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https://www.youtube.com/watch?v=jOLHX9MNJ6o

Marks:
"I still think we're the best place in the world to invest".

"We're a great car, at a high price".

I drive a Mazda hatch...

I respect Marks but I think he is also talking his own book here so he can't say it feels like it is late 1999 or 2000 because that would be too scary for his fund investors who will stay away. So he is saying we are still in the "early" stages of bull so invest in my "credit" funds which are safer than stocks. I doubt credit funds will do well if we have a significant market correction or recession.

I agree with Marks wholeheartedly and he says a big correction is not necessarily coming any time soon.

He’s saying the market is historically quite overvalued and could stay that way for some time. He’s also saying a legal contract for you to be paid a fixed sum with a bond is considerably less risky than the hope of returns owning a piece of a business purchased at a high price.

Marks has never talked his book. He made his fortune early on buying wildly mispriced high yield securities at a time when the world thought that was nuts. But he sought value. Often found under a rock or under a cloud.

Marks believes theres a very high likelihood of “acceptable results” across numerous scenarios with the purchase of quality bonds. But, importantly, fewer disaster scenarios.

He believes the range of outcomes with equities includes much higher potential upside returns with many more poor or terrible return scenarios.

This isn’t talking his book. This is rational economic thought in an otherwise irrational world. A world in which Buffett has about 1/4 of his company in common stocks. I don’t think that’s mere coincidence. When Marks publishes something, Warren says he’s quick to read it. Good advice imo.

Marks sold his business to Brookfield so things could very well be different now.

“So he is saying we are still in the "early" stages of bull so invest in my "credit" funds which are safer than stocks.”

He and Rick Reeder make reasonable arguments wrt a likely 6-7% return in high yields without too much risk. Bonds are honestly not my priority at all, but that risk-adjusted return seems pretty reasonable. Judging by his memos and talks, he seems quite authentic and relatively unbiased imo. I appreciate his general market commentary from 30,000 feet.

He and Rick Reeder make reasonable arguments wrt a likely 6-7% return in high yields without too much risk.

Only if you hold them to maturity (let's say 10 years); even then the returns could be lower than 6-7% if we have a recession in the interim period. We are at a historically low credit spreads right nown which discounts any possibility of adverse events which is also why stock market is overvalued.

What did Mr. Buffett say in his 22 November 1999 Fortune article? Look at that date. Just over three months before the NASDAQ began its 78% ride DOWN. 👀

He wrote about high expectations among young investors. He wrote about 17 year periods in history when GDP grew but stocks did ZERO (1964 to 1981), while GDP grew 370%. He wrote about investor Pavlov conditioning and rear view mirrors and windshields. He wrote about industries that previously transformed the world like: railroads, automobiles, airplanes, TV and radio and that it was hard to predict winners when new technologies are emerging. He famously quipped that it would have done capitalists a favour if someone had shot the Wright brothers out of the sky at Kitty Hawk.

Speculating on the returns and winners from the big (really big) investments currently going into AI chips and data centres is well, speculative. Equally we are all fully aware of how monumental (really monumental) AI is for humanity.

In 1999, Buffett said future returns would be a function of:

Interest rates (gravity)

Corporate profits as a percentage of GDP

Frictional cost (Fees charged by helpers)

He argued that for the high investor expectations at the time to be realised:

1. Interest rates would have to fall from the then 6% and

2. Corporate profits as a percentage of GDP would have to rise.

He mentioned that competition keeps profit margins down. He mentioned that for corporations to get a larger and larger slice of the pie, another group would have to accept a smaller slice. “That would justifiably raise political problems - and in my view a major re slicing of the pie just isn’t going to happen.”

Obviously there are parallels with today and differences.

Valuations are high.
New technology is changing the world.
Profit margins are higher today.
Corporations are taking a larger slice of the pie.
The Government deficit is a much bigger problem.
We have a tariff experiment.
Inflation and interest rates are important and hot topics.

