Howard Marks on investing: Finding rhyme in reason

Read the full video transcript

HM: Howard Marks

MR: Max Richardson

• Introduction

  MR: Welcome to the sixth live webcast in our series by Investec Wealth & Investment - Markets and Investing in Times of Covid-19. Our last webcast was viewed by clients and colleagues across the globe so welcome everyone wherever you are.

  I'm Max Richardson Senior Investment Director at Investec Wealth & Investment in London. Today I am delighted to introduce you to Howard Marks of Oaktree Capital who joins me for a fireside chat.
  

  Howard is highly renowned as a co-founder of Oaktree Capital, author of three books including The Most Important Thing and Mastering the Market Cycle but he's probably best known for the investment memos he's published since 1990.
  

  In the last few webcasts, we've chatted to investment strategists, economists, political analysts, psychologists and even those right at the coal face such as bloggers from Italy, professors from the WHO and recovered patients of Covid-19.
  

  Today I hope to focus on the current crisis’ unique properties, but also similarities in the investing sense to previous crises particularly in relation to investor behaviour - a topic close to Howard's heart.
  

  In these out of the ordinary times Investec looks to partner with our clients and to help you navigate a course to calmer waters. We do this by bringing together our own internal knowledge with external experts in their fields. Welcome Howard.
  

  HM: Thank you very much Max. It's a pleasure to be here.
  

• Howard Marks on his working from home experience

  MR: It's great that despite being 5,000 miles and eight time zones apart we can still hold this fireside chat thanks to modern technology, and you've clearly been very busy because as well as running Oaktree you wrote four memos in the month of March which I think is one more than you wrote in the entirety of 2019.

  Today I'd like to cover three broad topic areas including cycles, risk and the future post-pandemic as well as posing a couple of questions from our audience too. But before we start, I wondered whether we might you might be able to let me know how you're finding working from home?
  

  HM: Sure. Well, first of all, my home is in New York while Oaktree is headquartered in Los Angeles. I moved to New York in 2013 because my kids did and I wanted to chase them and since my wife and I moved there they both got married they both had children so I think it was a successful plan.
  

  On March 11th we were scheduled to have our biannual client conference in Los Angeles. My wife and I flew out to Los Angeles on March 6th, but we cancelled the conference. We live streamed it instead of holding it live for clients on the 11th. And on the 11th after lunch I went home and I've been here ever since, to my home in Beverly Hills that is.
  

  So, we just passed five weeks of lockup and the good news is that on the 13th, my son and his wife and baby joined us in Beverly Hills. So it's great to have the company and we are faring well, as well as one can under these circumstances.
  

  And I'm quite busy because my tasks include of course being up to date on events, writing the memos as you described at an unusual clip and also speaking with clients, you know, where I think the most important thing right now, of course is to a) not sell when the market is during a downdraft and also put some money to work. So, we're mobilising for that, speaking with clients and that's taking lots of time. But happily, I mean that's my job as I mentioned to you earlier Max, where would we be without work, you know work has kept us busy and kept the times interesting.
  

  MR: Yeah, that's certainly true - we're adapting well here as well, including looking after our children which is a new and great experience actually, it's challenging but we're enjoying it. 
  

• Understanding cycles and getting the odds on your side

  MR: A bit later we're going to talk about how human behaviour in business and markets might change as a result of the crisis, but I'm also interested to know what might have stayed the same. Have you detected the difference in the market’s psychology during this crisis compared to previous crises like 2008? Are investors acting in a very similar fashion, have you noticed any changes in yourself too?

  HM: Let me deal first with your last question. I don't think I've changed you know; I've been through a lot of these cycles. I'm now 51 years into the investment business and I've seen a number of major cycles, three in particular debt crises, this is the fourth. And so, I think that I've learned to understand them sufficiently that I don't fly off the handle anymore.
  

  You asked how it's the same and how it's different. And of course, that's a very interesting question. Mark Twain, the American humourist is supposed to have said that “history does not repeat, but it does rhyme”. And you mentioned that in 2018 I put out a book called Mastering the Market Cycle - still for sale I might add, any amount anybody would like to buy.
  

  And you know, I think that studying and understanding cycles is probably the single thing we can do to best get the odds on our side and that is the the subtitle of the book “Getting the Odds on Your Side”.
  

  We can't ever as investors get to the point where we are sure such and such is going to happen or we are sure such and such is going to work, but we can get to a point where the odds are on our side, and I think that understanding cycles is the most important element in that. 
  

