Howard Marks: 'Investing is About Time, Not Timing!' Secrets to Successful Investing

investing is a fascinating area but it

should be done on the basis of a strong

understanding many people invest before

they have the understanding it's not uh

like uh going to a casino it's not a

game of chance and the lower the prices

go the more eagerly they

sell this is wrong MH what we want to do

is buy low and sell High human nature

causes us to buy high and sell low at

minimum we want to avoid it and at

maximum we want to do the opposite now

it's not easy because what you have to

do is you have to restrain Your

Enthusiasm as things are positive and

you have to turn more positive as things

are negative very hard to do it's time

not timing that produces success just

just put your money in and let time

[Music]

pass from all over the country and the

world to our investors who have been

waiting for this he's considered a

Pioneer in the American Investment world

today we have the pleasure of having

Howard Marx chairman of oak tree Capital

with us welcome thank you well I'm very

glad to be here and contribute what

knowledge I have chairman marks I

recently read your investment letter as

someone who studied econometrics I found

many of the statements quite shocking it

was full of criticisms about economic

forecasting and econometric

methodologies I'm curious about the

background to

that this is quite a dilemma what is

investing investing is positioning

Capital to benefit from future events

MH and yet I insist that we can't know

the future how can we invest and

uh what what the important conclusion

from that is that you must not assume

that you know what the future holds if

you admit that you don't know what the

future holds then you will invest

carefully you won't bet too heavily on

one outcome you'll spread your risk

diversify

hedge and uh have a mixture of

Investments uh the Great American

humorist Mark Twain said it ain't what

you don't know that gets you into

trouble it's what you know for certain

that just ain't

true and I think this is very important

for your uh viewers to

consider no sentence that begins with I

don't know but or I may be wrong but

ever got anybody into trouble you get

into trouble when you say I'm sure that

this will happen I'm certain that that

will happen because if you are too

confident and you bet too much on one

outcome and you're

wrong then you can fail if you admit

uncertainty and balance your bets

uh uh over a number of scenarios uh it's

highly likely that you will succeed

people rely on forecasts because they do

not like to live with

uncertainty uh there's a quote in the

memo if people didn't have forecast

something like if people didn't have

forecast to rely on they couldn't get

out of bed in the morning uh it's uh

it's uh terrifying to know that you have

to live in a world that is

unpredictable but it is in my opinion

and you have two choices in my opinion

you can say the world is unpredictable

and we're going to accommodate to that

or we're going to live by

predictions one of my friends the day

the memo came out one of my friends said

to me yes but you have to take a

position don't you my answer is you

don't have to take a position if there

is is an event and you have no reason to

believe you know what the outcome is

going to be then you shouldn't bet on

that event or you should hedge that

event uh when oak tree makes its

Investments we

merely assume that we don't know what's

going to happen in the economy or in the

markets uh and we uh we take actions

which allow for that

uncertainty uh we all have opinions I

are I I rail against forecasting but I

have opinions I just don't bet heavily

on my opinions it's one thing to have an

opinion it's something very different to

be confident that you're right and I'm

never confident that I'm right where we

believe we can be right where we can get

a an edge and produce Superior

performance we hope is in our in what I

call the micro not the macro Macro for

the benefit of your viewers is countries

economies currencies Commodities

interest rates and

markets and

really nobody knows those things better

than anybody else the

micro

companies

Industries Securities these these are

things that through hard work and skill

I think you can get an advantage and do

a superior job so that's where we put

our emphasis but if if that is where

we're experts then we shouldn't be

betting on economies and interest rates

and currencies since 1969 for about 50

years you've been active in finance and

investment if you were to divide those

50 years into periods your philosophy

techniques and strategies must have

evolved how would you categorize those

periods and what stage would you say we

are at currently well as you indicate

when you say 50 years it sounds very uh

daunting uh it's a long time uh it

didn't feel like 50 years but um uh yes

I have lived through a variety of

periods Cycles

MH maybe divided by crisis you know uh

things are

down up down crisis up crisis you know

