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Billionaire investor Howard Marks has warmed up to crypto, and especially bitcoin, over the past few years.
In a recent podcast appearance, he recalled his January 2021 memo to Oaktree Capital Management clients titled “Something of Value,” in which Marks concluded he was “not yet informed enough to form a view on cryptocurrencies.”
That was a stark departure from 4 years prior, when Marks’ memorialized thoughts on crypto that played up the speculative mania, calling it “nothing but an unfounded fad (or perhaps even a pyramid scheme).”
A series of discussions with his adult son Andrew during the pandemic — or, as Marks calls it, “my time in captivity” — softened his view.
“Our families lived together for three months, and we had some great discussions, as you can imagine,” Marks told We Study Billionaires’ Trey Lockerbie. “And it was around April…when Andrew told me he had bought bitcoin,” for between $5,000 and $6,000.
Andrew Marks is the co-managing partner of TQ Ventures, a technology-focused venture capital firm, who has described himself as a huge Buffet nerd, but one who became more open-minded toward tech investments.
Howard Marks characterized his own investing style as “cautious” and remarked on his tendency to be “deeply dubious when we hear ‘this time it’s different.’”
“We point to a history of speculative manias and financial innovations that’s left behind significant carnage. It’s this skepticism that reduces the value investor’s probability of losing money,” he said.
A sea change
So, what’s changed?
A macro-driven sea change is in process, Marks said, calling the 40-year decline in interest rates “the biggest single event of the last 45 years in the financial world.”
“Like the frog in the pot of water,” the gradual decline in interest rates, “were responsible for the majority of all the money that’s been made in the last 45 years,” he said.
The Fed’s decision to leave interest rates at zero for the 7 years following the global financial crisis of 2008 was a mistake, in Marks’ view. Now interest rates are “going to kind of hang around at this level” — but not go up.
Marks even expects the Fed will cut rates in 2024, though it won’t be by much. “They’re through coming down in any major way,” he added, and “they’re through being ultra-low.”
Marks praised current Fed Chair Jerome Powell as “reasoned,” but “resolute,” in setting expectations for inflation, which Marks predicted “will abate naturally,” unlike the far worse scenario the country faced in the 1970s.
Bitcoin is a product of a loss of trust in the financial system, especially for people in countries with weak institutions and limited access to financial services, he now concludes.
“They don’t exactly want everybody in authority to know how much money they have. So it does seem that there are good uses for some coins, and bitcoin seems to be so far the one in the lead.”
Closer to home, bitcoin’s rally is fueled by the recent banking crisis.
“It’s an anti-bank play, and the weakness of the bank shows up the strength of bitcoin, and it’s done very, very well this year,” Marks said.