Gimme Credit

Bullish:

• $HYBOND - Howard Marks advocates for investing in high-yield bonds, citing healthy absolute returns and fair relative pricing despite narrow yield spreads. He emphasizes the potential for active managers to outperform by reducing credit losses in this environment.

  • “Credit isn't a giveaway today, but it offers healthy absolute returns, and it's fairly priced in relative terms. This is true despite the narrowness of yield spreads.”

    Howard·30:45

  • “For high yield bond managers with the ability to reduce credit losses through active management, there's a greater likelihood that spreads will prove sufficient to offset future credit losses.”

    Howard·16:45
• $CREDIT - Howard Marks suggests investors should consider public credit instruments, challenging the trend of favoring private credit. He argues that credit instruments currently offer higher expected returns compared to equities.

  • “Can we talk about credit? I see no reason why investors should blithely skip over public credit instruments and go straight to private credit.”

    Howard·2:15

  • “Obviously, today's expected returns on credit are considerably higher. On January 27, an article on the front page of The Wall Street Journal said the following. Snarks haven't looked this unattractive by at least one measure since the aftermath of the .com era.”

    Howard·27:30

Bearish:

• $SP500 - While not explicitly recommending a short position, Howard Marks suggests that credit instruments may outperform equities, implying potential underperformance of the S&P 500.

  • “Obviously, today's expected returns on credit are considerably higher. On January 27, an article on the front page of The Wall Street Journal said the following. Snarks haven't looked this unattractive by at least one measure since the aftermath of the .com era.”

    Howard·27:30
• $PRIVCRED - Howard Marks expresses caution about private credit, highlighting potential hidden risks and suggesting that its flaws may not yet be fully visible.

  • “To paraphrase Warren Buffett, the tide has never gone out on private credit, meaning we haven't had an opportunity to see its flaws.”

    Howard·24:15