Value investing master Howard Marks' latest memo "No One Knows": Don't trust experts, no one can predict when the financial apocalypse will arrive.

Howard Marks believes that the tariff development so far is like what football fans call an "own goal", in which a player accidentally sends the ball into his own goal and causes the opponent to score. This article originated from an article published by Oaktree Capital and written by Howard Marks, co-founder and co-chairman of Oaktree Capital. (Synopsis: Value investing guru Howard Marks' latest view: You should throw away decades of old valuation vision) (Background supplement: BlackRock CEO investor letter full text: Bitcoin is eating away at the dollar reserve status, tokenization will lead the capital revolution) On Friday, September 15, 2008, shortly after the close of the New York Stock Exchange, the news of Lehman Brothers' sudden bankruptcy filing shocked the world. Previously, Bear Stearns and Merrill Lynch filed for bailouts/declared bankruptcy, followed by Wachovia Bank, Washington Mutual Bank and American International Group in crisis. Market participants quickly concluded that the U.S. financial system was on the verge of collapse. The situation is already evident (very different from a few days ago), and financial institutions may or will collapse like dominoes under the combined effect of the following factors: (1) financial deregulation; (2) the wave of real estate mania; (3) irrational mortgages; (iv) structuring mortgages into thousands of inflatably rated securities; (5) the investment of highly leveraged banks in these securities, and (6) the "counterparty risk" caused by the high correlation between banks. Panic fermented and the market seemed to be in an endless downward spiral. I thought it necessary to comment on these developments and future prospects, and four days later I issued a memorandum entitled "Nobody Knows." As always, I admit that I don't know anything about the future, but this ignorance is even better when old expectations are completely turned upside down. No one knows if this downward spiral will stop, especially for me. Nevertheless, my conclusion is that we must assume that it will eventually stop, so we should increase our positions aggressively at a time when the price of financial assets is significantly discounted. At that time, no one dared to claim that they "knew" the future, including me. I can only conclude by extrapolation: we can't be sure when the end will come, and even if we know it's coming, we can't do anything about it, and if the end doesn't happen, everything we do will lead to disaster, and most of the time, the end won't come. Obviously, none of these conclusions is based on knowing the future. But I don't see a more logical option other than putting money into the market, including the untapped $10 billion in the Opportunity VII B fund. We created this fund precisely to capture significant opportunities in the troubled debt space. And when the opportunity comes, especially given the fact that we can buy the best quality debt at a discount – and amazing yields – in a difficult situation, how can we hold back? Admittedly, however, we have no idea what the future holds. I can't claim that I can analyze the future. In fact, I think the phrase "analyzing the future" is a huge paradox in itself. The future is yet to happen and is always subject to a myriad of complex, unquantifiable, unpredictable and ever-changing factors. We can think about the future and speculate about the future, but it is impossible to analyze the future, and this was certainly the case in the early days of the global financial crisis. In March 2020, I followed the title of my 2008 memo and wrote Nobody Knows II, the first memo I wrote during the pandemic. The article quotes Marc Lipsitch, an epidemiologist at Harvard University, that people typically base their decisions on three points: (i) factual evidence, (ii) well-founded inferences drawn from similar experiences, and (iii) opinions or speculations. But given that there was neither a factual basis for the pandemic nor similar experience at the time, we are left with this option. What I want to say about the 2008 crisis and other market turmoil I've experienced – including the present – is that my decisions are not guaranteed and I don't have to be apprehensive when I act. There is no certainty at all in the world of investment, especially during periods of market turnaround and high volatility. I was never convinced that my judgment was absolutely correct, but as long as I reasoned the most logical conclusion, I had to move in that direction. In my February memo, "2024 in Review," which was reserved for clients only, I used the term "uncertainty" to summarize the characteristics of the Trump administration. The president's decision-making thinking is more unpredictable than his predecessors, in large part because he does not necessarily follow a coherent ideology and is often subject to tactical adjustments and corrections. But it's worth noting that Trump has long complained about the unfair treatment of the United States in world trade, and has been advocating for tariffs since at least 1987. Nonetheless, even if we foresee him imposing tariffs, his policy will be much stronger than expected. Obviously, the market was also unexpected. The events of last week remind us of the events of 2008 and the global financial crisis they triggered. All rules were overturned. The way world trade has been shaped over the past 80 years may be rewritten. Its impact on the economy and the overall pattern of the world is completely unpredictable. Once again, we are faced with a major decision, but there is still no factual basis and historical experience to draw on. Truly unknown – Much of this memo will revolve around things that can't be known with certainty. But I hope it helps you clarify your thinking and assess the situation. I would like to point out that, in the current situation, there are no real experts. Economists have analytical tools and theories available, but in this context, no one scholar or model can draw conclusions with confidence. There has never been a large-scale trade war in modern history; Therefore, all theories have not been tested in practice. Investors, entrepreneurs, academics, and government leaders all make suggestions, but they are not necessarily more correct than the average perceived observer. The well-known conclusions, such as the possibility of rising prices, are obvious. The hidden truths that really matter are difficult to see. I insist that predictions alone are not enough, even for those who anticipate the future. In addition to the prediction itself, there is also a trade-off between the probability that it will come true, after all, not all predictions are of equal value. In the current environment, we must admit that the accuracy of forecasts is necessarily less accurate than usual. Why is that? The root cause is that the current situation is rife with an unprecedented number of unknown variables that could evolve into the most significant economic change of our lifetime. There is no such thing as foreknowledge, only complexity and uncertainty, and we have to accept that. This means that if we insist on certainty and even faith as a prerequisite for action, we will be at an impasse of inaction. Or, IMHO, if we think we've made a sure decision, we're probably making a mistake. We must make decisions in the absence of certainty. But it is equally important to bear in mind that the decision to "do nothing" is not the opposite of "take action", but is itself an action. The decision not to act – to keep the portfolio unchanged – should be considered as carefully as the decision to make changes. The proverbs seen by panicked investors as a hedge – "don't take the knives" and "wait for the dust to settle" – cannot in themselves guide our actions. I really like market analyst Walter Diemer (...)