and um I have uh my my career has been

punctuated uh by four crises uh

991 0102 mhm 089 Global financial crisis

and of course the pandemic and uh so

uh for

every strategy for every uh investment

approach there are times that produce a

lot of opportunity and there are times

that are uh what the farmer would call

phow slow periods and you have to know

the difference and you have to wait

patiently until the opportunities come

along and then you have to move

aggressively to take advantage of the

opportunities and once you do so and

they re and they make you money and uh

the markets recover then you should step

back again and become patient once again

it's it's it's wrong to think that there

are always great opportunities sometimes

there are not and I believe that

the availability of opportunities

depends on the market and it depends

most important ly on the behavior of

other

investors we've we've gone through a

long period um from the middle of 2009

the end of the global financial crisis

to early 20120 the beginning of the

pandemic we were in a period where the

central banks provided Easy Money

interest rates were low financing was

easily available to anybody who wanted

to get

money people were eager to provide the

money buyers were

enthusiastic sellers were complacent

they were not eager to

sell risk aversion was low fear was low

the greatest fear for many of those

years was what we call fomo fear of

missing

out when the market is in this condition

nobody's selling eagerly why should

prices be low they shouldn't be there

are no Bargains in that climate that is

a time for caution that and you must

recognize what's going on I wrote a memo

to my clients in February 2007 called

the race to the bottom and it talked

about what happens when people have too

much money and they're two year to

invest the opportunities deteriorate you

have to understand the conditions that

you're in and

then usually they take on too much risk

the structures that they build are too

risky something happens some trigger

event and uh it

collapses now everybody's terrified and

nobody's eager to buy everybody wants to

get out fear of losing money replaces

fear of missing out

and this is the time when Bargains are

readily available but you need the

courage you have to understand what's

going on and you have to have the

courage to take advantage of those of

those Bargains

and so if you accept that the market

fluctuates in this way Cycles we call

them then clearly it's not wise to

behave the same all the time you have to

vary your

behavior commensurate with what's going

on in the cycle the goal is to be

counter

cyclical normally what happens is when

things are going well economic reports

are good companies are reporting good

profits stock prices and security prices

are

rising people feel good they buy and the

higher they go the more they

buy then

they reach a maximum for some reason

maybe there's a negative event or maybe

the economy just turns down and the

economy is deteriorating and Company

reports are not as good and stock prices

are falling and now people get

depressed and they sell and the lower

the prices go the more eagerly they

sell this is wrong what we want to do is

buy low and sell High human nature

causes us to buy high and sell low

so that is what I call procyclical

Behavior at minimum we want to avoid it

and at maximum we want to do the

opposite now it's not easy because what

you have to do is you have to restrain

Your Enthusiasm as things are positive

and you have to turn more positive as

things are negative very hard to do uh

some professionals can do it not too

many amateurs can do it but at minimum

you want to not be emotional and not

succumb to the cycle so rather than buy

high and sell low maybe you say I'm just

going to hold throughout you see so

that's that's obviously better than

being procyclical of course the best

thing in the world is to be counter

cyclical at the right times but it's not

easy and um uh people should not try uh

with with the money they need uh but

anyway my my career has basically

consisted of these cycles and this is

why I wrote a book on on mastering uh

the cycle which I'm proud to say is

available in Korean uh not that I'm

trying to sell books uh but um uh

in investing is a fascinating area and

it's a potentially profitable area and I

recommend it highly but it should be

done on the basis of a strong

understanding and not too many many

people invest before they have the

understanding and it's not uh like uh

going to a casino it's not a game of

chance it is a serious Pursuit that

should be followed on the basis of

knowledge in which case uh you know uh

it you can count on having a good

outcome if you do it wisely the other

thing I want to say about the periods of

my life is I came into the investing

business as you indicate

1969 and we all know that the young

people will tell you that was a dumb

world

nobody knew much not no most people

didn't understand how the market Works

what makes for an attractive stock or

Bond uh most people did not have

