저자: HowardMarks · 외국인
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S&P500 상위 7개 종목이 지수 비중의 1/3을 차지해 시장이 비싸고 AI 내러티브 훼손 시 조정 위험이 크다고 봄. 다만 현재는 1999년식 광기(심리적 과잉)는 없어 버블로 단정하지 않음. 밸류에이션은 높지만 기업 실적도 강해 'expensive ≠ 곧 하락'이라는 입장. 가치투자는 AI 기업에 적용하기 어렵고, 대신 채권(크레딧)의 계약 수익률(약 6~7% 수준)이 주식보다 방어적이라고 강조.
다듬은 글
Does there another time that this reminds you of? Some people are wondering if there are echoes back to the dot-com. Seven stocks, their dollar gains have been responsible for more than half of all the gains in the 500 stocks in the S&P. Seven out of 500. The point is that things are expensive. This is an example of something called this time it's different.
This time it's different is always said about the quote new new thing. It's said during bubbles, too, right? Especially in bubbles. It is the sentiment that gives rise to bubbles. There hasn't been a serious market correction in 16 years. As I said before, I'm not raising an alarm bell, but I do think it's time for some caution.
That there is Howard Marks, a very highly respected Buffett-style value investor. He runs a fund called Oaktree that's grown from 5 to 209 billion over the past 30 years. And why do investors flock to Oaktree and Howard's leadership? It's because he is exceptionally balanced and level-headed as an investor, which is exactly why I find it interesting when he gets asked about the current state of the market because I feel a common trope in the media over the past few years has been this idea that we're in a big AI bubble, similar to what we saw in the tech bubble.
And it's strange because there are some alarming similarities between 1999 and today. Back then, the hot new thing was the internet. Today, it's AI. And back then, because the internet was still in its infancy as AI is today, people didn't yet have an understanding of which companies would be the true beneficiaries of the new technology going forward.
That led many investors to buy companies like pets.com, webvan, boo.com. And these prices skyrocketed, but once the bubble burst, they all went bust. It actually led Warren Buffett to write an article in Fortune magazine at the time basically saying that speculation is rampant and that he wasn't betting on any of the internet companies for the same reason he left automobile companies alone in his early career despite the automobile obviously being the next big thing.
Now, today, we see very much the same situation happening with AI. It's clearly going to be the next big thing. And investors have already placed mega bets on the Magnificent Seven being the primary beneficiaries. And what that's done is it's bid up these companies to some very high valuations. None of these companies sit at PE ratios under 25 with high flyers like Nvidia sitting up around 50 and Tesla around 250.
The Magnificent Seven now accounts for over 1/3 of the S&P 500, meaning seven out of 500 companies hold 33% of the weight of that index. It's quite staggering. And what it means is that if something were to happen to the AI narrative, these seven companies could bring down the entire market. I actually made a recent video on that.
So, that's the setup and that's what rational investors are concerned about going forward. But interestingly, Howard Marks has a slightly more balanced view of the market. Does there another time that this sort of reminds you of in any capacity? Probably around '97 when the market was kind of falling in [clears throat] love with tech stocks.
The market was rocketing along. People were not worried about the level of valuations. People were extremely optimistic about the opportunities for the internet. Greenspan famously cautioned that there might be irrational exuberance. Now, I picked '97 because even though Greenspan was concerned about exuberance, the market went on to rise for another 2 and 1/2 to 3 years.
Remember I said we're in the early days. We're not at a critical at a nutty valuation. I'm certainly not ringing the alarm bells, but the point is that things are expensive. They may go on to become more expensive, but the fact that they're expensive it it should not be lost. And that's an important point to factor in.
While the S&P 500 has rocketed up 90% in the past 5 years, we've also seen exceptional growth in the earnings of these businesses, particularly in the most recent few years. In fact, five out of the Magnificent Seven companies actually have lower PE values now than they did 5 years ago, meaning their earnings are higher relative to their stock price than they were 5 years ago, aka less bubbly.