• What are the rhyming elements in market cycles?

  HM: Okay, so what are the elements that rhyme from one cycle to the next? Well, first of all, I think the causes in the investment world are when we have too much willingness to bear risk, too much optimism with regard to the future and too much money in the hands of investors and too much eagerness to put it to work, then I think eventually markets will go too far to the upside.

  And you know, a positive market will turn into a bull market and a bull market will turn into a market which is too high and a market which is too high it eventually will turn it into a bubble.
  

  And I think that in the last few years we have had those things. We've had too much optimism, too much willingness to bear risk and too much money in investors hands, and too much eagerness to put it to work.
  

  The main reason for all of these things is the low level of interest rates and of course interest rates certainly in the US, but in most almost every place interest rates have been the lowest in history and in Europe and Japan at the government level negative, we've never seen that before. So, we had very low interest rates. And so, we had people willing to do risky things in order to make good returns in a low return world, that's number one. 
  

• The market pre Covid-19

  HM: And these things cause the market to appreciate. We had the longest bull market in history reaching into its 11th year the low of the S&P and the Global Financial Crisis was reached March 9th, 2009.

  So, we came within 20 days of making it 11 years this March. The S&P peaked out February the 19th. Okay, so that's the backdrop. We had a very strong market for the reasons that I described, and the upcycle was very powerful and then went on long.
  

  Now the interesting thing is I don't describe this cycle as having reached a bubble - valuations were not highly excessive, behaviour was not crazy and, in particular, a bubble is characterised by hearing people say there's no price too high.
  

  Whether it be internet stocks or the price of a home, we heard in past cycles, no price too high. We didn't hear that this time and I didn't think we were in bubble territory, but I thought we were high enough so that Oaktree was behaving in an unusually risk-averse fashion.
  

  We always take a cautious approach to our risky asset classes, we only invest in risky asset classes, we don't invest in treasuries or gilt-edged stocks and so forth. We take risk to make money but we take a cautious approach and in the last several years we've taken an unusually cautious approach even for us. 
  

• How the market reacted to the Covid-19 shock

  HM: Okay now let's run that forward. In the last two months, of course, we've had unusual developments. Now, we had the arrival of the Coronavirus and this was not a cyclical event, this was a sunspot type event - a random event thrown in by the gods or the fates or whatever you want to see into this normal cyclical experience, and of course from February 19th the high of the S&P at about 3380 or something, the market went down 34% in five weeks. And that was the fastest trip to a decline that low in history and you know, we had some panicky behaviour on the part of investors.

  When investors switch I always say that in the real world things fluctuate between pretty good and not so hot, but in the investment world we go from flawless to hopeless, and when investors flip from being optimistic to being pessimistic and fatalistic and suicidal then we get big declines in prices and we get bargains to buy. So maybe I'll stop there Max, and rather than just drone on you might want to ask me, you know, what happened in mid-March?
  

• Climbing a wall of worry

  MR: Yeah, but I think the point you made there about this, and you refer to this concept of the pendulum of psychology a lot, and I've started to refer to it as well when I talk to clients, and we weren't at the stage where the pendulum was really at the euphoric stage.

  You know taxi drivers weren't giving you stock tips, people’s belief system wasn't that markets would go up forever, in fact people have been quite cautious for 10 years despite being a bull market, and then of course the virus happened and the economy stopped and so we had a catalyst for a bear market that was an exogenous shock I guess.
  

  HM: Yeah, I think you know the expression that we used to use when I was young was that the market was climbing a wall of worry - there were things to worry about like well, let's say we'll use the rubric global leadership, political leadership, also relations with the Chinese and things of that nature, and the market rose anyway, and when the market rises despite concern that's called climbing a wall of worry and that's viewed to be healthy as opposed to a parabolic assent which is has the potential to be unhealthy. So, you're right to say that the environment was not euphoric.
  

• Calibrating your investment strategy

  MR: So that brings us quite neatly on to my next question, and you've written and there's also been lots written about how difficult it is to call the bottom of the market. And when the right time to buy is - is it better to buy before or when you know very little, or buy after the bottom when perhaps you might pay more but you have some more information? So, what strategy would you advise for investors trying to allocate capital when faced with a large decline in asset prices such as we've seen?

  HM: You know, I wrote a memo, one of those ones you referred to, and the title was Calibrating and I think that it's all a matter of calibration, and when I go on TV, they try to get me to say buy or sell, in or out and it's not that black and white.
  

