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Treasure Hunters Of The Financial Crisis

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http://www.nytimes.com/2013/11/10/business/treasure-hunters-of-the-financial-crisis.html?ref=business&_r=0

Five years ago, the global financial system was falling apart. Lehman Brothers had imploded. Banks had stopped lending. Foreclosure signs were as common as weeds on the front lawns of suburban homes.

And Bruce A. Karsh saw the buying opportunity of a lifetime.

Mr. Karsh, a low-key money manager from Los Angeles, had spent his career analyzing and trading the debt of companies. With the world economy buckling, the prices of corporate debt had plunged to levels suggesting that much of American industry was hurtling toward bankruptcy.

So Mr. Karsh, through his Oaktree Capital Management firm, plowed money into distressed debt at a torrid pace, investing more than $6 billion over a three-month stretch.

“Unless the second Great Depression lies ahead,” Howard S. Marks, Oaktree’s chairman, wrote to their clients on Oct. 6, 2008, “today’s purchases should produce substantial returns, and in a few years we’ll reminisce together about how easy it was to take advantage of the bargains of 2008-09.”

It paid off. With the help of an extraordinary government bailout and stimulus, the second Great Depression never came and a global recession eventually faded. A half-decade later, Mr. Marks’s prediction has come to pass. Virtually all of the debt bought on the cheap has fully recovered in value. The trade yielded spectacular profits, earning about $6 billion in gains for Oaktree’s investors and $1.5 billion for Mr. Karsh, Mr. Marks and their partners.

How very generous of the Fed, if they hadn't acted the profits made would have been far less.

Still champers all round.

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It paid off. With the help of an extraordinary government bailout and stimulus, the second Great Depression never came and a global recession eventually faded. A half-decade later, Mr. Marks’s prediction has come to pass. Virtually all of the debt bought on the cheap has fully recovered in value. The trade yielded spectacular profits, earning about $6 billion in gains for Oaktree’s investors and $1.5 billion for Mr. Karsh, Mr. Marks and their partners.

Global QE $£Trillions and all the other schemes, but most painful of all, excuses for massively overborrowed reckless positions, no stomach for correction at the margin but wimping out with excuses, protect values for outright owners, BTL and other investor VI.

Dec 17, 2014

[..]MARKS: Well the -- it may not surprise you, Stephanie, to know that I'm working on a memo. And it'll be not about oil, but it will be about the lessons of oil. And one of the lessons that we're learning again now is how fast things can change in the investment world. There was an economic philosopher, Rudiger Dornbusch, who said it takes a lot longer for things to happen than you think that it can, but then they happen much faster than you thought they would. And that's the way things go in the investment world.

[..]MARKS: I'd say we should start getting interested in the asset class. Declines are not a reason to get worried. Declines are a reason to get excited. The investing public like things better at high prices than at low prices. The professionals like things better at low prices than at high prices.

MILLER: Now let me ask you.

RUHLE: Hold on, one more time. Say that one more time because it's such a good point.

MARKS: Well the public, people who and who don't understand how investing works like things, feel better at things when they're at high prices, and lose confidence as the price falls. Warren Buffett says, I like hamburgers and I eat more of them when they go on sale. The investment professional who understands the intrinsic value of the things he's looking at, hopefully, likes things better when the price converges to or falls below the intrinsic value.

http://www.bloomberg.com/video/investment-strategy-oaktree-s-marks-on-russia-markets-7hsbr1puT32ePy0aaOSyNA.html/

Alternative link with transcript: http://www.marketoracle.co.uk/Article48681.html

A lot of people love paying high prices, it seems to me, with debt, because it reflects on how they value themselves so highly.

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