market folly

Oaktree Capital's Chairman Howard Marks is out with his latest memo entitled "Liquidity."

Marks outlines the definition of liquidity as the ability to sell something at a price equal or close to the last price.  He also argues that an asset's liquidity can come and go with what's going on in the market. 

He profoundly writes, "In other words, the liquidity of an asset depends on which way you want to go ... and which way everyone else wants to go."

Oaktree's Chairman goes on to write, "The bottom line is unambiguous.  Liquidity can be transient and paradoxical.  It's plentiful when you don't care about it and scarce when you need it most.  Given the way it waxes and wanes, it's dangerous to assume the liquidity that's available in good times will be there when the tide goes out."

Marks also opines about exchange traded funds (ETFs) and liquid alternatives, in an interesting take on how they should be viewed.

Embedded below is Howard Marks' memo on Liquidity:



You can download a .pdf copy here.

If you haven't already, be sure to check out Marks' acclaimed book, The Most Important Thing: Uncommon Sense for the Thoughtful Investor.