The Memo by Howard Marks

In his latest memo, Howard Marks offers observations based on his meeting with the board, consultant, and senior staff of a state pension fund. Howard explores the key topics covered during the session, including determining an appropriate risk posture, selecting an investment approach, and assessing performance. While these decisions are challenging, the board and its consultant applied the only reasonable method: asking the right questions and pursuing rational conclusions. You can read the memo here (https://oaktreecapital.com/insights/memo/a-look-under-the-hood).

To celebrate the 35th anniversary of his memos, Howard Marks recently held a fireside chat for Oaktree employees. Listen to an excerpt from the conversation to hear Howard discuss why he started writing and why he’s kept at it, and learn more about the enduring investment truths encapsulated by his memos.

In his latest memo, Howard Marks sets forth the essence of value and price, as well as the critical relationship between the two. He posits that value exerts a ‘‘magnetic’’ influence on price, meaning the relationship of price to value should be expected to strongly influence investment performance in the long run, with high valuations presaging low subsequent returns, and vice versa. In the context of today’s elevated U.S. equity valuations and widespread investor optimism, he advises us to consider going to an ‘‘Investment Readiness Condition’’ in which investors shift their portfolios somewhat in the direction of increased defense. You can read the memo here (https://www.oaktreecapital.com/insights/memo/the-calculus-of-value).

In his latest memo, Howard Marks discusses the implications of governmental intervention in economies. Considering examples such as rent control, fire insurance, and tariffs, he emphasizes that while free markets don’t produce perfect solutions, efforts to control them often make things much worse. He argues that when allowed to function, the laws of economics create prosperity through incentivizing innovation and productivity. He also touches on the U.S. fiscal deficit, questioning how much longer the government can continue spending more than it takes in.

In celebration of Oaktree’s 30th anniversary on April 10, 2025, cofounders Howard Marks (Co-Chairman), Bruce Karsh (Co-Chairman and Chief Investment Officer), and Sheldon Stone (Principal and Co-Portfolio Manager, High Yield Bonds) held a fireside chat for employees where they shared stories about Oaktree’s origins and the firm’s journey over the last three decades. We’re excited to share an excerpt from their conversation.

In his latest memo, Howard discusses how the recent events surrounding tariffs can have a seismic but unpredictable impact on the global economy. Seismic in that they reflect a fundamental undoing of longstanding norms, and unpredictable in that tariffs would bring untold second- and third-order consequences. He emphasizes that there is no foreknowledge here, with forecasts even less likely to be accurate than usual. Howard considers the response of the financial markets, highlighting the key question regards the appropriateness of the market reaction thus far: has it been just right, excessive, or inadequate? You can read the memo here (https://www.oaktreecapital.com/insights/memo/nobody-knows-yet-again).

In his latest memo, Howard addresses a common question he’s been receiving over the last few months: “What about credit spreads?” He explains that the key question should be whether today’s spread is sufficient to offset the credit losses that’ll occur, rather than whether it’s historically narrow or not. Further, he emphasizes that spread widening is a short-term phenomenon and expresses his belief that the elevated yield offered by credit presents a better deal than equities, even at today’s spreads.

In the latest episode of Behind the Memo, Howard discusses his recent memo, On Bubble Watch, which revisits a subject he first wrote about 25 years ago. He delves into the investor psychology that underpins a market bubble, and assesses the danger of letting excitement and fear of missing out override risk aversion. You can listen to or read the Memo here (https://www.oaktreecapital.com/insights/memo/on-bubble-watch).

On January 2, 2000, Howard Marks published his first memo to garner any reader response, bubble.com, calling attention to excesses he detected in the market for tech and internet stocks. His newest memo revisits the subject of bubbles. Howard expresses his view that they’re more a state of mind than a quantitative calculation and describes bubble thinking as irrational, often underlaid by a widespread belief that ‘‘this time is different.’’ Rather than opining on whether we’re in a bubble, Howard lists the signs he sees today and suggests how you might think about them . . . just as he did 25 years ago. You can read the memo here (https://www.oaktreecapital.com/insights/memo/on-bubble-watch).

In his latest memo, Howard Marks outlines the need to base asset allocation decisions around an established risk target. He describes the fundamental differences between ownership and debt, as well as the importance of finding the combination of the two that gets an investor’s portfolio to the desired position on the risk/return continuum. Finally, he expands on the increased utility of debt investments in today’s portfolios. You can read the memo here (https://www.oaktreecapital.com/docs/default-source/default-document-library/ruminating-on-asset-allocation.pdf?sfvrsn=67775566_2).

