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the seasoned billionaire investor Howard Marx renowned for his Decades of successful guidance at Oak Tree Capital has warned about a significant sea change in the US economy his recent analysis highlights the potential end of abnormally low interest rates and a government burdened with debt the implications for your Investments are profound thoughts on sea change okay firstly let's talk about finding those hidden gems do you know how everyone always seems to be looking for them I love seeing those super helpful websites that are entirely free to use I may have stumbled across a real winner workery this website has it all whether you're a business owner job Seeker or need extra cash it can help they've got free business listings a jobs board classified ads and even a Marketplace to sell stuff you don't want it's convenient now back to that economic sea change Howard Marx isn't just the co-founder of oak tree Capital One of the most significant investment firms handling distress debt this investor has an insane reputation for predicting colossal Market swings Marx has been in the game since the 1960s famous for investment memos and super detailed essays that break down the economy they're so respected that even Warren Buffett swears by them he thinks things are getting a lot tougher for businesses and investors remember those crazy low interest rates we've gotten used to well they're not here to stay plus the government is drowning in so much debt it's starting to feel scary this combo is going to shake things up seriously like easy loans and those guaranteed investment winds we've been spoiled with they might become more of a struggle which will have a massive impact on how investors play the market in Pal's remarks on Monday he said we won't cut rates until we see we're making progress toward 2% I thought that the word toward was very important he didn't say until we're at 2% the the only thing I'm sure of is that if if interest rates are higher the people who invest in credit instruments which is what we do uh are buying in at higher yields and invariably will have higher returns than they have in the recent past so so today's rates are not high historically but they're certainly higher than we had from 09 through 21 okay I know this all sounds a bit scary but here's the thing Marx also thinks there's a silver lining he says investors focusing on bonds and Loans might be on to something in the strange new world but of course unless you're a total Pro that stuff can get confusing fast setting the scene let's first set the scene to fully understand Howard Marx's recent warnings about this sea change remember those crazy low interest rates we got spoiled with over the last two decades he has some strong opinions about these he doesn't consider the rates we're seeing now around 5 to 5.5% high he thinks they're pretty standard based on historical averages he brings up his early career in the 1960s when interest rates bounced from a low of 4% to 20% compared to that today seems downright stable but why does he think we will stay within the ultra low rates we got used to Marx believes there are a few big reasons for this first the average period for interest rates he argues was back in the 1990s when rates were between 3 and 8% even more importantly with inflation rearing its head again he thinks the FED will want to keep rates higher to prevent prices from soaring out of control plus after this recent brush with inflation he needs to convince the FED is eager to rush back to Super stimulative policies all this adds up to what he sees as an average base rate of 2 to 4% in the coming years a far cry from the near zero rates we had not so long ago of course some people might argue differently but that's Mark's bottom line Easy Money days might be over for a while now you might be thinking so what what's the big deal well Marx is famous for dissecting how interest rates affect the whole economy and it's not good news for folks who got used to the good times low rates can pump up the economy but too much of a good thing can cause serious problems like outof control inflation and when rates are Rock Bottom investors start making riskier bets just to score decent returns it's a recipe for lousy decision making down the line he describes it as a cycle low rates lead to easy money then overcome confidence Reckless Investments and eventual painful losses then the whole thing reverses with fear tight credit and the economy Contracting the scary thing is he says the lessons we should learn from these easy money eras don't stick investors get caught up in the profits the fear of missing out and ignore the apparent risks so we had a low interest rate environment which made life very easy for borrowers asset owners it was easy to run a business the economy was was did well we had the longest bull market in history the longest economic recovery in history uh we had very low incidents of default and bankruptcy it was an easy world and if if you read articles about for example Silicon Valley Bank they talk about the Easy Money environment and the main point of C change is we're no longer in an easy money environment inflation is not under control Marx thinks inflation might stick around for a bit longer than investors hope he doesn't see the FED throwing a party in slashing rates anytime soon especially not while those inflation numbers are still uncomfortably high and here's where things get interesting he points out that we've been spoiled with cheap goods from all over the world for decades and that era might be fading fast remember those falling prices on everything we buy part of the reason for that was globalization he thinks that if companies bring production and Manufacturing closer to home prices will be more challenging on the wallet all this to say that those good old days of easy money and falling prices might be more of a historical chapter than our new normal with significant change comes opportunity right he has been dissecting investment strategies his whole career and boy does he think this new landscape will demand a considerable rethink that old approach of buying assets with borrowed money and just watching your Investments effortlessly grow yeah he's not convinced that's going to work so well anymore okay so what are we supposed to do luckily folks like Howard marks are not about to leave us clueless let's discuss his insights on this sea change and how Savvy investors might want to adapt but before we dive back into those investment strategies