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hey what's up guys we are currently in uncertain situation in the economy where new cases of this illness continues to increase while workforce stagnet in this video the billionaire investor howard marx will explain what we should anticipate as investors in the next few years the billionaire investor howard marks needs no introduction i made few videos about him before but those of you who are not familiar with marx he is a money manager and co-founder of oak tree capital management they currently manage around 124 billion dollars recently howard marx expressed many concerns about our current economy at massive money printing no one truly knows the impact of unprecedented stimulus measure enacted by federal reserve and the government to support financial market that were negatively impacted by this recent illness few months ago marx indicated recently what role federal reserve should play in our economy and this is what he said will the feds spend trillions of dollars every year forever to support the market is this its role it's not its role howard marx has not been shy above expressing his fear that market may become too dependent on the u.s central bank where we have seen how federal reserve balloon kids balance sheet from 4 trillion to 7 trillion dollars but now it seems like fat destroyed 2 billion dollars they trying to at least slightly reduce its balance sheet the impact of this illness set in put unprecedented pressure on the wall street back in march even before this crisis marx has expressed concerns about the outlook for the long-term investors he voiced worry about growing debt in the financial system and companies exposure to rising interest rates he predicted that the return for the investors for the next five years will stagnate so much has changed since then with the benchmark interest rates at the range of zero percent and 0.25 percent the trillions of liquidity slashing throughout the financial system because of the fat but it's not clear how it will end just few days ago howard marx had another interview and let's see exactly what he thinks will happen in our economy and financial market for the next few years realistic i'd like to make the distinction between this episode and a normal cycle because you know we have the normal cycles where uh you know things go well and then they go too well and then people anticipate a continuation and instead they're disappointed disappointed and then things go poorly and then too badly and then people anticipate permanent collapse and and of course then there's an opportunity for rebirth uh this is a very difficult different thing this is a a idiosyncratic one-time exogenous event and uh so uh i don't think this is the so the entry for this experience has not been a typical cyclical downturn where the where there were excesses and then they had to be corrected uh however number one i do think that the preceding cycle in the years 8 17 18 19 took us to a high point from which we were uh vulnerable to an exogenous influence such as we received and number two of course i think that we will have what feel what will feel like a cyclical recovery but of unusual proportions um so similarities but uh as as you say history does not repeat there is there are of course um reminders of the global financial crisis except that that was a a uh an experience that began inside the financial world and this one comes from outside the financial world that one came from foolhardy errors that uh financial institutions and lenders made this one it wasn't really the fault of errors made by financial market participants you know it's very popular in the states nowadays to say that this is not the the people's fault they didn't make a mistake they didn't cause the problem uh and and and certainly that's true but but it it was uh worsened by the fact that we were at a cyclically high level um so another similarity to the global financial crisis is that um you know the the fed and the treasury came to the rescue at that time it took them some months to figure out what to do and get financial support uh get the legislative support from the from the from the congress uh but eventually it was successful this time they they used the playbook from from the global financial crisis they did everything in a matter of weeks in a very large scale uh and apparently with great success so uh similarities and uh then of course uh the other difference is that um that was a being a cyclical experience it took a while to recover and uh here people are talking about well if we can just get the disease under control uh we'll have a a a a v uh i i don't necessarily agree uh but that's what they're saying i think that uh it's going to take a while the the vaccine will not be uh here as as quickly as the optimists hope you know uh i would say people started to talk about a vaccine in march and uh the indication from the professionals was that it would take a year or a year and a half so that means march to september of next year and i think that's right you know you know uh the optimists think that we'll have a a uh a vaccine in the second half of uh 2020 and my guess is that it will not be fully approved and if anything it will go to a front first line responders at that time emergency cases and not to the general public and of course it'll take uh take a good while to create uh millions of doses of the vaccine and get it distributed throughout the country and throughout the world and administered so uh so i i think that uh that's that's one thing then another thing is that i think that the return to work will be very gradual since we will not have uh a vaccine for let's say nine months from now i think that people who have a choice economically will return slowly uh and you know people who who have to go to work are probably being being commanded uh to go to work now or next week or the week after something like that but the people who who that and that'll be the people who deal with the public or deal with a physical product those of us in the in the white collar world probably have the opportunity to work from home and many will do so as long as possible so i think it'll be gradual uh i heard hank paulson the former head of goldman sachs and the former secretary of the treasury um two weeks ago he said he thinks that half the people who are out of work will return to work this year he also thinks that a a fair fraction of the jobs that have been lost have been lost permanently and it's likely that a lot of small and medium-sized businesses which were uh founded based with limited financial uh resources will uh have trouble scraping together the capital uh to try again so uh for all these reasons i think that the recovery will be gradual and uh my own guess is that uh gdp and snp earnings you know let me say first that i'm i don't follow the stock market professionally and invest in it professionally and i don't uh professionally make earnings projections but my guess is that gdp and s p earnings in 2021 will not necessarily be back to the 2019 level uh and uh that that may well take until 2022 uh so i think that uh you know people have been talking about a a v shaped recovery and i i like to think about a check mark firstly however marx makes a distinction between normal cycle and this one time in the century black swanky went as he described normal cycle is where things go well then they go too well people start getting euphoric and extrapolate the same momentum into the future but once the market declines things go poorly then too badly then people anticipate depression and permanent collapse this is when the market creates an opportunity for rebirth but this time howard marx believes it's different mainly because like in 2008 housing bubble where that crisis came from inside of the financial world while this current crisis came from outside so he's trying to say that it's not people's fault wall street did not cause the problem like they did back in 2008 and i agreed this is true but we have to be real let's look at the facts and real numbers unemployment claims continued to increase just last week another 1.3 million americans filed for unemployment benefits over the past four months more than 51 million americans have filed for new unemployment claims that's a unprecedented level as of 2019 there were around 160 million people employed and the unemployment level was at all time low 51 million people of 160 million that's about 30 percent numbers do not look too good let's be realistic many people went back to work but even larger number of people continues to lose jobs as howard mark said that around 50 of the people who lost the jobs lost them permanently if you look at this chart it indicates that about 20 million people lost the jobs forever and if you look what is going on in the united states with the new daily cases it looks like we're reaching a new all-time high every single day back in march everything starts to shut down and people were paranoid but in july it's much worse and who knows what will happen by the end of 2020 gdp and earnings are projected to decline i like this chart earnings of s p 500 are stagnant and will continue to decline while the stock market continues to go up and up addition to that howard marx mentioned that we will not reach 2019 numbers in earnings and even in economy anytime soon he believes that most likely sometimes in 2022 we will be able to recover and reach 2019 earnings which means probably for another two years from here the economy will continue to stagnate until people will be able to go back to work safely let me know what do you guys think will happen to our economy in the next few years
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