Key insights
- Howard Marks warns against market forecasting, advocating for situational awareness. He highlights the current semiconductor boom, driven by FOMO and the "this time is different" mentality, as a potential "hot territory" mirroring historical boom-bust cycles. Upcoming IPOs from SpaceX, OpenAI, and Anthropic are viewed as potential exit liquidity for early investors, selling to retail investors driven by fear of missing out, suggesting elevated risk and potentially overvalued assets.
Howard Marks says that we shouldn’t forecast the market but prepare ourselves accordingly to current situation. We should check the temperature of the market and adjust our portfolio and investment decisions accordingly. The current boom in the semis and RAM is built around 4 riskiest words “this time js different”. RAM which is a commodity always went through boom and bust cycles. Excessive demand, rise of prices, rise of earnings, building new factories, oversupply, drop in earnings and stock crash. People start to extrapolate current situation and act as it were to last forever. We are in HOT territory. People who didn’t earn enough in semis feel FOMO that’s why they decreased their required return and willing to buy stocks with lower MoS or overpaying. Good indicator of the market temperature are the upcoming IPOs: SPACEX, OPENAI and Anthropic. Which may be just the exit liquidity for early investors and VCs. Stock will be sold to FOMOed people willing to take huge risks for low expected returns.
What do you think about this take?