  When should you own more and when should you own less that's the question by the way, it's kind of a distraction to think about buy sell buy sell – own, we own investments. When should we own more and when should we own less and that's a rather easy question to answer.
  

  We should own more when the environment is hospitable and, I'll define that in a minute, and prices are low, and we should own less when the environment is precarious and prices are high.
  

  Again, this is all discussed in the book about the cycle, but what does it mean for the market to be precarious? Well, I described it a bit ago, I said it occurs when investors are optimistic. And there's not much risk aversion and there's a lot of money and a lot of eagerness to put it to work.
  

  So when these things are true then everything else being equal, it's likely that asset prices will be high relative to asset values. That's really the key determinant. Where does the price of what you're considering holding stand relative to its intrinsic value, and that is determined by factors like the ones I mentioned.
  

  Let's simplify it: the more optimistic people are, the higher the price is likely to be relative to its intrinsic value, period. You want to buy when the price is low relative to the intrinsic value or perhaps doesn't reflect all the merits of the intrinsic value, and you don't want to hold that much, maybe you even want to sell, when the price is very high relative to the intrinsic value.
  

  So, you know, my point is that in the middle of March we saw a real panic and Oaktree invested aggressively in the things we buy which are mostly credit instruments, especially from March 9th when the panic I would say set in until March 23rd when it abated, thanks to the actions of the government.
  

  Things went on sale. Think of it as just going to your local department store and when things go on sale, you should buy more, and we did. And that's what we have done in past crises and that's what we try to do. That's our job is to own more when they're on sale.
  

  And then the government came out and the news started to filter out around March 23rd about what the government and Fed of the US would do, and interestingly here we are in this terrible environment, this terrible health pandemic, and from March 24 to 26 - those three days were the highest returning three days in the last 80 plus years in the stock market going back to the 1930s and the Depression.
  

  And so you may say that it was a response to the government programmes, you may say that it was a relief rally and the market rose - the Dow was up 19.8%, I think in the S&P 17.6% - and so well, guess what, after a rise of that proportion, and then it has continued higher and the S&P which was up 17.6 in those three days is now up about 26% or so from the low of March 23rd. And that's probably the quickest trip into bull market territory in history, bull market defined as a period when the markets been up 20% without a decline.
  

  So very simple things aren't as cheap anymore, they're not on sale to the same extent you shouldn't own as many. Now when I say you should own more, you should own less, most people don't want to jump around from day to day. Most people shouldn't be trading daily in out of more or less, but the point is we had a major move down, things were put on sale, Oaktree bought, we had not a corresponding move up but a strong move up and we stopped buying as much because we couldn't get bargains of the same magnitude. And so, first we thought the risk was great in past years and we were defensive, then people panicked over the exposure of the risk and we bought, and then people got more comfortable and our buying slowed. That's the way I think about calibrating.
  

• Expect another “testing of the lows”

  MR: Thank you. That's very useful and it's an interesting challenge because markets, bear markets usually test the lows. There's normally a rally and you said this in Calibrating, actually you can you put the numbers there that showed that over the last, I think, 80 years or so that when we see a decline as we've seen, there tends to be a rally, but then the market might test it once maybe twice maybe three times --- 

  HM: I think the figure Max was nine times out of ten, and if you look at the last two crises - the bursting of the [Technology, Media and Telecoms] TMT bubble in 2000 and the Global Financial Crisis in 2008, each of the stock market declines - you saw a big drop, a rally, another big drop, a rally and another big drop before we reach the bottom, so you know it’s based on history.
  

  Now there are no rules that say history has to apply, but based on history the fact that we had a 34% decline of the S&P from February 19th to March 23rd, and then a 26% gain since then, based on history, we would expect that there would be another testing of the lows and maybe two.
  

  The other thing I mentioned in that memo was that in the bursting of the TMT bubble, it took seven years to get back to the stock market high of 2000 and it took, in the Global Financial Crisis aftermath, it took five and a half years to get back to the high of the stock market in 2007.
  

  If the stock in the State's rose another 15%, we would be back to the 2019 high. Do we do we really think that it's appropriate for the stock market in the US to be back at its highs after two months or three months, despite this virus pandemic? To me it seems illogical.
  

• What is the “end game” for fiscal and monetary stimulus?