information access to information uh if

you wanted to study a company you have

to send them a letter and ask for the

annual report and then they had to send

it back in the mail it took a long time

and um it was easy to get a knowledge

Advantage just through a little effort

Warren Buffett talks about buying

dollars for 50 cents that's a good thing

to do but it R it it relies on other

people who don't understand that those

are 50

do fast forward to today now everybody

has a computer everybody's hooked up to

the Internet there's lots of data feeds

everybody understands how the market

works now the market is now the world is

a smarter place

and uh knowledge is

cumulative everybody knows everything

today so uh my son pointed out in one of

my memos called something of value

January of 21 that readily available

quantitative information about the

present will not be the source of

superior profits because everybody has

it in order to have Superior profits you

have to have some Advantage you have to

know something that the other people

don't know or do a better job of

interpreting it m and uh so it is

competitive and challenging

so what we say in the terminology of our

profession is that the markets have

become more

efficient they the markets now have more

information and do a better job of

incorporating it so it it I would say

that it has has gotten more challenging

over my lifetime when I

started I joined the industry in ' 69 I

started managing money in 78 I started

with high yield bonds most people didn't

know about them most people didn't

understand them most people were afraid

of them so it was possible for me to get

a

bargain today all that has changed now

everybody knows about them and nobody's

afraid of them so why should they be as

cheap as they used to be and the answer

is they shouldn't the market has become

more efficient so I I noticed that you

have copies of my first book here called

the most important thing and uh there

are 20 chapters and each one says the

most important thing is and then it's a

different thing because in investing

there's no one important thing there are

many and and and balancing all the

considerations is one of the things that

make it makes it challenging but chapter

number two says the most important thing

is understanding market efficiency you

have to understand the concept that I

just uh explained and the change in

efficiency has been a a a big marker in

my career in Korea you're regarded as a

master of contrarian investing and

that's how you're seen you're known for

your great success using a strategy of

taking positions opposite to the market

has it been about 7 months since Mr Kung

interviewed chairman marks that's right

about 7 months I saw it then and I

watched it again to prepare for this

interview even even back then when the

market had a 10% correction you said

that it was a healthy adjustment and

there was no need to leave the market

but the situation is more serious now

many tech stocks and platform companies

have fallen another 30 to 50% so I'm

curious how you view the current market

uh since the market has worsened do you

think it's time to actively buy stocks

I'd like to ask the only not thing I

know for sure is it's a better time than

a year ago or two years ago uh the

market was very high

uh

surprisingly after the pandemic the

market was very high because the central

banks of the world uh came in so strong

with the rescue uh that they they they

made the uh economy uh stronger and they

made the liquidity very available and

that produced uh asset prices that were

very high and um

in the last year prices have been coming

down and uh as I as you say as as you

say I said a healthy correction not over

necessarily there's no reason to think

that this is the bottom

uh prices were very high now they're

moderate they're not terribly low MH

these are not Bargains we're talking

about these are reasonable prices nobody

can say whether it's going to to go

lower MH it may well uh your question

part of your question is is this the

chance of a lifetime no it's not the

chance of a lifetime it's a reasonably

priced market now I believe that most

investors should be invested most of the

time the idea of being able to get in

and get out and get in and get out what

we call Market timing is not a good idea

for most investors it's very hard to do

you have to understand the market you

have to stand the economy you have to

stand your psychology and you have to

operate against your psychology you have

to buy when things are really bad and

sell when things are really good this is

hard for most people so I I don't think

that the average viewer should try

Market timing they should invest either

all the time or almost all the time now

it would be great to try to reduce your

risk when the market is really high

mhm hard to do may be worth trying but

that's about it

and Market timing most of the time uh is

too hard to try now when I was working

on my book about the cycle I said to my

