Keep pulling the thread on Howard Marks.
Howard Marks believes the introduction of artificial intelligence makes the world less predictable than at any other time in his lifetime.
Howard Marks predicts that a period of tough economic times, which will reveal poorly underwritten loans, lies ahead.
Howard Marks believes that when investing in companies with high fundamental business model risk, such as those in AI, it is preferable to buy equity to capture potential upside rather than providing debt for a fixed return.
The company Block, which had 10,000 employees, recently laid off 4,000 people, a 40% reduction in its workforce.
Howard Marks states the reason for Block's 40% workforce reduction was that AI could perform the work more cheaply and faster.
Howard Marks believes that while artificial intelligence as a technology is not in a bubble, specific investments in AI companies could be.
Howard Marks believes the market may be underestimating the long-term expectations and impact of artificial intelligence.
Howard Marks states that historically, 99% of the high-yield bonds his firms have purchased have paid off.
Around 2011, non-bank lenders began to fill the void in buyout lending as traditional banks pulled back due to regulation following the global financial crisis.
Approximately two to three months ago, public credit was yielding about 7% while direct lending was yielding about 8.25%.
Howard Marks believes the 125 basis point spread between private and public credit yields two to three months ago represented a fair, but not lush, liquidity premium.
Howard Marks speculates that many retail investors who bought into private credit vehicles did not fully understand the risks associated with illiquidity and the lack of mark-to-market pricing.