Recent Posts


Circle of Competence Issue #33

Quote of the week: "We don't understand life any better at forty than at twenty, but we know it and admit it." - Jules Renard (H/T Tim Ferriss)


Where are we?

Last week, I listened to several interviews with Howard Marks and read his latest memo, and it got me thinking about several of the points he raised in his letter to clients. I re-read it this week and wanted to try to write a few observations on where we are currently in the market cycle from my reading

- interest rates are low historically but starting to rise. This artificially "low for long" period has allowed most asset prices to be inflated and bid up with cheap financing.

- we are just beginning to feel the effects of quantitative tightening as fed funds rates continue to rise and quantitative tightening begins to show its effects

- mortgage rates are rising, which may put more stress on marginal borrowers and dampen home sales

- inflation is starting to tick up consistently above 2%

- institutional venture capital and private equity markets have been raising money at incredible (historical) rates, and doing deals at rich multiples, reflecting the large amount of money chasing relatively fewer deals

- trade war is continuing between China & US with likely adverse economic implications for both economies which will show up in higher inflation and lower growth on the margin

- debt offerings are beginning to tilt in favor towards covenant lite vs. traditionally more stringent covenants