Howard Marks releases a new memo based on often used phrase “this time is different.” He highlights nine ideas, each a different form of those four words, that come up often today. His response to two ideas is worth highlighting.
The first is on the idea that we don’t have to have a recession.
When I hear people talk about the possibilities that the Fed will prevent a recession, I wonder whether it’s even desirable for it to have that goal. Per the above, are recessions really avoidable or merely postponable? And if the latter, is it better for them to occur naturally or be postponed unnaturally? Might efforts to postpone them create undue faith in the power and intentions of the Fed, and thus a return of moral hazard? And if the Fed wards off a series of little recessions, mightn’t that just mean that, when the ability to keep doing so reaches its limit, the one that finally arrives will be a douzy?
The push to minimize volatility in cycles — markets, business, economy — was the main theme that came out of the financial crisis. It’s not a new theme either. Except, what people really want, is what everyone wants — the upside without the downside that comes with it. It never works out that way, but it doesn’t stop people from trying again and again… Continue Reading…