  MR: Yeah, actually, if you go back to the 30s it took even longer for markets to recover the absolute magnitude of fall, and that brings me quite neatly on because I think one of the things that is slightly different this time and I'm going to reference one of your memos from last year, which was called This Time It's Different, is the huge stimulus we've seen from central banks and from governments as well.

  Now we saw that in 2009, but actually it was quite late in the context of the length of the crisis. In that memo last year, you talked about government deficits in quantitative easing by central banks, because markets are made up of people and people like stories or narratives to help them navigate uncertainty. The market then for 10 years bought into a narrative that central banks have your back, that when economies or markets dip the Fed or the Bank of England or the Bank of Japan step in to provide stability. And that's clearly been true in this crisis too where we see an unprecedented commitment to the economy by governments and central bankers. But what do you think the end game there is, and what happens when that narrative changes as often happens in times of crisis?
  

  HM: Right, great question Max. Number one: history does not repeat exactly as we know; number two: people tend to learn. So one of the reasons that we had the Great Depression in the 30's was that the government practiced austerity and I believe raised taxes and did not increase the money supply, we learn from that and we are very fortunate that we had Ben Bernanke heading the Fed at the time of the Global Financial Crisis and he did not repeat those mistakes.
  

  In fact, he went on to work out the programmes that the Fed installed and to supply liquidity and that's why we came out of the Global Financial Crisis as well as we did, and the States came out quite well, and better than any other country I might add. 
  

  As you point out this time, all the things that were worked out over a course of months in the Global Financial Crisis, were activated in a matter of weeks in the Coronavirus incident. So yes, we went to work much faster, we installed the programmes right away, we installed them in a mind-blowing magnitude and you know Jay Powell, the head of the Fed, said we are not going to run out of ammunition and he indicated that his appetite to be activist was limited.
  

  Now the question is whether there are any negative ramifications. And you know, certainly the Fed has the ability and the Treasury have the ability to send every American a cheque, to make up for the lost wages of every worker and the lost revenues of every business. They can do that. You know our GDP is 20 plus trillion a year so all they have to do is write out five trillion in cheques and they could simulate the operation of the economy. But is that okay?
  

  Number one: we don't actually just need the economic activity, we need the product, we need the things that people make, the services and goods they provide and just sending cheques would not handle that. And number two: is there a downside to the government writing cheques to that degree and running deficits and running up debts as a result?
  

  In the memo It's Different This Time, I talked about Modern Monetary Theory, which is a new theory abroad which basically says that there's no consequences, you can run up as much deficit and as much debt as you want if you use the money for productive purposes, that's their theory.
  

  And we're seeing it in action now, we're not seeing it in action because people adopted the theory, we're seeing it in action because the Fed and Treasury and politicians decided that we needed maximum stimulus, but the result will be the same.
  

  You know Keynes who's accused of having been very liberal and advocating deficits - that's why we use the word “Keynesian” when we talk about the voluntary incurring of deficits. Keynes said that in times of weakness when the economy is not producing enough jobs we should run deficits to stimulate the economy and put money in circulation and then when the economy comes back and is in prosperity, we should run surpluses and we should use the surpluses to pay down the deficit. 
  

  Well, they forgot the surplus part now, no politician stands for surpluses, everybody wants to just spend money and as a consequence in the States this year we were heading for a trillion dollar deficit in prosperity which Keynes would fly off the handle at.
  

  Well now with all these programmes, the deficit is probably going to be four trillion closer to four trillion than one and nobody seems to care or I shouldn't say that, they care but everybody views it as necessary and I think it is. The point is we'll see later the consequences.
  

• Why risk is reduced in a crisis

  MR: Yeah, it's a very interesting experiment and one that the future generations will reflect on I'm sure. I want to lead on to risk now because this is just fascinating. Well, it sounds pretty dry actually as a subject, but it is actually fascinating because people view risk in totally different ways.

  Now you studied at University of Chicago Booth School of Business in the late 1960s, which was probably a great time to be there because you were in the vanguard of classes that were taught many of the economic theories and tools that we use today to manage portfolios and to think about things like risk and diversification.
  

  The investment industry and academia like to define risk as volatility of returns. So how smooth or not returns tend to be over time, and it seems clear this crisis has highlighted a number of other risks that we as investors should be aware of. Perhaps you can talk about how you're thinking about risk has changed over time and particularly in the last month or so?
  

  HM: Well, you know Max I wrote two memos on the subject one called Risk, aptly titled I thought, in 2006, and one called Risk Revisited and then Risk Revisited '14 I think it was and then Risk Revisited Again in '15. So if people want to catch my thinking on risk, they should read the last one Risk Revisited Again.
  