Sure, as Ray Dalio says, it still looks frothy, but it hasn't skyrocketed to crazy levels that we saw in 1999. So, we're in this weird and annoying spot where the market is expensive and frothy, but it isn't becoming runaway just yet where things look ridiculous. The valuations are not crazy. High, but not crazy.
To me, the main ingredient in bubbles is psychological excess. There's no such thing as a price too high. And I don't detect that level of mania at this time, so I have not put the bubble label. Right. on this on this incident. I think there's relatively little doubt that AI will change the world. And AI has been successful as an investment, and people are piling in, and there's some fear about being left out, but expensive and going down tomorrow are not synonymous.
But that leaves us with a difficult question of how the hell do we go about our investing now when the market is expensive, so there's not a lot to buy, but it could very well rise for years before a potential correction. That's what Howard Marks explains next. But one thing that can at least help us sleep a little bit better in the meantime comes from the sponsor of today's video, which is Eight Sleep.
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You get 30 days to try it at home and return it if you don't like it. So, give it a go and thanks to Eight Sleep for sponsoring this video. This is an example of something called this time it's different. This time it's different is always said about the quote new new thing. It's said during bubbles, too, right?
Well, especially in bubbles. And it's it is the sentiment that gives rise to bubbles. This is something we've never seen before. There's no historical parallel. This thing's going to the moon. The valuations are high, but this time is different. This may prove to have been a time when you should should have become defensive, but I don't think you can say that dependably right now.
And that's the tricky thing. The market is expensive, but it may not be a bubble ready to burst. And this has been exceptionally frustrating for the value investors of the world like Warren Buffett because ultimately, it makes it hard to find great businesses to buy, which leads to an accumulation of cash on the sidelines.
But then at the same time, the market still posts really solid returns, which makes you feel like you're missing out. This has been the experience of all value investors over the past few years, and it's naturally led to a lot of debate as to whether value investing has passed its sell-by date. Do value investors are they missing something?
A lot of it came down to whether you're talking about a value with a small V or a big V. Value investing with a big V is kind of a, shall we say, a sect, and it has hard and fast rules, and it's firmly delineated, and we do this, but we don't do that. And I think that the key to excellence in investing is open-mindedness.
That's probably not a good approach. Value investing with a small V, which means trying to figure out what something is intrinsically worth and seeing if you can buy that at a reasonable price, I think that makes a lot of sense. And that's an important distinction, and it's one that even Warren Buffett has made over time.
Value investing used to mean buying distressed companies at very low cash flow multiples to squeeze out whatever's left of a dying business. It's kind of like being at the end of your roll of toothpaste, but before throwing it out, you know, you roll it up and you squeeze it super hard to try and get one last bit of toothpaste out.
These days, modern value investing is a lot different. It's more about buying great businesses that are growing and thriving as opposed to heavily distressed companies and paying fair, but not paying ridiculous prices. And you can still do that today. Maybe not in the AI companies, but in other parts of the market, you can still find opportunities.
I was actually talking to Phil Town the other week, and he said that the market has felt frothy like this for about 7 years, but he and his team have still been able to find at least one great company on sale every single year across that period. So, it is possible, but maybe not in the field of AI.
And a lot of that comes because these companies have not been working on their AI efforts for long enough to see real results on the bottom line. It's tough because [snorts] you probably can't reduce an AI company's potential over the next 30 years to a discounted present value today and try to buy it at that or less.
So, when you get into the new new thing where sometimes big money is made, it's harder to do that on a value basis, especially for startups or companies that are early in their life cycle. This is a super important point. As investors, looking at the past is exceptionally useful. For example, if a company has grown its cash flows between 10 and 12% annually for the past 10 years, you know, it's quite likely that they'll do that for the next 10.
That consistency really helps in the reliability of your valuation. With these new AI companies or established companies that are incorporating lots of AI into their products and services, it is very hard to reliably judge the impact of AI on their earnings over the next 10 years because we have to remember that the AI craze only started after the release of ChatGPT, which was in November of 2022.
