Oaktree co-founder Howard Marks: 'It's different this time'

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02:24

October has seen five trillion US dollars in value wiped out from global stock markets. Is it time for caution? Oaktree Capital, one of the world's biggest alternative investment firms, sees opportunity.

"Prior to October, we had high asset prices and aggressive behavior in the face of some uncertainties that have been dogging me," said Howard Marks, Oaktree's co-founder and chairman.

"What interests me is the fact that I think sanity is coming back into the market… In October, people are set to realize that those uncertainties exist – they have taken the market down – that has created lower prices and some vindication of the value approach," he said.

Chinese A-share market also experienced a hard October. But Marks mentioned that recent rout in Chinese mainland's markets made it good value. When asked how he could apply those value principles to China's relatively young market which is more restricted, he had one word "gingerly."

On the distressed debt business for which Oaktree operates, Marks says he wants to see more legal certainty in China before making bolder moves, although Marks said that regulators are trying to reassure foreign investors.

In light of the recent volatility, Marks, named “Wall Street's Favorite Guru” by Barron's in 2013, has timely advice on market cycles in his new book Mastering the Market Cycle: Getting the Odds on Your Side. The ideas that run through the book are best captured by an observation attributed to Mark Twain: “History doesn't repeat itself, but it does rhyme.”

While younger investors shrug off market cycle patterns by saying "It's different this time," the investment guru says “It's different this time” are the four words worst in the world, and also very dangerous. “Because what it means is that the old rules/norms don't matter.”

Howard Marks, Oaktree's co-founder and chairman, speaks during an interview in New York, US. /VCG Photo

Marks explained: “Back in 1999, the market was very excited about investing in Internet stocks and e-commerce stocks. And if people were pointing out that the stocks should not sell out for billion dollars if there's no profits and perhaps no sales, people would say ‘but it's different this time,' because the Internet is going to change the world, and you're just too old to get it.”

"And of course, usually the world is not different. The norms that only a profitable company is valuable are applicable," he stressed.

The business media also came under criticism, Marks believes investor sentiment (the ultimate swing factor in markets) is overly affected by media sensationalizing positive or negative news, which often changes on a daily basis.

"Oh, sure, I think business media is always to blame. That's why the sentiment goes from flawless to hopeless," he told CGTN.