My understanding of Mr Market’s view of the unknowable future, is that rates will be cut due to political will, inflation will not be a big problem and valuations will expand even further.

This situation will continue for a few more years. Which syncs with Howard Mark’s 1997 reference.

There are many risks to Mr Market’s outlook. Inflation being one. But we don’t really know.

Personally, I’m not comfortable without a significant cash allocation. This cash may well underperform, as the market moves higher in the medium term. I believe it’s hard to build a case for high long term returns from current levels. For a long term investor, the numbers just look uninteresting.

Better to wait for when it’s next raining gold and grab a large bucket. We are a long way from that. Certainly Berkshire has found itself in that position, whether through choice or lack of opportunity.

https://www.berkshirehathaway.com/1999ar/FortuneMa...

"Only if you hold them to maturity (let's say 10 years); even then the returns could be lower than 6-7% if we have a recession in the interim period. We are at a historically low credit spreads right nown which discounts any possibility of adverse events which is also why stock market is overvalued."

An even worse possibility would be stagflation. A recession combined with high inflation. So not only do you not get paid on some of those bonds, but inflation eats away at the return.

Just watched it. Marks seems to be seriously flip flopping from his view a while back on the "sea change" and also pushing China, no?

I find the follow up interviews interesting.

In this one he acknowledges he's talking his book (bonds) however he suggests investors should be at Defcon 2 (defensive) and switching out of more speculative stocks whilst remaining invested and looking closely at fundamentals / intrinsic value.

Comment on China, they're uninvestible as they've sided with Russia and N Korea?.... Same with India then?

Linked below.

https://youtu.be/bfgNtbr2KuE?si=eE45PsD6hp-Yiauj

India "crosses red line" by joining Russia / Belarus war games in Zapad exercises.

There's a lot of the world becoming uninvstible!

Ref Times UK

While it is true that the US's secondary boycott of India (rather than China) to punish it for buying Russian oil was a major blow, "Redline" may be too tough a world.

India sent a 65-member contingent to participate in Zapad 2025, held at the Mulino Training Ground in Russia.

The exercise focuses on conventional warfare and counter-terrorism, with participation from over 20 countries including China, Iran, and Belarus.

India’s involvement is framed by its Ministry of Defense as a way to enhance interoperability, exchange tactical knowledge, and strengthen defense ties with Russia.

Western governments, particularly the U.S. and EU, have pressured India to distance itself from Russia due to the ongoing Ukraine conflict.

By joining Zapad, India signals its strategic autonomy—choosing to maintain defense cooperation with Moscow despite Western criticism.

The exercise reportedly includes nuclear training components, which adds to the sensitivity.

Whether India “crossed a red line” depends on who’s drawing the line:
Western analysts may view this as a diplomatic provocation or a challenge to NATO-aligned norms.
Indian officials see it as a continuation of long-standing defense ties and a demonstration of non-alignment.

So yes, India joined the exercises—but the “red line” narrative is subjective and politically charged.

Jeff (with help from Copilot)

And?
https://www.kyivpost.com/post/60168

US military officers made a surprise visit to observe joint war games between Russia and Belarus on Monday and were encouraged by Belarusian Defense Minister Viktor Khrenin to look at “whatever is of interest to you.”

The surprise visit by US officers is seen as the latest sign of warming ties between Washington and Minsk after a series of high-level visits and gestures of goodwill from both sides.

In a video released on Telegram by the Belarusian Defense Ministry, two uniformed US officers thank Khrenin for the invitation in Russian and shake his hand.

They were joined by military-diplomatic missions from 22 other countries, the Belarusians said, including Azerbaijan, Hungary, China, Iran, Kazakhstan, Turkey and Vietnam.

Zapad-2025, the first such exercise to be held since the full-scale invasion of Ukraine in 2022, involves simulating attacking with and defending against nuclear weapons.

During the exercise, troops will practice planning nuclear strikes against a potential adversary in order to “maintain the credibility” of Russian and Belarusian nuclear deterrent forces, Khrenin told the state-run Belta news agency.

Jeff

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