READ THE ORIGINAL
Published in full and free by Oaktree Capital Management. This page indexes its arguments; it is not a copy.
THE ARGUMENT
The memo Marks is most cited for. He argues the investment environment had just left a 40-year regime of falling rates and easy leverage for one of higher rates, higher prospective returns and real default risk — and that strategies calibrated to the old regime would not carry over.
What it actually claims
He counts only three regime shifts worth the name across a 53-year career, which is what gives the term its weight: the case for buying high yield at all, the 40-year rate decline Volcker set off, and the reversal he was writing into.
He quantifies the tailwind that the prior four decades handed to anyone holding equities.
- S&P 500 rose from 102 in August 1982 to 4,796 at the start of 2022
- a compound annual return of 10.3%
He uses a single borrower’s rate across his career to make the rate regime concrete rather than abstract.
- 22.25% in December 1980 falling to 2.25% fixed for 10 years — a 2,000-basis-point decline
He argues the prior decade’s benign default experience was an artifact of the rate regime, not a permanent feature of credit.
- high yield defaults averaged 3.6% from 1978 through 2009
- but an unusually low 2.1% from 2010-19
He isolates globalization as a disinflationary force that had begun to reverse.
- globalization reduced inflation by about 0.6% per year from 1995 to 2020
Figures are the author's own, as cited in the memo.