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Oaktree’s Howard Marks Says Credit Markets Rich But Not In A Bubble

Credit market valuations driven primarily by “quest for returns”: Howard Marks



Howard Marks, co-founder and co-chairman of Oaktree Capital Group LLC, speaks during a Bloomberg Television interview in New York, U.S. (Photographer: Christopher Goodney/Bloomberg)
Howard Marks, co-founder and co-chairman of Oaktree Capital Group LLC, speaks during a Bloomberg Television interview in New York, U.S. (Photographer: Christopher Goodney/Bloomberg)

The credit markets are sitting at rich valuations but are not in a bubble yet, Oaktree Capital's Howard Marks told Bloomberg.

“You have to think of the world as rich, fair and cheap. We are in rich territory but I don’t think we are in bubble territory,” Marks, co-chairman and co-founder at Oaktree Capital, said on Bloomberg Daybreak: Americas.

If the bond spread was 240 basis points (bps) rather than 340 bps or 370 bps, that would have signalled a bubble, said Marks of Oaktree, the world’s largest distressed-debt investor.

“I think we are not in a bubble because one of the characteristics of having a bubble is having people say, no matter what price you pay, you will make money. We saw that in tech bubble, we saw that in Nifty-50 bubble 50 years ago. I don’t think they are saying this,” said the billionaire investor.

Nifty-50 refers to the 50 popular large-cap stocks on the New York Stock Exchange, which includes The Coca-Cola Co., IBM and others.

Instead, investors are fretting about how expensive things are, which is a good sign because it implies a sense of “awareness” about elevated price levels among market participants, said Marks.

Oaktree Capital had more than $100 billion in assets under management, with only 4 percent invested in equities while the rest is held in debt, convertibles and real estate.