market folly

Oaktree Capital's Chairman Howard Marks is out with his latest memo entitled "Latest Thinking."  In it, he details his take on the markets and tax cuts.

He begins by highlighting the positives: fundamentals are solid, worldwide growth is in full effect, deregulation and pro-business policies are in place, etc. 

He then turns to the negatives, writing.

"Most valuation parameters are either the richest ever (Buffett ratio of stock market capitalization to GDP, price-to-sales ratio, the VIX, bond yields, private equity transaction multiples, real estate capitalization ratios) or among the highest in history (p/e ratios, Shiller cycle-adusted p/e ratio).  In the past, levels like these were followed by downturns.  Thus a decision to invest today has to rely on the belief that 'it's different this time.' Prospective returns in the vast majority of asset classes are some of the lowest in history."

Marks says that he would be on the "defensive or cautious part of the spectrum" in regards to portfolio construction at the moment.   You can read his full thoughts:

Embedded below is Howard Marks' new memo, "Latest Thinking":



You can download a .pdf copy here.

For more from this investor, be sure to also read his well-known book, The Most Important Thing.