Screengrab via Bloomberg
Howard Marks, a legendary investor, has joined a group of top business leaders Ring the inflation alarm.
He told Bloomberg that he was worried about inflation in an interview. InterviewTuesday, February 12, 2009. “Inflation is too high.”
The Consumer Price Index a popular measure of US inflation gained 7% year-over-year in December, marking the strongest inflation reading since 1982. This is a slight increase from November’s 6.8% increase.
“A little inflation is good, it keeps everything moving.” Marks said that excessive inflation, defined at more than 2%, was not desirable. “Higher inflation means higher interest rates, higher interest means lower asset prices. That’s exactly what’s happening right this moment.
Oaktree Capital Management’s billionaire cofounder and cochairman said that the Federal Reserve’s decision to reduce interest rates during the pandemic to incentivize borrowers and consumers to consume and invest faster has been successful.
He stated that the economy has become very strong and has been very strong for a long time. This is contributing to the inflation. “I believe that interest rate should rise. The economy must be less stimulated.”
The Fed has signaled that it will increase interest rates. This influences borrowing costs from car loans to mortgage rates. He claimed that these higher borrowing costs will lead to a slower recovery.
Marks is a well-known expert in distressed debt and shared two methods on how investors should position in an inflationary environment.
He suggested that investors might be interested in more floating-rate debt or instruments with variable rates of interest, and renting out properties with rates that can rise over time.
He also said that investors shouldn’t invert or dump their existing portfolios. “I wouldn’t sell everything I own to buy a bunch of the things I just described. He said, “That’s too extreme.” “Just make small changes at the margin, my opinion.”
He also warned that investors are not always successful in timing the market, and most traders trade “to their own disadvantage.”
He said that “being in over time is what makes people success as investors” and added that only a few professionals are capable of securing good opportunities at the right moment.
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