That's not that long ago. So, we're so early that it's impossible to guess the earnings potential of AI with any level of accuracy. And that's what's tough about the Magnificent Seven today because investors have made a big bet that it will lead to very substantial cash flows. And that ultimately keeps most value investors out of these stocks.
It's the same reason why most value investors don't buy IPOs. New company, sure it's growing at 30% now, but we don't have any historical context as to whether that's normal, whether that's high, or whether it's low. So, it makes it impossible to value the company with any degree of confidence. But here's the other side of the coin, particularly looking at the Mag Seven companies.
You know how Buffett says he'd rather pay a fair price for a wonderful company than a wonderful price for a fair company. These companies, while they might be expensive, are also exceptional businesses, which makes the situation that much more tricky. The PE ratio on the S&P 500 is around 24 on the next year's earnings, and the historic average is 16.
So, you can't say it's not expensive. But what you have to engage in is and I in the my last memo, The Calculus of Value, I gave the what I thought was part of the bull case, which is the S&P now is better. They're better companies. They have market dominance, fabulous products, moats protecting against competition, enormous incremental profitability, and great growth potential.
So, the optimism is warranted. They're better companies, so they warrant higher multiples. And this is the catch-22 that investors face. You look at Nvidia in 2023, it had a PE ratio of 147. That's ridiculous, right? But the business was also growing like crazy. The stock is up around 550% since that time, and the PE ratio has come down to 50.
Now, it's still high, but what does that mean? It means that despite the price rising insanely quickly, earnings have relatively grown even faster. The denominator has grown faster than the numerator, thus the ratio has lowered. So, that's the catch-22 we're all in. These companies may be expensive, but they're also performing really well.
So, it's a tricky time to invest because things are expensive, but they could go higher if business performance stays strong. But if AI doesn't pull the dollars in over the next 5 to 10 years, then for sure we'll see a lot of these companies get re-rated to lower share prices. So, it's a very risky place to be for an investor, and that's why you hear so many differing opinions.
But as Howard Marks is about to explain, that's also not the only place investors can be at the current time. And this is how Howard has built the majority of Oaktree's wealth over time. As John Stuart Mill said in I believe it was 1859, you have to know the all the sides of the story to understand whether your side holds water.
But what I do, what what Oaktree does is mostly something called credit, buying the debts of companies. And debt is inherently more defensive. Debt or fixed income or bonds or what I call credit, all different words for the same thing, is different in nature from equities because you do have a promised contractual rate of return.
And you can say that the promised contractual return isn't as high as it has been historically, or the the increment that it provides over Treasuries to compensate for the credit risk isn't as high as it has been historically, but you can't say that they don't promise 7 and 1/2%. A promise of 7 and 1/2% you're going to pay for some fees, you're once in a while going to encounter a a credit loss.
I think it's highly likely to provide, let's say, a return in the 60s over the next 10 years. A contractual guarantee approaching something in the 60s over the next 10 years is, I think, more defensive than being in the stock market at these elevated valuations. That's the point. You have a promise of payment, you know what your return will be if they pay interest and principal as promised, and most of the time they do.
So, because interest rates are elevated now, we can't forget that bonds, while they're super boring, they are offering decent returns. Now, Marks is talking about corporate bonds here, but even short-term US Treasuries are paying 4% versus 2020 where they were paying zero. And one of the most notable buyers of US Treasuries at the moment is Warren Buffett.
You know, with a lack of good opportunities for him to deploy money into the stock market, he's parked most of Berkshire's giant cash pile in Treasuries, taking the risk-free rate and farming cash while he waits for the next big thing. So, it's not for everyone. I know a lot of investors will still take the stock market at elevated levels over bonds, but it's something that Howard Marks is considering nonetheless.
But with that said, they are Howard Marks' thoughts on the current state of the stock market and what he's doing about it. So, if you enjoyed the video, please leave a like and subscribe if you've not done so already. I would really appreciate it, and I hope to see you all in the next video.
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