market folly

Oaktree Capital's Chairman Howard Marks is out with his latest letter entitled "High Yield Bonds Today."  As implied by the title, it deals with the distressed manager's take on an asset class frequently talked about these days:

He notes,

"While we believe spreads are attractive given the risks we see in our portfolios, it is true that there is little room for price upside, making the reward for risk taking limited.  In this type of environment, superior returns are more likely to be earned through minimizing mistakes than through stretching for yield.  Rather than behaving aggressively, the search for return should involve risk control, caution, discipline and selectivity."

Marks concludes that investors shouldn't sell their bonds and wait for a better time to invest, arguing that market timing is near impossibility (especially in less liquid markets like high yield).

Embedded below is Howard Marks' entire memo, High Yield Bonds Today:




You can download a .pdf copy here.

For more from this manager, see Marks' other recent commentary on fixed income returns not being worth the risk.