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NOTEBOOK – One Good Read: Is lazy thinking taking over markets?


“The value of a home always increases.” That certainty in thinking was one factor that helped lead to the blindness that was a major trigger of the Great Recession. Billionaire investor and Oaktree Capital Management Co-Chairman Howard Marks sounded some alarm bells recently about what he views as lazy thinking that could have a negative effect on the markets. Marks, who correctly warned about both the dot-com bust and the 2008 collapse sent a letter to the firm’s clients questioning nine financial theories that should be scrutinized. Here’s the list from a piece in CNBC:

  1. There doesn’t have to be a recession.
  2. Continuous quantitative easing can lead to permanent prosperity.
  3. Federal deficits can grow substantially larger without becoming problematic.
  4. National debt isn’t worrisome.
  5. We can have economic strength without inflation.
  6. Interest rates can remain “lower for longer.”
  7. The inverted yield curve needn’t have negative implications.
  8. Companies and stocks can thrive even in the absence of profits.
  9. Growth investing can continue to outperform value investing in perpetuity.

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