let's talk about a seriously excellent resource called workery it's an entirely free website that's got it all whether you're looking to post job openings advertise your business promote products or services or even find a buyer for those things collecting dust in your basement workery makes it easy they offer free business listings classified ad space and a Marketplace for deals it's your One-Stop shop for getting things done plus it works in the US UK and worldwide governments can't keep us a loft forever okay so what about this whole government debt mess Howard marks is sounding the alarm and the numbers are seriously eye popping the US government is raising a bill that makes your credit card statement look like a pocket change they're so deep in the hole that he doesn't mince words governments can't keep us a loft forever think of it like this the US government needs more money to keep things running smoothly so what do they do they keep printing more it's a risky game because as the old saying goes there's no such thing as a free lunch this debt pile up is a real problem he worries it could get ugly governments don't make money they're not expected to make money and they pay their debt by running the printing press so that's a very different function and then they have the ability of extending the cycle at the same time I think this is what I'm trying get my head around if they've absorbed basically The Leverage that existed elsewhere yeah and they are less exposed to the challenges of companies that you would invest in are you thinking of a much longer cycle as a consequence um well I don't think I don't think governments can keep us a loft forever you know but uh and then the other question is are the currencies acceptable to the world and at price at Broad price you know an exchange rate is a price the the dollar uh Euro exchange rate is the amount of dollars that people will pay to get a Euro and if that goes off the rails then maybe they can't print as much or have other indigenous problems however unlike Uncle Sam who has a bottomless credit card limit companies have been more cautious with borrowing for this reason Mark is pretty optimistic about credit markets he points out that when interest rates are higher those who make loans get paid more meaning better returns for investors like him but back to this government debt situation markx warns that this could seriously strain the whole system and as an investor looking at those numbers he's steering clear at least with so much borrowing going on the FED is being forced to hike those interest rates to cool things down and for folks looking for safe ways to grow their savings it's about time accounts started paying a decent return it's a small silver lining in this Gloomy picture Mark's advice so we know things are changing but how does Howard Mark suggest we navigate this new investment reality he's big on being a contrarian this means zigging when the rest of the market zags most folks buy when things are booming and panic sell when times are tough he sees this as a recipe for disaster instead he's all about buying low and selling High obvious right but it takes guts to hold your nerve when everyone else is losing theirs think back to the chaos of 2008 when everyone was scrambling to dump their asset that's when Marx and his firm oak tree went shopping scooping up what others were throwing away at fire sale prices speaking of nerves he emphasizes the absolute importance of patience remember that bargain stock you scooped up don't stress if it doesn't soar the next day or even the following week these things take time part of being a successful investor is having the patience to let your strategy play out he's famously said being too far ahead of your time is indistinguishable from being wrong but how do we find those Bargains in the first place he stresses the need to understand the businesses or assets you're buying he's not about mindlessly following Trends or chasing hot stocks instead he carefully studies companies and Investments ensuring they have sound fundamentals a robust business model and a management team that executes well and here's another crucial idea even the most outstanding company can become a bad investment if you overpay for it he loves his margin safety buying things for a lot less than they're worth imagine owning a share of a business for $50 when the industry is worth a 100 that's your margin of safety the cheaper the price the higher the potential return and the lower the risk it's Common Sense yet many investors forget this when things overheated he is super clear that there's no one-size fits-all investment strategy every approach has limitations the key is knowing when yours works best and when it won't this means being willing to sit out the those Trends or opportunities that just don't fit your approach which let's face it can be challenging when those around you seem to be making a killing it takes discipline to say no to the flavor of the month all of this would matter little with the final ingredient psychology marks famously said psychology matters more than Market predictions he stresses the danger of letting fear or greed get the better of you this is where he thinks most investors go wrong they panic when the Market's dropping or Pile in at the top mastering your emotions might be more challenging than learning Finance okay so let's bring it back to this C change Marx is discussing he thinks we need a mindset shift after Decades of low interest rates and easy money we can't count on the same things to work going forward with that in mind perhaps there's never been a better time to take a close look at Mark's philosophy after all he's navigated his firm through several Market cycles and comes out stronger each time so while the investment world might feel un certain websites like workery make it easier to hustle on the side or pursue entrepreneurial dreams it's your One-Stop shop for job postings business listings product sales whatever you need to make those side projects work seriously check it out if you found this helpful folks remember to do all that good stuff like subscribe hit that notification Bell and leave a comment I love hearing your thoughts on Howard Marx's strategy and hey if there's any other investing wisdom you're curious about let me know there's always more to learn in this crazy exciting world of Finance also please share this video with anyone you think might find it valuable and check out the next one in the series
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