son who is a very important uh sounding

board for me I said you know I think my

market calls have

been correct over over my career and you

know what he said to

me that's cuz you did it five times in

50 years mhm this is very important

concept and you know he he he looks at

all these questions with fresh eyes and

makes great

observations five times in my life the

market was

here or here and on those occasions the

error was obvious

the argument was compelling the chance

of being right was very high mhm here or

here what about here or here or here or

here in between it's not so obvious and

uh the chance of being wrong is quite

substantial that's why people should not

try this on a regular basis and we don't

try on a regular basis we don't change

from month to month or year to year only

in the extremes and and you know and

we're professionals and we think we

understand the process and yet we don't

try that often to time the markets

um and think about it this way let's say

I told you that the market is 10%

overvalued let's say I'm correct

what's the probability that it's going

to go down over the next year versus

up my guess would be 55 to

60% it's it's very common for the market

to be

overvalued and go up

further and in fact if the market went

down every time it was 10% overvalued it

would never get to 20% overvalued or 30%

overval or 40% we've seen those gain and

and

and we would never have bubbles which we

do from time to time so clearly

overpriced and going down tomorrow are

not synonymous and so I think for most

people Market timing is not the solution

for most people this the the answer

is understand investing

figure out a rational way to do it

whether it's picking good companies or

or going into funds or hiring a manager

or something like that don't expect too

much you know uh I go to people I say I

think we can make you 8% a year I think

we can make you 12% a year with our

riskier products I say maybe we uh uh I

think we can make you 20% a year then

the next guy comes in he says we'll

triple your money he gets the money but

of course

his his activities are not founded on a

solid

foundation we're not going to produce

Miracles if you can compound your money

at at 10% a year it's a great

accomplishment and most people should

not expect to do that or or do better

than that the the the S&P 500 the main

stock index in the United States has

risen at about 10 and a half% since 1920

now since 1920 we've had 17 recessions

the Great Depression several Wars

including a World War MH now we've had a

pandemic many geopolitical

problems many economic problems we've

still compounded at 10 a half% a year

and if you put a dollar in the S&P in

1920 and you held it strongly you never

bought you never sold you know what you

have today

8,000 that's the magic of compound

growth without interruption so for most

people the the answer

is put your money in understand what

you're doing so that you can be steady

MH don't mess it

up and um I I think that uh there's a

great American investor named Bill

Miller who has one of the greatest

records and he said I quote him as

saying it's time not timing that

produces success just just put your

money in and let time

pass so Market timing is difficult as

you just mentioned you always say to buy

time not timing so uh in a situation

like this in terms of asset allocation

are there any assets or portfolios

you're particularly focused on

well if if you're going to ignore my

advice and not just hold steady and try

to move money around to

improve then uh I think that we have to

be aware that the period immediately

ahead is more likely to be a worse than

average period rather than a better than

average period there are a lot of

uncertainties uh and in particular of

course most countries have high

inflation today the central bank banks

are trying to rain in the economies cool

off the economies uh uh in order to

control inflation which means that

they're raising interest rates and

withdrawing money from the

system

and historically these actions have for

the most part produced

recessions if you if you can do it

without producing a recession we call

that a soft Landing most most of the

time the soft Landing is is not

achieved so we're we're going we're

looking at a period ahead where business

will not be as easy as it used to be we

were in an easy money environment with

low interest rates and now we're in a

tighter environment because the FED has

to cool off the

economy which means that it'll be more

difficult for

companies and um economic growth will be

weaker that's the goal go just remember

the goal of the of the central bank

right now is to is to slow the rate of

growth because it is from an overheated

economy a too strong economy that we get

inflation you can't have inflation

control in a raging

economy you put all this together and

you must say that the next year or two

will be

challenging we as

as we're predominantly what's called

Credit in investors we invest in debt

debt bonds

loans are a promised stream of payment a

