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Howard Marks: This is not a Bubble

I have to admit – when I wrote that piece a few weeks ago confidently declaring that the market was not a bubble I didn’t feel terribly comfortable about it.  But now that a lot of rather famous people have come out saying the same thing I guess I can feel better about being involved in this (potential) case of groupthink (that’s sarcasm in case it doesn’t come through – I actually still don’t feel comfortable about declaring this to not be a bubble even if my reputation is on the line with a bunch of much more credible and famous people).

The latest memo from Howard Marks includes a long and thoughtful discussion about the present day markets, but he concludes with similar thoughts – this is not a bubble.

  • “Prices and valuation parameters are higher than they were a few years ago, and riskier behavior is observed.  But what matters is the degree, and I don’t think it has reached the danger zone yet.
  • “The absolute quantum of risk doesn’t seem as high as in 2006-7.  “
  • “The modern miracles of finance aren’t seen as often (or touted as highly), and the use of leverage isn’t as high.  “
  • “Prices and valuations aren’t highly extended (the p/e ratio on the S&P 500 is around 16, the post-war average, while in the 2000 it was in the low 30s”.
  • I think most asset classes are priced fully – in many cases on the high side of fair – but not at bubble-type highs.”

H/t Doug Kass via Twitter

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