The WSJ has a copy of Oaktree Capital’s Howard Marks’ latest letter to shareholders. Overall, it’s about what you expect from Marks: smart and bearish stuff, with lots of data, some hard rights and uppercuts, and a general sense, of "Oooooh, what if he is right?"
Marks has a kind of stages of grief/denial view of capital markets. He argues we’re still only in the second of three stages, and we may never get to the third, where investors are convinced that things can only get worse.
Fair enough, we’re not in his third stage yet. And we may never get there, of course, much to his chagrin. Because he concludes, as most bears do, with this:
One of these days, though, we’ll reach the third stage, and the herd will give up on there being a solution. And unless the financial world really does end, we’re likely to encounter the investment opportunities of a lifetime. Major bottoms occur when everyone forgets that the tide also comes in. Those are the times we live for.
And that’s the trouble with that sort of thing. All of the pointing to catastrophic sentiment collapse, despair, etc., that people like my friend Barry like to cite is true, and they do make great buying opportunities, but they only accompany major stock market bottoms, which occur maybe a few times a century.
If your entire trading model is built around only buying such "major market bottoms" you might get one/two buying opportunities in your career, and that’s it. Granted, those are awesome times to buy, but they’re so infrequent as to be nearly useless in the real world of capital markets. It does make for a nice story though.