contract a company sells you a bond what

that means is you give them money and

they sign a contract that they will pay

you such and such interest every six

months at the end of X years you get

your money back this is a Dependable

contract as long as the company is

creditworthy and we think that this is a

very good asset class in this this

environment a year ago high yield bonds

which is one of our main uh products uh

produced uh roughly 4% uh interest every

year now it's nine that makes it very

attractive and when you combine a high

level of promised return with the

contractual nature of the return it it

sounds pretty good to me

uh in the long run stock

which do not have the benefit of a

contract participate in the growth of

the economy and are expected to do

better than Bonds in the long run but uh

you know for the period immediately

ahead uh credit I think is is a good

tool and if we run into tough times your

your credit or we call it fixed income

investments will probably do better than

your stocks in a tough envir

but I want to add one more thing and I

want to demonstrate how complicated this

area is I never talk about this to to to

make it seem easy I don't want to make

it seem

easy we know that the economic Outlook

is worse than it was in the recent past

we also know that the market is

down so the question is is the market

down appropr rately given the the worse

environment or too much mhm or too

little mhm and you know we know we

suspect that there are challenges ahead

for the economy but what if I told

you the recession will probably take uh

5% off of

GDP but the market is priced as if it's

going to decline GDP is going to decline

15% that is to say stocks are too cheap

so most people think positive

event pric is up negative event price is

down but it's not just events and prices

there's a there's something in between

which I've been alluding to

psychology it's it's not just what what

the events are but how people feel about

those events that produce the change in

price so if the events are

negative but the psychology is too

negative one can argue that that the

prices will go up now that's I'm not

making that argument I'm only showing

how much vaguery vagueness there is in

this process of assessing future

Direction uh having said that I admit

that the future year or two will be

challenging

uh uh I don't think it's going to be so

bad that people should get out today in

the expectation that they'll uh avoid a

big loss and and get in lower later uh

but it's certainly possible that the

markets can decline from here but no

sure

thing after this interview was arranged

I looked into what oak tree was buying I

saw that you hold a lot of energy

companies their relative performance is

good right we have a lot of portfolios

we have strategies to do many different

things each portfolio holds many things

we do not bet so heavily on something

that we commit the whole portfolio to it

having said that yes we have Holdings in

energy and uh uh not disproportionate I

don't make these Investments I don't

make any Investments anymore I I provide

leadership and and general direction and

my my colleague make the individual

investing decisions having said that uh

I think it's fair to say that in the

last year energy Investments produced

the best results um and uh we made a lot

of money in

energy um our goal as investors is

always the same which is to buy the

things that provide the best bargain in

terms of the ratio of the possible

reward to the risk involved so uh we're

always trying to uh make in Investments

which produce what I call is an

asymmetry you have a high probability of

making money and a low probability of

losing money now at Oak Tree we go

further we

say if something has a big chance of

loss but a huge chance of gain we

generally don't do that because we don't

like to make investments where we could

have big losses what we try to find is

things with a good upside which is

disproportionate to a downside risk

which is which exists but is modest and

that's what we found in energy and

uh why why were we able to get good uh

deals in energy Securities why did we

make these Investments

and the answer is that in recent years

the

world uh developed an

allergy to fossil fuel and people who

believe in Social responsible

investing uh said you must take all the

oil and gas and coal stocks and sell

them and this is called

ESG among other

things We Believe very strongly in ESG

we believe in being responsible

investors we believe that the

businessman has

responsibilities other than just to make

money we believe in the responsibility

to the planet and the people who live on

it as well as our employees and our uh

fellow

citizens but I don't believe that the

best thing we can do for the planet is

sell all of our energy

Investments let's say we

do what does that accomplished for the

planet somebody else buys them they

still exist nothing has changed

fundamentally or ecologically MH it's

just a a show of

intention who buys them people who don't

