The Memo by Howard Marks

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] (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. You can read the memo here [https://www.oaktreecapital.com/insights/memo/more-on-repealing-the-laws-of-economics] (https://www.oaktreecapital.com/insights/memo/more-on-repealing-the-laws-of-economics).

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] (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. You can read the memo here [https://www.oaktreecapital.com/insights/memo/gimme-credit] (https://www.oaktreecapital.com/insights/memo/gimme-credit).