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Howard Marks says ‘easy money has been made,’ but doesn’t see a bubble

Howard Marks, co-chairman and co-founder at Oaktre
Howard Marks, co-chairman and co-founder at Oaktree Capital Group

Howard Marks, co-chairman of Oaktree Capital Management (OAK), the Los Angeles-based manager of $100 billion in credit-focused alternatives investments, says investors should be wary of high-flying markets now but not panicky.

"The easy money has been made" and fear seems in short supply, said Mr. Marks in a question-and-answer session last week in Singapore, sponsored by the local branch of the CAIA Association. "But I don't think we're heading for a collapse or a crisis" like the one that occurred a decade ago, the industry veteran said.

While the word "bubble" — seldom heard prior to the explosive run-up in technology stock prices during the late 1990s and the subprime mortgage wave that crested in 2007 and 2008 — is popping up again now, "I don't think we're in a bubble today," said Mr. Marks.

Psychology today isn't absurdly euphoric, banks aren't levered like they were a decade ago and there's no counterpart in today's markets to the subprime mortgages, which wreaked havoc on markets then, he said.

One of the most prominent voices raising concerns about the continued exuberance of markets this year, Mr. Marks said, "I think it would be a huge mistake for people to get nervous and fear that we're heading for another crash" — defined as a stock market decline of 50% or more.

Something short of a crash, such as a correction of 20% or 30%, could still be "very unpleasant," said Mr. Marks, warning people not to interpret his calls to avoid panic to mean "there's nothing worrisome going on" now.

He said Oaktree's investment team is approaching the current environment under the battle cry of moving ahead "with caution."