The macro future is essentially unknowable
Howard Marks, legendary credit investor and Oaktree Capital Management co-founder, has historically taken a humble approach to investing:
the macro future is essentially unknowable. Here’s how he put it in his 2011 book The Most Important Thing:
- I’m firmly convinced that (a) it’s hard to know what the macro future holds and (b) few people possess superior knowledge of these matters that can regularly be turned into an investing advantage.
Which is why I /Jonathan Levin/ was so surprised to see him put out a pair of essays recently that seemed to traffic in the sort of sweepy macro soothsaying that he’s long criticized
The essays — “Sea Change” and “Further Thoughts on Sea Change” — make splashy predictions
Here’s a brief bullet point summary of the two memos (which you can read in full here and here.)
But ultimately, I think Marks captures the nuance of a complex situation better than some of his contemporaries.
Most of them start with the observation that borrowing costs declined consistently from the 1980s through the start of the pandemic and end with a warning about what the cessation of the trend could mean to the investment landscape.
Another classic Howard Marks line (from The Most Important Thing) is: “While we never know where we’re going, we ought to know where we are.”
Everyone’s making big macro calls these days, and he couldn’t help himself either — but at least he still has the sense to recognize the uncertainty around the projection.
Jonathan Levin Bloomberg 17 oktober 2023
NOBODY KNOWS ANYTHING
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