Oaktree's Howard Mark on Bloomberg Wealth with David Rubenstein
David Rubenstein・22 minutes read
Howard Marks succeeded in distress debt investing, starting in the late 70s and founding Oak Tree Capital Management after leaving TCW with Bruce K. Marks emphasizes a shift in financial markets towards higher interest rates, predicting a move towards fixed income assets and credit instruments over equities, while highlighting concerns about increasing default rates and the impact of the US government's debt and deficits on economic stability.
Insights
- Marks, a successful distress debt investor, emphasizes the current shift in financial markets towards higher interest rates, leading to credit instruments offering equity-like returns.
- Marks warns of potential bankruptcies stemming from credit changes, reduced lending capacity, and higher standards, highlighting the importance of recognizing the pivot in the financial market for successful investing strategies.
Get key ideas from YouTube videos. It’s free
Recent questions
What is distress debt investing?
Distress debt investing involves focusing on companies in bankruptcy or default, seeking to profit from their financial distress by purchasing their debt at a discounted price and potentially turning a profit if the company recovers.
Who is Howard Marks?
Howard Marks is a successful investor known for his expertise in distress debt investing. He co-founded Oak Tree Capital Management and is renowned for his investment memos that provide insights into the financial markets.
Why are credit instruments offering equity-like returns?
Credit instruments are offering equity-like returns due to higher interest rates in the financial markets. This shift has led to opportunities for investors to earn higher returns through credit instruments compared to traditional equity investments.
What are the potential causes of bankruptcies?
Bankruptcies can stem from various factors such as unmet maturity of loans, reduced lending capacity from banks, changes in credit standards, and shifts from easy to difficult money-raising periods. These factors can lead to financial distress for companies.
How does Howard Marks predict the future of fixed income assets?
Howard Marks predicts a shift towards fixed income assets over equities due to higher interest rates. He believes that credit instruments will be favored over equities as investors seek higher returns in the changing financial landscape.
Related videos
David Perell
This Investor Raised Billions by Making Complicated Ideas Simple | Howard Marks
ColdFusion
When Risk Taking Goes Too Far - The Archegos Collapse
Boxoffice Movie Scenes
Ryan Gosling explains how to turn debt into money | The Big Short | CLIP
Bloomberg Originals
How to Lose $20 Billion in Two Days
FRONTLINE PBS | Official
Money, Power and Wall Street, Part Two (full documentary) | FRONTLINE
Summary
00:00
Howard Marks: Distress Debt Investing Pioneer
- Howard Marks found success in distress debt investing, focusing on companies in bankruptcy or default.
- Marks began his credit market career in the late 70s at City Bank before moving to TCW in 1985.
- Together with Bruce K, Marks raised one of the first distressed debt funds at TCW.
- In 1995, Marks and K left TCW to establish Oak Tree Capital Management.
- Marks highlights a significant shift in financial markets, emphasizing the end of an easy money era.
- Marks suggests that credit instruments now offer equity-like returns due to higher interest rates.
- Marks did not anticipate Oak Tree becoming one of the largest investment firms globally.
- Marks is renowned for his investment memos, which are based on his observations and experiences.
- Marks discusses the importance of recognizing the current financial market pivot.
- Marks predicts a shift towards fixed income assets due to higher interest rates, favoring credit instruments over equities.
14:55
Bankruptcy risks from credit changes and debt.
- Bank may refuse refinancing due to credit changes, reduced lending capacity, or higher standards.
- Bankruptcies often stem from unmet maturity, especially during shifts from easy to difficult money-raising periods.
- Default rates on high-yield bonds average around 4%, with expectations of future increases.
- Loan renewals may lead to reduced funds, higher capital costs, and financial gaps, potentially causing bankruptcies.
- Concerns arise over the US government's $32 trillion debt, annual deficits, and potential devaluation of the dollar.
- Federal Reserve's interest rate adjustments and inflation recognition are crucial factors in economic stability.
