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12-04-2013, 09:17 AM
Hi all, I've been lurking ard this forum for a while now, and thought it is a great forum with alot of knowledge sharing. I'm currently reading "the most impt thing" (thanks to fellow forum buddies for introducing the book), and came across Howard Marks' latest memo to his clients, on his views on the equity market
I have cut and pasted the concluding remarks from his memo, and for those interested in the entire article, i have also attached the pdf. Enjoy!
"A great rotation? Maybe . . . or maybe not. Nowadays pundits and the media are quick to come up with cute labels – usually just the right size for a headline or sound bite – to describe things that are taking place or that “everyone knows” are just around the corner. I don’t know whether it’s going to be great. Heck, I don’t even know if it’ll happen. But I like to enumerate the pros and cons and try to put them in perspective, as much as I like skewering excessive generalizations and pat pronouncements.
Of course, doing that isn’t enough. I feel I should come down on one side or the other. Thus I’m quite comfortable imagining a few years of equity performance that provide a pleasant surprise relative to what I think is the prevailing expectation of 6% or so per year.
And if I’m wrong – if there is no rotation from fixed income to stocks – I’m not that worried that I’ll end up with great regret over having failed to pile into T-bills yielding zero or the 10-year note guaranteeing 2.0%. When attitudes are moderate and allocations are low, like I feel is currently the case with equities, there’s little likelihood of investing being a big mistake. And when interest rates are among the lowest in history, it would take deflation, depression or calamity to make failing to invest in Treasurys and high grade bonds a serious omission."
I have cut and pasted the concluding remarks from his memo, and for those interested in the entire article, i have also attached the pdf. Enjoy!
"A great rotation? Maybe . . . or maybe not. Nowadays pundits and the media are quick to come up with cute labels – usually just the right size for a headline or sound bite – to describe things that are taking place or that “everyone knows” are just around the corner. I don’t know whether it’s going to be great. Heck, I don’t even know if it’ll happen. But I like to enumerate the pros and cons and try to put them in perspective, as much as I like skewering excessive generalizations and pat pronouncements.
Of course, doing that isn’t enough. I feel I should come down on one side or the other. Thus I’m quite comfortable imagining a few years of equity performance that provide a pleasant surprise relative to what I think is the prevailing expectation of 6% or so per year.
And if I’m wrong – if there is no rotation from fixed income to stocks – I’m not that worried that I’ll end up with great regret over having failed to pile into T-bills yielding zero or the 10-year note guaranteeing 2.0%. When attitudes are moderate and allocations are low, like I feel is currently the case with equities, there’s little likelihood of investing being a big mistake. And when interest rates are among the lowest in history, it would take deflation, depression or calamity to make failing to invest in Treasurys and high grade bonds a serious omission."