STREET DOGS: Marks
Two things Howard Marks would never say: "get out" and "it’s time"
From Howard Marks’s January Memo: why do cycles occur? Why doesn’t the US economy just grow at the average rate of 2% to 3% every year? And since the average return on the S&P 500 is in the range of 9% to 11%, why isn’t the return between 9% and 11% every year (and why does the yearly return fall between 9% and 11% so infrequently)? Because of the involvement of people. Economies and markets, as well as other cyclical phenomena, tend first to overshoot in one direction (given how people are wired, usually to the upside) and then are bound to correct in the opposite direction. When markets do too well for a while — when equity returns far exceed the growth rate of companies’ profits, and when bonds return more than their promised yield to maturity — it usually means they’ve become overpriced and will correct sooner or later. And when an economy expands faster than the potential growth rate determined by its population growth and increases in productivity — usually because companies o...
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