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Feb. 5, 2019, 12:00 p.m. EST

Billionaire Howard Marks to Goldman Sachs: We’re not in bubble, but...

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By Shawn Langlois, MarketWatch


Bloomberg News/Landov
Howard Marks, co-founder at Oaktree Capital Group

‘I don’t believe that we’re in a bubble, and I don’t think we’re going to have a crash... but for an investor, I think the next five years simply aren’t going to be as good as the last ten.’

That’s Howard Marks, the billionaire co-chairman of Oaktree Capital, sharing his market outlook with Goldman Sachs /zigman2/quotes/209237603/composite GS -0.83%  in an interview this week highlighted on the Heisenberg Report blog .

Also read: Howard Marks slams Ocasio-Cortez’s tax plan

Marks explained that he often gets asked by nervous investors whether the stock market is on the brink of implosion.

“This is understandable because those who came into the market as much as 25 years ago have seen two bubbles and two crashes,” he told Goldman’s Allison Nathan. “But markets aren’t always about extreme ups and downs; there are bull markets and bear markets, rises and corrections.”

Marks says there’s plenty right with markets at the moment. Valuations are in line with the postwar average, banks aren’t highly leveraged and there doesn’t seem to be an analog for subprime mortgages in today’s climate.

“In many ways, the current environment is less precarious than 11 or 12 years ago,” he said, adding that he’s “argued since roughly mid-2017 that markets were excessively optimistic. And excessive optimism, faith in the future, and greed leave the market vulnerable to this type of sentiment-driven correction.”

So what concerns him most these days?

“I worry about the amount of debt in the system and about companies’ exposure to rising interest rates,” Marks said. “I would guess that the next big problem in the economy will emanate from the credit markets.”

He then offered up a quote from Berkshire Hathaway’s /zigman2/quotes/208872451/composite BRK.A -0.02%  Warren Buffett when asked how investors should be positioned for lower returns in the coming years: “The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs.”

Little caution was being exercised in Tuesday’s upbeat session, with the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.53%  , Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.84%  and S&P 500 /zigman2/quotes/210599714/realtime SPX +0.64%  all moving nicely higher.

/zigman2/quotes/209237603/composite
US : U.S.: NYSE
$ 298.50
-2.51 -0.83%
Volume: 2.80M
Jan. 19, 2021 10:50a
P/E Ratio
17.14
Dividend Yield
1.68%
Market Cap
$103.57 billion
Rev. per Employee
$1.42M
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/zigman2/quotes/208872451/composite
US : U.S.: NYSE
$ 350,255
-65.00 -0.02%
Volume: 117.00
Jan. 19, 2021 10:46a
P/E Ratio
15.50
Dividend Yield
N/A
Market Cap
$547.53 billion
Rev. per Employee
$650,360
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
30,977.89
+163.63 +0.53%
Volume: 113.10M
Jan. 19, 2021 10:50a
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
13,108.02
+109.52 +0.84%
Volume: 2.03M
Jan. 19, 2021 10:50a
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,792.50
+24.25 +0.64%
Volume: 679.88M
Jan. 19, 2021 10:50a
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Shawn Langlois is an editor and writer for MarketWatch in Los Angeles. Follow him on Twitter @slangwise.

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