care about social responsibility so

maybe they buy up these oil and gas

companies and operate them in a less

responsible manner that doesn't help the

planet

um and

um the point

is we're going to require oil and gas

for a long time the the state of

California has just made a decision that

that they're going to stop the sale of

gasoline powered cars 2035 2035 mhm

which means that even in California

which is the most ecological State we're

going to be selling gasoline cars for 13

years and those cars are going to last

20 years after that which means we're

going to need gasoline for the next 33

years the the key question is who can

produce it the

cleanest so rather than saying we're

going to sell oil of our energy stocks

we say we're going to buy the companies

that are better

performers and we're going to buy the

companies that are lesser performers and

make them better MH if we can and I

personally think that this is a more

responsible position than merely selling

which accomplishes nothing in my opinion

so that's the way we feel about it and

so many people were negative on energy

stocks

that for us

they became one of the areas where you

could find the best bargains and in this

way I believe that looking for bargains

and good investment returns for the

clients and being a responsible investor

socially came together it's actually the

same as my investment idea we're in an

era of energy

transition but paradoxically that energy

transition increases the short-term

value of the traditional energy industry

industry uh because as you said everyone

will try to respond to a predetermined

future so major oil holders will likely

try to raise the price that that's a

common assumption I personally invest in

energy stocks and related Investments

too for balance I may hold solar wind or

hydrogen assets as well we call it the

barbell strategy I think we have to be

realistic and practical in making

decisions for our portfolios and for the

world

um in recent years prior to this

one uh people were saying that fossil

fuel oil gas coal are bad don't do it

mhm and a lot of people said sell your

oil stocks and some people did

sell but and by the way a lot of

countries said we're not going to engage

in oil and gas production we're going to

shut that down and will import it from

other countries

like

Russia and so in this process

Europe to be green MH reduced some

countries reduced their energy

production and became totally dependent

on Russia MH and and energy dependence

is one of the weapons that Russia is

using against the West right now so now

people say well maybe we need oil and

gas maybe it has to be produced so I

think I think that this idea that oil

and gas are bad you should sell at

stocks you should engage in that

industry is

simplistic and the world is not

simplistic and I've been here with you

now on this interview what have I told

talking about how complicated things are

how difficult things are there are very

few important decisions in life that can

be made on the basis of one

factor you want to be green shut down

your oil industry and then uh and then

uh you know people will uh be cold and

uh won't be able to get to work uh it's

not so easy people said uh arms

manufacturer

are bad shut down all the arms

manufacturers sell the arms manufactur

guess what we're at War we've been

attacked in Ukraine now we need arms to

fight Russia maybe arms are not so bad

again a multivariate decision not one

you've emphasized risk management for a

long time and are there any particular

risks that investors should avoid or

manage at the moment this idea of risk

management is very interesting first

first of all

there's risk management which means

using statistical techniques to

predict the downside of a

portfolio and I don't believe in that

and I don't believe that people can show

me that it has worked risk management I

believe that after

0102 uh it was mandated that every Bank

uh have a risk manager and more money

was spent on risk management between 02

and ' 08 than in the rest of History put

together and guess what we still had a

global financial crisis so I don't think

you can eliminate risk through the

application of statistical

tools and then you have risk management

every investor at Oak tree every

investment professional at oak tree is a

risk manager which is to say that when

they pick up an

opportunity in addition to figuring out

how well it will go if things go well

it's their job to figure out what would

happen if things go poorly what is the

risk to assess how much the downside is

what would have to happen for us to lose

money how bad it could get how probable

it is that it'll get that bad and what

and then the portfolio manager's job is

to

understand if we add that security to

the port P folio what does that do to

the overall risk things like correlation

and so forth and but I I believe that

this function is best performed by by

analysts and portfolio managers not by

somebody who sits over there who is

neither an analyst nor a portfolio

