Oaktree’s 22-page letter echoes what many in the industry have been saying this year, as markets continue to post record high after record high, with volatility at historic lows.

Paul Singer of Elliott Management, which raised $ 5 billion in less than 24 hours earlier this month, said in his first-quarter update that now “is a good time to build a significant amount of dry powder” to deploy during future market turmoil. 

Baupost Group, a $ 30 billion hedge fund, laid out a road map for market chaos in a recent letter to investors

“We remain in a market that is broadly expensive and largely indifferent to risk,” Baupost Group’s head of public investments, Jim Mooney, said in the letter. “No one should be lulled into a false sense of comfort by the illusion of stability which surrounds us.”

And Tourbillon Capital’s Jason Karp wrote in a recent letter to investor that the stock market’s seemingly endless gains don’t make much sense

“People are just paying significantly more for assets without any fundamental improvement in those assets,” he said. 

Still, Marks can’t see an obvious catalyst to put an end to the bull market run, even if he is confident it will arrive eventually. 

“We agree things can’t go well forever,” he writes. “But we don’t see anything that’s likely to bring the bull market to a close anytime soon.”

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