  I think that risk is not volatility, risk is the probability of having a bad thing happen and for most investors that means the probability of permanently losing money. And if we have invested within our financial resources, not exceeded our financial ruthlessness and if we have the emotional ability to hold on even when things get choppy, then volatility or instability is not our enemy, our enemy is losing money.
  

  And of course, when volatility hits and prices drop it's never clear whether that's a downward fluctuation temporary in nature or a permanent loss of money and it's our job to try to figure out which is which.
  

  But for the most part when people turn pessimistic and risk aversion soars and prices collapse in these crises that I mentioned having lived through, that's a reduction of risk. You see the S&P went from 3300 to 2300 and the average investor says, “oh the market is so much riskier today,” well I think the market is so much less risky.
  

  It's so much less risky to hold it when it's a 2300 than it was to hold it at 3300 and you know I have experience and maybe enough cold-bloodedness to get excited and feel positive when prices drop, most investors of course do the opposite and panic out.
  

  Buffett says, “I like hamburgers and when hamburgers go on sale, I eat more hamburgers,” and I feel the same and when investments go on sale, I want to own more of them not less.
  

• You can't predict, but you can prepare

  HM: So now your question was about risk this time. I think this time was the greatest example of an exogenous factor at work. The Coronavirus is not a financial element and certainly it was unpredictable and you nobody would say “well that that guy was dumb he didn't anticipate the Coronavirus”, you know, very few did. Gates of course warned about virus and many scientists, but of course nobody identified the Coronavirus or said it was going to happen in the first quarter of 2020. Generalised warning is better than none but wouldn't have helped you much in the market. 

  So, is it what's the import of the fact that we couldn't expect to identify the Coronavirus in advance? I about 2001 I wrote a memo called You Can't Predict You Can Prepare and I heard this on TV during a football game, this was the advertising slogan of an insurance company I think with the Mass Mutual insurance company, and I thought it was brilliant. 
  

  Now superficially it sounds dumb, you can't predict you can prepare. How can you prepare for something you can't predict, but I think it's an essential insight: even when you can't predict the thing that is going to affect the world you can prepare for the arrival of risky elements.
  

  And when do you have to prepare? You have to prepare when the cycle is not on your side and as I said before when investors are optimistic and risk aversion is at a low and investors have a lot of money and investors are eager to put it to work and as a consequence asset prices are high, this is the time to prepare for a worsening of the environment, even though you can't predict what's going to make it happen.
  

  And to me this purported oxymoron, you can't predict you can prepare, makes perfect sense. And so, the point is, as I mentioned, we were defensive in recent years, our defensiveness allowed us to be prepared for an event that we did not predict. And now that the virus is here, and now that asset prices are lower especially in our area of credit, we feel we were prepared and now we're swinging more into action of investing.
  

• Things will go back to normal

  MR: Very good. Now is a good time I think to talk about the future because a lot is being written and talked about what the impact of this experience might be in many different regards, but I want to focus on two things. Firstly, on the human behavioural perspective and also from an economic perspective, both of which are linked because human behaviour shapes economies clearly, but how do you feel about the future, what are your thoughts? 

  HM: Well, Max, let me just add to it… you said the two are connected, human psychology and the economy, actually if you think about it they are one and the same because what is an economy? It's a group of people who get together and interact in economic transactions.
  

  And markets? There's nothing to the market or to the economy other than people and people make individual decisions and their collective decisions move the market and the economy.
  

  So, you know, the interesting question is, where are we going to be in the future? As you know my last memo April 14th was entitled Knowledge of the Future and I like oxymorons and I think that's an oxymoron because we don't know anything about the future. We live normally by understanding the past and extrapolating it into the future, but it doesn't always apply and in this case we've had unique events, we've had one of the greatest pandemics in history, one of the worst economies in history, the biggest stimulus package in history, the biggest price decline of oil prices in history. So if you have all these superlatives and you've never seen anything like this before, one of the things I say is if you haven't seen something before you can't say you know how it's going to turn out and I think that's true of where we stand today.
  

  But of course, we have to hypothesise about the future and I'm willing to do that. I believe that when this is over, when we have a testing for immunity and testing for the disease, and when we have a vaccine and the vaccine works and it can prevent people from getting the disease and it prevents it from being handed on, I think things will go largely back to normal.
  