manager but a very good

statistician

and in Oak tre's investment philosophy

there are six

tenets the number one is risk

control and uh we believe that a

successful long-term record is best

produced by having a long series of

successful uh uh Investments and no

terrible ones not by trying to shoot To

The Moon but just try for consistent uh

success and uh avoidance of disasters

and of course we're now you know I've

been working with my clients for uh my

colleagues

for

uh uh 36 years I've been a man manager

for uh 44 years and I think this is the

record we've produced we don't do as

well as the big Risk Takers in the good

times perhaps we do much better than

they do in the bad times and and we do

steady throughout and number two on our

list of of investment uh philosophy is

consistency I believe risk control and

consistency can be a very satisfactory

foundation for long-term investment

success and that's what we try to

produce the interview is almost over

actually there's a question I really

wanted to ask you I think many Korean

investors will be curious too even

though you said oak tree doesn't

forecast the future and invest based on

that I have a question for you

there seems to be a consensus that the

Federal Reserve played a significant

role in the current instability of the

global financial markets but recently

there's been growing discussion in the

US markets about a possible fed pivot

where they might soon stop raising

interest rates or even lower them so I

really want to ask you this has the FED

acted appropriately to rescue the us or

global economy from this inflation and

if there is a pivot in the future when

do you think it will happen I'm just

asking casually you know the first thing

I want to say is that if you offered me

that job I wouldn't take

it it's very challenging you know uh

since I don't believe in economic

forecasts uh I would not know how to do

that job and in the last memo which I

believe you read uh I talk about the

fact that even the FED can't predict

what it's going to do and this shows the

challenge that's involved

MH second I believe that the fed and the

all the world central banks had the

challenge in 2020

of

confronting something it had never seen

before which was the pandemic

MH

and in

a in a crisis in trying to figure out

what lies ahead I read a quote from a

Harvard Harvard epidemiologist named

Michael lipich MH he said we have

facts analogies to Prior experience and

supposition which means

guesses but in the pandemic we had no

facts we had no prior experiences to

generalize from all we had was guesses

that was true for the doctors trying to

respond to the pandemic it was also true

for the central bankers trying to

respond to the economic difficulty this

is the first time in history that the

economy was shut down to prevent the

spread of a disease first

time how do you figure out how to do

that and how to recover from it

so the the vaccine was developed and I I

use the analogy that sometimes when a

man is very sick a person they put him

into a coma so that they can develop a

cure and fix it m then of course you

have to bring the person back to life

they put the economy into a

coma they had to a keep it alive MH and

B bring it back to

life how do you do

that if you've never been through it

before so the FED took very strong

actions March

23rd of 2020 I believe it was they

announced the the the stepping up their

program and by the way the markets went

straight up from

2020 2020 from March 23rd straight up

yeah now you have three choices let's

assume you can do it exactly

right too much or too little which

should you

do they don't they don't know how to do

it exactly right since there's no

precedent okay take that one off the

table that means too much too much or

too little too much too much and they

did too much and in in America for

example in I happen to know the

statistics in the third round of relief

they sent a check to everybody who made

less than $175,000 a year which I think

is 80% of the population now something

like I estimate that something between

10 and 20% of the population was hurt

financially by the pandemic so 10 to 20

were hurt 80% got checks 60 to 70% of

the population got checks for

nothing and they couldn't spend the

money because the economy was shut down

you couldn't go on a vacation you

couldn't have a wedding you couldn't

have a party you didn't need a dress for

a

party so people got rich the money piled

up in the

bank at the same time that manufacturing

was shut down so they

did arguably too much but they did not

want to do too little and let the

economy slide into a depression I

believe that if the central banks had

not taken action there would have been a

global depression and a global

depression is not just a recession

that's a little worse it's horrible my

father and mother lived through the

depression and believe me they told me

about it and you had grown men standing

on street corners selling Apples because

they couldn't get a

job

so the central banks did too much

