The Four Horseman
1. Howard Marks 5/5 on recession calls the past 50 years because he states that he only calls them when they are completely obvious.
2. Paul Tudor Jones, a macro trader with no down years from 96-2017
3. Drunkenmiller, a macro trader with 5/120 down quarters, no down years in 30 years.
4. Ray Dalio, a macro trader who is an elite historian on credit cycles
I pay very close attention to these 4 opinions on macro. They all know their bounds and say that they can’t predict the market and no one can. They even contradict each other from time to time. But I feel that they put the probabilities in my favor. I’ve added other opinions, but do not put much emphasis on them. I block out articles and CNBC anchors, columnist who won’t post their record on calls etc..
- 10/3/18 Howard Marks calls for caution. selling more than buying. Has a $8.5B distressed debt standby fund in case of recession(started 2015).
- 1/22/19 Klarman “it can’t be business as usual amid constant protests, riots, shutdowns, escalating social tensions. The seeds of the next major financial crisis may well be found under today’s sovereign debt levels.”
- 2/8/19 Marks we are above the midpoint in the cycle. the probabilities are towards the downside, but not so much to not invest. Be more worried about losing money then making money. Be defensive rather than aggressive.
- 3/5/19 Howard Marks “I think he will raise interest rates more than people think. I think there are a lot of reasons why we should have interest rates above today’s”
- 3/23/19 3 month 10 year yield curve inverted
- 4/25/19 Howard marks today were a little on the high side. I don’t see a lot of euphoria right now.
- 4/26/19 Howard marks on people making money investing in things that other people aren’t willing to do. “But today, I don’t think anything is being ignored. Investors are willing to do almost everything.”
- 6/12/19 memo In mid-2007, in a real economy that felt to me a lot like this one. In recent years, the U.S. has simultaneously experienced economic growth, low inflation, expanding deficits and debt, low interest rates and rising financial markets.It’s important to recognize that these things are essentially incompatible. They generally haven’t co-existed historically, and it’s not prudent to assume they will do so in the future. I’ve seen times in the past when people believed such an ideal state would continue in perpetuity, but it has never worked out that way. Widespread attaching of “the four words” to bullish propositions suggests that the environment is being perceived as flawless. When and if that swings to hopeless, the result is pain for investors.
- 6/12/19 Tudor Jones “We’ll really have to see the impact they are going to have and if the next round of tariffs gets implemented. It’s a huge deal. I would say if they get implemented and we go to the $500 billion, I think certainly it’s possible it could tip us into recession,”
- 8/4/19 Greenblatt does daily market analysis to see how expensive it is compared to the history since 1990. market is in the 19% % towards expensive. Which means it Has only been more expensive 19% of the time since 1990. At this price. During the past it has been 4-6% return over the next year, 10-12% over the next two. Not a prediction, but is what has happened in the past. Russell 2000 is in 6%. Next year return is flat
- 1/14/20 Marks Q: is now a good time to invest? “probablistically it is not, because if you look, the market has been up for 11 years, it’s quadrupled off the low , we’re in the longest bull market, the longest expansion in history. Profits are not rising, stock prices are. It’s what we call a liquidity driven rally. That means it comes from people having a lot of money to spend… it doesn’t mean that the market is going to go down tomorrow, but I’d does mean that the odds, in my opinion, are not in the investors favor.
- 1/23/20 31% cash Klarman “we believe that ongoing selling pressure of value names has contributed to mis pricing a that represent potential opportunity for long term-investors” “possible liquidity trap(d/t ineffective low interest rates.)” “the rocket fuel that has propelled markets in 2018 will run out.” “Should corporate earnings weaken, record-high profit margins shrink, markets falter, or inflation pick up (driving central bankers to reverse current easy money policies), the downside from here could be quite significant. As funds continue to flow into the hands of indexers, stocks not included in prominent indices relentlessly lag, while the beneficaries of such inflows move more or less in tandem, sometimes seemingly regardless of diverging fundamentals.”
- 1/25/20 Tudor Jones “We’re just in the craziest monetary-fiscal mix in history. It’s so explosive, it defies imagination. It reminds me a lot of ‘99. The difference is the fed’s funds rate was 4.75%, today’s its 1.62%. Then we had a budget surplus, today we have a 5% deficit.” “The nasdaq gained 130% between 1999 to the market top in 2000.” “At the top, rated will be theoretically substantially higher…the market will go(up) until at some point the fed gets in the game(and reverses) this insane monetary policy they’re running.” 1999 had “a bunch of 6% corrections” “we’ve got monetary and fiscal conditions that would argue for some type of blow off that will ultimately be ended by the fed hiking a lot sooner than they would begin to contemplate.”(when asked if he agreed with tepper about 2020 continuing to go up)
- 2/3/19 Tepper the coronavirus has “certainly ruined the environment” for stocks that was in place a few weeks ago, “You have to be careful, because it may be a game changer. So you’ve just got to be cautious,” “If you’re a long-term person, you better not be leveraged,”
- 2/24/20 Marks “What I’ve been saying for months is that I’m afraid to be in the market today. I’m also afraid to be out,” “They’re are no screaming bargains today. It’s all a matter of finding the examples within each asset class that are a little more attractive than the others,”
- 3/23/2020 Buying stocks but is nibbling.
