Bloomberg Talks: Howard Marks Talks Interest Rate Cuts
Date: December 11, 2025
Host: Bloomberg
Guest: Howard Marks, Co-Founder and Co-Chairman, Oaktree Capital Management
Episode Overview
In this insightful episode, Howard Marks joins Bloomberg to discuss his latest memo and provide a nuanced view on current market risks, the lasting impact of technological bubbles (including AI), and the societal implications of transformative innovation. He reflects on Federal Reserve policy shifts and the delicate balance investors must strike amid changes in interest rates. Marks also shares personal concerns regarding AI’s disruption of the job market, blending investment wisdom with caution about broader economic and social trends.
Key Discussion Points & Insights
Productive vs Unproductive Bubbles
[01:35–02:52]
- Unproductive bubbles are "financial fads" (e.g., portfolio insurance, subprime mortgages) that rapidly gain and lose favor, often destroying value without lasting change.
- Productive bubbles are based on technological advances—the steam engine, railroad, radio, automobile, computers, internet, and now, AI. These cause bubbles due to exuberant funding, but ultimately leave society transformed for the better.
- Quote:
"These [technological] bubbles push society ahead and change it irreversibly... AI is in the latter category."
— Howard Marks, [02:16]
- Quote:
- The critical question for investors: Will the implementation of AI be “excessive in scope and in the way it’s financed?” [02:52]
Investment Approach During Bubbles
[03:05–05:18]
- Entering overhyped markets requires caution:
- Quote:
"...when everybody likes something...chances are it may be overhyped and overpriced. So you just have to be careful."
— Howard Marks, [03:18]
- Quote:
- Lending vs Equity:
- Lenders should have clear visibility on repayments; if outcomes are purely conjectural, avoid lending and consider equity instead (where upside is shared).
- Quote:
"You certainly shouldn't [lend] in activities that have a high probability of not paying off at all because then you have unlimited downside and limited upside."
— Howard Marks, [04:39] - Quote:
"...if you want to participate, you should be in the equity. So at least you get the upside. The lender has no upside."
— Howard Marks, [03:50]
- Quote:
- Lenders should have clear visibility on repayments; if outcomes are purely conjectural, avoid lending and consider equity instead (where upside is shared).
- Startups: Lending to risky startups with binary outcomes is a “bad trade”—investors risk losing everything with little reward for success ([05:09]).
Market Risk and Investor Sentiment
[05:18–06:25]
- Quotes Warren Buffett:
"...the less prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own affairs."
— Howard Marks, [05:37] - Healthy skepticism in markets is a positive sign. Current market conditions, with some pushback against risk, appear healthier than in the excesses of 2000 or 2006.
The Role of the Federal Reserve
[06:35–08:29]
- Concerned that excessively accommodative Fed policy (rate cuts/propping up demand) incentivizes imprudent risk taking:
- Quote:
"The Fed manipulations are a form of price controls... If the Fed puts money artificially cheap, it induces behavior like risk taking."
— Howard Marks, [07:11] - Artificially low rates force investors out of safe assets into riskier ones, fostering the belief in a perpetual “Fed put.”
- Quote:
- Argues for a more passive Fed, intervening only in cases of severe economic overheating or stagnation.
- Quote:
“I believe that the Fed should be passive most of the time and only come to the rescue if the economy is seriously overheated or seriously under active and not creating jobs. I don't think that's the case right now."
— Howard Marks, [08:04]
- Quote:
Return Expectations in Today's Environment
[08:29–10:17]
- Current base rates ("fed funds at three and a half") are low historically, though higher than recent years.
- Debt markets: Prospective returns are "moderate, not lush, but not inadequate."
- Equity markets: High P/E ratios suggest low expected returns; historically, buying at these levels produced “very low single digits” over 10 years ([09:51]).
- In "moderate return scenarios," most people chase higher returns by taking on more risk—a move Marks does not favor unless “compelling.”
The Societal Impact of AI and Labor Market Fears
[10:17–12:21]
- Marks moves beyond investing, expressing genuine societal concern over AI’s impact on employment:
- The internet replaced “white collar jobs ... by blue collar jobs,” so the count of jobs stayed stable, but quality declined.
- Links job displacement from automation/offshoring with the opioid epidemic:
"...it's a natural consequence of people sitting around all day. Even if we can find a way to replace their income, I worry about purposelessness."
— Howard Marks, [11:36] - Emphasizes that a job’s non-monetary value—purpose, self-worth—cannot be replaced.
- Quote:
"We get so much from our jobs other than a paycheck, and you can't replace that stuff. So I worry for society."
— Howard Marks, [11:36]
Notable Quotes & Memorable Moments
-
On Fads vs Innovation:
"The unproductive bubbles I would describe as financial fads...Subprime mortgages was another...But then there are bubbles which are based on technological progress...AI is in the latter category."
— Howard Marks, [01:50–02:52] -
On Risk and Opportunity:
"When everybody likes something, is excited about something, chances are it may be overhyped and overpriced...you just have to be careful."
— Howard Marks, [03:18] -
On Investment Strategy:
"If you want to participate, you should be in the equity. So at least you get the upside. The lender has no upside."
— Howard Marks, [03:50] -
On Prudence in Markets:
"When other people are showing appropriate concern, that's a positive sign that the market is applying some discipline."
— Howard Marks, [05:37] -
On Societal Risk of AI:
"Even if we can find a way to replace their income, I worry about purposelessness...You can't replace that stuff. So I worry for society."
— Howard Marks, [11:36]
Important Timestamps
- [01:35] – Productive vs. Unproductive bubbles
- [03:12] – Cautionary notes on investing in hyped markets
- [04:39] – Lending vs. equity in uncertain ventures
- [05:37] – Market discipline and prudence
- [06:51] – Concerns about Fed accommodation and risk
- [08:54] – Return expectations in current environment
- [10:43] – Personal views on AI, jobs, and societal risk
This episode provides thoughtful analysis of market cycles, the dangers and opportunities tied to financial innovation and technology bubbles, and ends with a deep, personal warning about society’s preparedness for the disruptions of AI. Howard Marks’ trademark prudence, skepticism, and humanism are on full display.