especially the

fed and it's it it laid the groundwork

for uh inflation what is inflation too

much money chasing too few goods so

people had too much money they were

enriched by the relief too few goods the

manufacturing was shut down and when it

started up again it was a little

unsteady so we got inflation now the big

mistake was that the

FED concluded that it was likely to be

transitory

temporary I'm not smart enough to know

whether that was well reasoned or not it

was merely wrong and and as a

consequence they didn't start to reduce

the stimulus early enough and now we've

had inflation now for a year and a half

at a at a serious level um so uh now

they're trying to withdraw uh stimulus

reducing interest rates and uh rather

than buying bonds which puts money into

the economy they're selling bonds which

takes money out of the

economy and

so you have to before you criticize you

have to understand the difficulty and uh

anytime I think I know better than them

I say to myself would you like that job

and that's why I said no so uh they are

now going to stay what we call hawkish

easy money is called dubish Tight money

is called hawkish they're going to stay

hawkish for a good period of time I

would estimate

uh at least till next

summer number one they want to stop

inflation and you know when we go

camping whether did they tell you if you

have a campfire it's not enough to put

out the flames you have to make sure

that the Embers are cold so that they

won't start up again when you leave

right they have to make sure all the all

the fire is out

um number two they have to uh slay the

dragon of inflation they have to kill

inflationary thinking inflationary

thinking is very dangerous because if I

believe that there's going to be

inflation ahead I say well prices are

going to go up in the future I better

buy now what does that have what does

that do it causes prices to go up so

inflationary expectations are

self-fulfilling they have to Stamp Those

out out and kill them kill them and then

number three they have to preserve their

own credibility by not do EAS uh hawkish

doish hawkish doish hawkish doish they

have to appear to be presenting a

consistent framework so I think that

they're going to

stay hawkish for a good period of time

uh

and that is likely to bring on a

recession most people believe that the

session will be relatively brief and

relatively

mild and what I say about that is we'll

see here's what's impressive that the

covid-19 pandemic was something the

world experienced for the first time if

the central bank had left it in a coma

so to speak then they would have had to

operate in a coma state that they had to

perform surgery that surgery for

inflation surgery for a fatal dis

disease doesn't seem that easy is what

you're saying it's a very metaphorical

expression what's more the recession

resulting from that operation might not

be as mild or brief as we think anyway

you gave me the answer I was worried

about we'll leave the interpretation to

ourselves finally I want to ask you this

question oak tree also has a Korean

portfolio right we don't have a Korean

portfolio but we include Korea in many

of our activities uh we have an uh we we

invest in emerging market

equities and and and that Korea is

eligible for for inclusion there uh uh

and we have owned the debt of Korean

companies from time to time in the past

and we make real estate investments in

Korea okay Korea is an industrial

country that has achieved unprecedented

development perhaps it even skipped the

middle inome trap or broke through it

very

quickly it's shown insufficient

performance recently there's been a lot

of negative public opinion about the

Korean economy since you've come to

Korea you must have thought a lot about

Korea so for my final question I'd like

to hear your thoughts on the Korean

Economy based on that if you have any

advice for Korean investors please share

it with us I've been coming to Korea for

up to 15 years I enjoy my visits I have

friends here that I like to spend time

with I have a high opinion of Korea I

think it's a very industrious country

well organized

I think it has a good balance of uh

prudence and uh uh shall we say

aggressiveness um and uh good energy uh

High aspirations for the future um and

uh uh I I stress the fact that I don't

know enough about Korea to have an

opinion on its markets uh I think it has

a bright future I don't know how its

Securities are priced commensurate with

that future um you know I I certainly

are am happy if Korean Securities are

included in our portfolios but I keep my

hands off okay all right uh it was great

honor to have

you uh here our studio and I was so

happy to share this privilege to our

audience thank you very much sir well

it's great to be here I look forward to

the next time that I can see you Jacob

and you n okay in New York in New York

in New York on wall on Wall Street all

right thank you very much sir thank you

thank you thank you

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