Billionaire Explains How To Exploit Market Edges

Billionaire Explains How To Exploit Market Edges
This is a Guest Post by AK of Fallible
AK has been an analyst at long/short equity investment firms, global macro funds, and corporate economics departments. He co-founded Macro Ops and is the host of Fallible.

Howard Marks is the founder of Oaktree Capital — a hedge fund that manages $100 billion. Howard himself is worth almost $2 billion and his Oaktree memos to clients are extremely popular in the investment community. Oaktree focuses on, and is most famous for, distressed debt and high yield “junk” bonds. In this video Howard Marks talks all about how to have an edge in the market.

Howard speaks on what it was like when he first entered the high yield bond market in the 1970’s. Back then had two edges — informational and behavioral.

His informational edge came in the fact that no one was looking at the high yield markets. There was no data, no price history, nothing normal investors need. It was a brand new market. Most didn’t even know it existed, and those that did, didn’t know much about it. So in this type of market, just getting your hand on basic info, and then having a basic understanding, gave you a huge advantage over everyone else.

His behavioral edge came from the fact that this market was very unpopular. Back then, 90% of funds had rules against getting involved in that market. Credit agencies came out and flat out said these were BAD investments. They even had a dirty name — “junk”. They were thought of as immoral investments. With all this negative sentiment surrounding the market, there were probably great opportunities to be had. And as Howard found out, there absolutely were.

Follow AK on Twitter:
***All content, opinions, and commentary by Fallible is intended for general information and educational purposes only, NOT INVESTMENT ADVICE.