  Now, one of the characteristics of these crises that I've been through is people say life has changed forever but one of my heroes John Kenneth Galbraith says that one of the outstanding characteristics of the financial markets is shortness of memory. And, you know, people say “that's it I'll never take risk again, I'll never go into the market again, it's just a way to lose money” but when the market’s been up a few years and people look around and see how their friends make money they tend to go back into the market and take risk again.
  

  Likewise, in most ways I think our behaviour will revert to what it was. Right now it may be hard for some people to believe they'll ever get on a plane again or stay in a hotel again or take a cruise again or go to a sporting event or a concert or a movie and eat in a restaurant and so forth, but they will.
  

  And you know, the question is how long it will take to come back? And the game I play with myself is I think about different industries and I say okay, two years from now April of 2022, what will be going on for example in hotels? And in hotels two years from now assuming that the virus is under control and we have an effective vaccine, I think that business travel will be 90% back to where it was in 2019, and holiday travel will be 70 or 80%.
  

  Now there will be some people who want to be over cautious and don't go back but I think most will. You might think that oh, you know never nobody's ever going to step foot on a cruise ship again because we have the image of those cruise ships that were caught off shore and people sickening and so forth, no port would take them. But the truth is that the cruise ship companies will offer 50% off sales and free drinks and people will go back. So, I would think that in 2022, 60% of the business that was done in '19 will be done again.
  

  So, some cases will still have an after effect. The important question would be something like office space. We're all working from home we are getting our work done, I don't think it is as enjoyable as interacting with my colleagues and I don't think it's quite as creative because I think when we sit in a room together and the American term is “spit ball” we throw ideas back and forth, I think we create more.
  

  But on the other hand, you know, the companies are going to see that people worked okay from home and maybe they'll say okay “you group over there, you come in half the week, that other group they come in the other half of the week so we only need half the office space”. 
  

  And you know it may be a while before people get as sanguine about the outlook for commercial real estate. Now when you talk about commercial real estate you want to include retail and retail looks like it's in a downdraft that'll never be erased. The occupancy of retail space was already in decline and the malls were showing declining custom and this of course brought it to zero and so you have an exacerbating exogenous factor at a time of declining systemic growth and it's going to be tough for retail real estate. 
  

• The optimistic and the pessimistic view of the Covid-19 crisis

  MR: Yeah, I think that's true there are some industries clearly that were already in decline and one of the things that recessions and crises do is to accelerate existing trends, so yeah, I would tend to agree with that and we shouldn't underestimate the power of free drinks on cruises either so that could be something that pulls people back to the sea.

  I'm going to move on now to a couple of questions from our audience if that's okay beginning with a question from Dave Murray who asks: do you buy the apparent dislocation between financial markets, especially equities and the deep crisis fundamentals, even though we've seen extraordinary pump priming by central banks and governments? Is it credible and sustainable that we will have had one of the shortest bear equity markets? I think this is something that we partly talked about already but does the crisis reinforce the prioritisation of nationalistic agendas?
  

  HM: Well Max I'll try to give you a concise answer which is not my thing, but you know we don't know what's going to happen in the future and in a memo a couple of weeks ago I gave you the bull case and I gave you the bear case, the optimist and the pessimist. I don't know which way it's going to be. We all have to choose between it, there is no intellectual basis between choosing between the optimistic case and the pessimistic case, but we largely reflect our biases.
  

  I consider myself a professional worrier, so I tend to lean towards the pessimistic case more than the optimistic case. I think that the current level of stock prices embodies the optimistic case and if the future turns out to be as the optimists hope that'll be fine. But if the future turns out to be as the pessimist’s fear, then the current prices will turn out to be too high and I do think we will have a correction.
  

  And so, the interesting thing is that if you look at the markets stock are almost, they're probably within 15% of their all-time high which strikes me as too high given the uncertainty. Credit is not and what we call structured credit which is to say leveraged investment entities are very far from expecting an optimistic case. So different cases, different levels of bargain on offer.
  

• Conclusion

  MR: Howard, many many thanks for taking the time to join us today as ever it's been an incredibly insightful experience and I look forward to meeting again in the future.

  HM: Well Max thank you very much for having me today. You've conducted what I found to be an interesting discussion and I particularly want to thank Investec for including me in this series and including Oaktree in its trusted team. So, thank you very much and I want to wish you and yours and everybody who's on the call a good health and good safety and good innings.
  

  MR: Great, thank you.
  

  HM: Bye.