Oaktree’s Marks Says Inflation Is ‘Excessive,’ Higher Rates Overdue – News Couple

Oaktree’s Marks Says Inflation Is ‘Excessive,’ Higher Rates Overdue

(Bloomberg) — The fastest inflation in four decades has reached an “excessive” level, in part due to the stimulus monetary policy used to counteract the economic consequences of the pandemic, said Howard Marks, co-founder of Oaktree Capital Management.

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I am worried about inflation. “Inflation is excessive,” Marks said in a Bloomberg TV interview. “Higher inflation means higher interest rates, higher interest means lower asset prices.”

Now, as Marks argued it should have done months ago, the Fed is preparing to raise interest rates to contain rates. He said that these higher borrowing costs will lead to a slower recovery.

However, Marks added that this does not mean that investors should dispose of their existing investment portfolios. He said market timing is tough even for professionals, and credit investors shouldn’t do it because they get a fixed, contracted return in the end if they keep going.

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Marx said that most people trade too much “on their own”. He said investors worried about inflation could ride it with assets such as floating rate debt and property.

Marks is known as the doyen of distressed debt investing, and Oaktree is one of the leading specialists in distressed firms. The Los Angeles-based company, which manages $158 billion in various types of alternative investments, has thrived in times of economic stress, when corporate bonds threatened with default plunge into steep discounts.

But last year, Marks lamented that finding opportunities was nearly impossible amid the easy money environment that prevailed after the Federal Reserve flooded the economy with liquidity to cushion the impact of the pandemic.

The move eliminated most of the outstanding bad debt and bolstered companies that were stumbling even before the Covid-19 outbreak, depriving value-oriented investors like Oaktree of new targets.

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