The market sold off sharply after the Fed announced an aggressive 75 basis point rate hike in mid-June.
At this point, Oaktree co-founder and debt investor Howard Marks started to be “aggressive,” saying in his latest interview that “the time is ripe for a bargain.”
The leading measure of U.S. junk-rated corporate bonds has fallen nearly 13% this year, the biggest drop since the 2008 financial crisis, according to Ice Data Services.
In this regard, Max said:
Everything we trade today is much cheaper than it was 6 or 12 months ago, like high-yield junk bonds, leveraged loans, mortgage-backed securities and mortgage obligations.
Separately, the data shows that the price of loans to low-rated corporate borrowers has fallen by more than 5%, to an average transaction price of 93.27 cents, the last time such a bargain was seen in November 2020. Max feels that the time has come to snap up “bargains”, he said:
I think waiting for the bottom is a terrible idea. We can’t say when the market bottoms, we buy when we think we can buy an asset at a discount, i.e. get value on the cheap.
The assets we are currently seeing may be cheaper than valuations, in which case we would buy more.
Max is a well-known investor on Wall Street. He has more than 50 years of investment experience and has witnessed many “flashes” that have caused financial market turmoil and even collapse. In Buffett’s view, Max’s memo is a “must read for investors.”