In his latest memo, Howard Marks discusses the economic facts of life, as he examines the workings of free markets and what happens when they’re tampered with. He considers what “price-gouging” actually means and how rents should be set. He ultimately argues that the laws of economics shouldn’t be overridden — even when it’s politically advantageous to do so – because of the loss to society. You can read the memo here (https://www.oaktreecapital.com/docs/default-source/memos/shall-we-repeal-the-laws-of-economics.pdf?sfvrsn=ab205566_1).

In this special episode of Behind the Memo, Howard Marks is joined by Morgan Housel, the bestselling author and partner at the Collaborative Fund. They discuss ideas from Howard’s recent memo “The Impact of Debt,” which was inspired by Morgan’s article “How I Think About Debt.” They explore the relationship between leverage and longevity, the nature of risk, and the eternal relevance of Voltaire’s famous saying: “History doesn’t repeat itself. Man always does.” You can listen to or read the Memo here (https://www.oaktreecapital.com/insights/memo-podcast/the-impact-of-debt).

In his latest memo, Howard Marks discusses the reasons for the recent market volatility using one of finance’s classic metaphors: Mr. Market, the figure Benjamin Graham created in 1949 to explain the erratic nature of financial markets. Howard pulls together some of his best writing on investor psychology from the past three decades, adds some of his favorite investing cartoons, and offers a few new observations. He suggests that Mr. Market’s lessons about the behavior of markets are as relevant today as they were 75 years ago. You can read the memo here (https://cnt.oaktreecapital.com/docs/default-source/memos/mr-market-miscalculates.pdf?sfvrsn=ddfe5566_1).

In this episode of Behind the Memo, Howard Marks is joined by two special guests: Oaktree cofounder Bruce Karsh and the chess Grandmaster Maurice Ashley. In a wide-ranging conversation, they discuss Howard’s recent memo "The Indispensability of Risk" as well as the inspiration for that memo: Maurice’s Wall Street Journal article, "Chess Teaches the Power of Sacrifice." They consider the many parallels between chess and investing, including the lesson that not taking enough risk may be one of the riskiest strategies of all. You can read the memo here (https://www.oaktreecapital.com/docs/default-source/memos/the-indispensability-of-risk.pdf?sfvrsn=52b45666_3).

In his latest memo, Howard Marks discusses the importance of avoiding expressions of absolute certainty when operating in fields subject to randomness and human emotion, like politics, economics, and investing. He suggests that it’s better to have humility and acknowledge that the smartest thing to say is often “I don’t know.” You can read the memo here (https://www.oaktreecapital.com/insights/memo/the-folly-of-certainty).

In a special edition of The Insight: Conversations, you’ll hear excerpts from multiple sessions held during Oaktree’s recent biannual client conference. Oaktree co-chairman Howard Marks does a deep dive into his sea change thesis, members of Oaktree’s Global Credit team examine the most significant trends impacting the high yield bond and leveraged loan markets, and Oaktree’s Opportunistic Credit team explores key themes reshaping today’s restructuring environment.

Oaktree Co-Chairman Howard Marks (https://www.linkedin.com/in/howardmarksbook/) joined the In Good Company podcast with Nicolai Tangen (https://www.linkedin.com/in/nicolai-tangen/). They discussed Howard's investment philosophy, risk management, and how to determine the quality of a decision.

In his latest memo, Howard Marks examines the relationship between leverage and survivability, taking inspiration from a recent Collaborative Fund post by Morgan Housel. Howard explains why determining the appropriate amount of leverage should be about optimization, not maximization. You can read the memo here (https://www.oaktreecapital.com/insights/memo/the-impact-of-debt).

Where are we in the market cycle? Why is it healthy to be uncertain? And what does it mean to actually “be opportunistic”? In the latest episode of The Insight: Conversations, Howard Marks (Co-Chairman), Armen Panossian (Co-CEO), and David Rosenberg (Head of Liquid Performing Credit) discuss these and other topics from the recently published Performing Credit Quarterly 1Q2024: Unusually Uncertain.

In his latest memo, Howard Marks considers what chess can teach investors about the paradox of risk-taking. Drawing on insights from a recent Wall Street Journal article (https://www.wsj.com/sports/chess-teaches-the-power-of-sacrifice-221db7b7) by chess grandmaster Maurice Ashley, Howard explains why not taking enough risk may be one of the riskiest strategies of all. You can read the memo here (https://www.oaktreecapital.com/insights/memo/the-indispensability-of-risk).