Oaktree's Marks Weighs In on Big Tech Debt Sales

Summary

• Howard Marks warns that "credulousness" (excessive optimism) is rising in financial markets.
• Points to Big Tech companies like Google, Microsoft, Amazon selling very long-term debt (30-100 years) as evidence of this trend.
• Specifically mentions Google issuing 100-year bonds with a 5.8% yield as an example of unwarranted optimism.
• Argues that when optimism and credulousness are ascendant, it becomes difficult to make investments that produce excess returns commensurate with risk.
• On investing in AI and new technology, advises preferring equity over debt to capture upside potential if companies succeed.
• Quotes colleague Bob O'Leary from a December 9 memo, emphasizing the wisdom of buying stock rather than lending money for AI investments.
• Suggests that fixed-income investments in tech may not adequately reward investors compared to equity.
• Implies a skeptical stance towards long-term debt offerings in a market perceived as overly optimistic.
• Highlights the uncertainty in predicting the future, especially for rapidly evolving technologies like AI, making selection challenging.