- Howard Marks and Joel Greenblatt discussed bubbles, tech stocks, and investing tips.
- The value investors suggested some companies deserve their lofty valuations.
- Here are Marks and Greenblatt’s nine best quotes from the interview.
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Value investors Howard Marks and Joel Greenblatt discussed market bubbles, tech stocks, and the key things they’ve learned during their careers in a recent RealVision interview.
The Oaktree Capital Management co-chairman and the co-chief of Gotham Asset Management agreed there were signs of irrational exuberance in markets.
However, they argued that some technology companies deserve aggressive valuations, and rock-bottom interest rates are limiting investors’ options. They also questioned the long-term consequences of the US government’s efforts to prop up asset prices.
Here are the nine best quotes from Marks and Greenblatt, lightly edited and condensed for clarity.
Marks: “We are definitely in a time of optimism that is largely man-made, stemming primarily from the actions of the Fed and the Treasury to counter the economic weakness of 2020. They produced a resurrection of risk-bearing. FOMO took over from fear of losing money. And it really led to very strong demand for securities. So that’s worrisome.”
Marks: “We see risky behavior ranging from the rapid acceptance of SPACs, to the ease of doing IPOs, phenomena like GameStop, and the heavy involvement of retail buying, margin buying, and option buying. A lot of these taken together could be signs of a bubble. But I think that most asset valuations are reasonable relative to the level of interest rates.”
Marks: “A ‘bubble’ connotes unreasonably optimistic psychology and a belief that there’s no price too high for the bubble asset. I don’t think that those are going on today. I just think that all prices are up because of all the demand, as well as returns being down.”
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Greenblatt: “I do not believe there will be hundreds of other Amazons, Googles, Microsofts out there. Many companies are priced as if they will be. I think that’s an element of froth.”
Marks: “The 40-year tailwind of declining interest rates that has lifted the price of all assets is at an end.”
Greenblatt: “If you take a business like Microsoft, Amazon, or Google and actually put a reasonable growth rate on them for five years, and then look at where you are in five years, it’s 30 or 40 times earnings. Your results show that they’re not astronomically priced. They’re, in many cases, reasonably priced.”
Marks: “I always say that if you stand at a bus stop long enough, you’ll get a bus. But if you run from bus stop to bus stop, you may never get a bus. And I think that’s an important thing for people to accept – nothing will work all the time.” – advising investors not to switch from one strategy to another.
Read more: Short-seller Carson Block says the day-trading revolution that hit GameStop and other stocks is changing the playing field for investors like him. Here’s how his firm is reinventing itself – and what he’s betting against today
Greenblatt: “The people who are really successful at investing do it for love, do it for the fascination, do it for the challenge. And those are the people who are most successful. They, as Warren Buffett would say, tap dance to work every day. And that’s really the secret.”
Marks: “It’s not what you buy, it’s what you pay for it. Investing is a matter of buying things well, not buying good things.”