No. of Recommendations: 3
Howard Marks of Oaktree Capital
I want to point out that there are no experts on the subject at hand. Economists have analytical tools and theories to apply, but no economist and no tool will produce a conclusion in this instance that we can follow with confidence. There have been no large-scale trade wars in the modern era; thus, the theories are untested. Investors, businesspeople, academics, and government leaders will all give advice, but none of them is much more likely to be right than the average intelligent observer. The things on which everyone will agree are obvious, such as the likelihood of higher prices. The less obvious truths will be harder to discern.
https://www.oaktreecapital.com/insights/memo/nobod...
No. of Recommendations: 5
Good write-up, thanks for posting it. It seems to be a longer version of his recent column in the Financial Times, which I physically clipped.
I guess I would sum it up as "Nobody knows anything, but, sorry, you still have to make a call."
"One of the things I insist on is that even for someone who deals with the future via forecasts, a forecast isn’t enough. In addition to a forecast, you also need a good sense for the probability your forecast is correct, since not all forecasts are created equal. In this case, under these circumstances, it must be accepted that forecasts are even less likely to prove correct than usual.
"Why? Primarily because of the vast number of unprecedented unknowns involved in the current matter, which has the potential to turn into the biggest economic development in our lifetimes. There’s no such thing as foreknowledge here, just complexity and uncertainty, and we must accept that as true. This means that if we insist on achieving certainty or even confidence as a precondition for action, we’ll be frozen into inaction. Or, I dare say, if we conclude we’ve reached decisions with certainty or confidence, we’ll probably be mistaken. We must make our decisions in the absence of those things.
"But we also have to bear in mind that deciding not to act isn’t the opposite of acting; it’s an act in itself. The decision to not act – to leave a portfolio unchanged – should be scrutinized as critically as a decision to make changes. The old saws that are the refuge of terrified investors – “we’re not going to try to catch a falling knife” and “we should wait for the dust to settle and the uncertainty to be resolved” – cannot in themselves be allowed to determine our behavior..."
Jim
