Here's why Howard Marks doesn't think we're in a bubble

Oaktree Capital’s Howard Marks is worried, just like everyone else in this market.

But he does not think we’re in a bubble, despite the dangerous combination of our current uncertain macroeconomic environment and low returns on assets.

He explained why at Bloomberg’s Most Influential conference in New York City on Wednesday.

“You have to proceed with considerable caution … but I don’t think we’re in a bubble,” he told moderator Erik Schatzker. “I think that bubbles are connoted by extremely high valuations and bubble thinking.”

Right now, everyone’s too cautious for it to be a bubble, he reasoned.

Also, Marks is essentially a credit investor and if companies can pay their debts, investors like him will at least get their promised return if they’re correctly “discerning about credit.”

“In the bubble it was really easy to issue paper that we were sure wouldn’t be paid,” Marks said.

Now, none of this is to say that Marks isn’t worried at all. It’s just that the things he’s worried about have a longer term horizon than his fund does.

“I don’t like being a downer,” he said. “I was lucky to be born 70 years ago during the best period in history — during the best time in the best place… I don’t like saying that to my kids.”

Marks cited globalization and automation as the two major forces changing the destinies of workers around the world.

“When you don’t have open borders, workers in one country can be paid more than workers in another country even if the product isn’t the best,” he said.

As for automation, he mused on workers who were once farmers in the South 100 years ago, then manufacturers in the Midwest 50 years ago, not having a place in this new global economy.

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