- 3/26/2020 Paul Tudor Jones We could retest the lows. The current bounce is most likely due to pension funds re-balancing after the crash.
- 4/8/2020 ““There’s a curious disconnect between when you speak to the companies, most of which are closed, and what’s going on in the market,” Cramer when talking about what Tepper told him.
- 4/9/2020 Marks We are currently in a worse crisis than both the dot.com bubble and GFC
- 4/9/2020 Ray Dalio. “This is bigger than what happened in 2008.” We have too much leverage. things go down. too much leverage means youre broke. then you look around systemically and ask who do you not want to go broke. So you print money and keep them alive. In 2008 it was just the banks. But now it is more complex than that because there are more than just banks that need help. including small businesses etc. But it is more difficult now because we have an ineffective monetary policy bc interest rates have reached their limit and just buying normal financial assets won’t work. They have to buy the debt of the government, and the government has to be effective in getting buying power and production to those who need it around the world.
- 4/10/2020 Chamath Palhihapititya: “As bad and dislocated as the equity markets are, and what I mean by that is people have just basically said ‘I’ve thrown up my hands in the air, I’m essentially going to be net long, I refuse to think about earnings, I’m going to assume that it’s going to be a 1-2 quarter abberation.’ So I’ve decided basically to step out of the equity markets in the public side for the time being, because I think that they are not reflective of what it is happening on the ground….In the public equity markets right now, if you have any reasonable way of just saying that this is just a 1 or 2 quarter aberration, you’re going to be given a hall pass for at least 9 months. Which means that the buying opportunities in public equities are limited to none .” He says there are better deals in the credit and private markets.
- 5/14/2020 Druckenmiller the worst risk/reward ratio in stocks that he’s ever seen.
If fed continues as planned, then liquidity will shrink after September 2020. - 5/15/2020 Tepper The second worst risk/reward ratio in stocks that he’s ever seen. The first was the tech bubble.
- 5/18/2020 Marks The rating agencies/banks think that 15-25% of high yield bonds will default. This is roughly $400Bn the fed would have to buy. That’s a lot. In April 2020 there were 19 defaults/bankruptcies. This is the most in a month in history. There are still many more months to run, which will probably lead to more bankruptcies.
Bull
- 6/7/18 Jamie diamond we are in the 6th inning, possibly another 3 years of growth. Consumers balance sheets are good. Income is increasing, debt levels are low. The growth has been slow only 20% in 9 years. Where as an average recovery would be a 40% growth over a 7-8 year period. Buffett agreed in the same interview
- 12/10/18 tudor Jones could see 2019 going up or down 10%. If it goes down 10% then it’s a layup and “I’m going to buy the hell out of it”. Says fed will not hike in 2019.
- 12/18/18 drunkenmiller yield curve is at amber not red
- 2/11/19 Tudor Jones i think this year we’re going to continue to have U.S. exceptionalism and U.S. outperformance,” Paul Tudor Jones says. “The S&P 500 will outperform its peers, it will outperform emerging markets.” Rates won’t go down, they will probably go back up and I think the dollar stays firm,” “I’m very bullish in the U.S. stock market.” “Last year, we walked into a situation with a lot of euphoria; a huge amount of long-equity positions both in the U.S. and globally,”. “We took those positions and we washed them into a trillion dollars in corporate buybacks. Fast forward to where we are today, all that leveraged positioning … that’s been washed out.
- 3/1/19 Dalio 35% chance of recession- down from 70% a month earlier(after feds dovish view and announcement of stopping roll off of balance sheet) 8/16/19 40% chance of recession by the end of 2020 9/5/19 20% Chance of recession through 2020.
10/22/19 “It doesn’t feel to me like a recession is imminent. I don’t think we’re going to go 5 years without it, so some time two years from now.” Howard Marks. - 1/17/20 Tepper “I love riding a horse that’s running. We have been long and continue that way. At some point the market will get to a level that I will slow down that horse and eventually get off.”
- 1/24/20 Dalio “cash is trash” “there’s still a lot of money in cash..everybody’s missing out, so every one wants to get in” “you have to have a well diversified portfolio, be global, and be balanced… you have to have a certain amount of gold in your portfolio.” “The depreciation of the exchange rate and the printing of money over the next few years are gonna be the biggest things.” “So basically…if you oversimplify a portfolio, you want stock in the technology disruptive companies and some gold. Because it’s the new technology revolution in relationship to the monetization question I think.”
- Once upon a time, there was a President with a special investigator on his tail…
- …so he started a trade war, threatening the world’s 2nd largest economy with tariffs…
- …while the Fed had nearly inverted the yield curve.
- The year was 1995!
- For 2018 Goldman says stock repurchases pumped $509 billion into the market last year after adjusting for equity offerings and mergers and acquisitions. The only other net buyers of stocks last year were individual investors, who put in an additional $190 billion. On the other hand, pensions, mutual funds and foreign investors were all net sellers of stocks last year, collectively pulling $460 billion out of the market.
The Rational Cloner 