Memo to Oaktree clients from the Chairman of Oaktree Capital

Howard Marks of Oaktree Capital says it “Doesn’t Make Sense” (.pdf), opening with:

In fact, I marvel at how many things take place in the worlds of business, investments and politics that stem from irrationality…

Mr. Marks ventures on to numerous issues related to the current financial malaise – here are the highlights:

  • The “wisdom of the crowds” only works for so long, and compulsive-short term thinking simply exacerbates inevitable corrections
  • The ratings system was flawed from the get-go – there was no way this wasn’t eventually going to happen
  • Blaming speculators is the weapon of mass distraction for the politicians and their media cohorts
  • Setting the expectation that losses will soon disappear is easy to do when there is no one left that remembers any differently

And one of Mr. Marks’s favorite tidbits…

Being too far ahead of your time is indistinguishable from being wrong.

Certainly rings home here, but I’ll add that chance favors the prepared. Further, the chance of turning “wrong” back into “right” is magnified the further the downside deviates from the mean.

For those that fear reality-based thinking (which I believe is the standing majority), move on. For the rest, read the whole thing.

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