Why gold and bitcoin are uninvestible to this Wall Street legend
By Steve GoldsteinHoward Marks, co-chairman and co-founder of Oaktree Capital Management, authored his most recent investment memo last week.Howard Marks has been writing investment memos for 35 years - and the one thing you'll never read is him making the case for gold or bitcoin."Well, you know, look, I and Oaktree consider ourselves value investors," he said during a podcast interview with "We Study Billionaires." Marks is co-chairman of Oaktree Capital Management, the largest investor in distressed investments worldwide."And what the value investor does is you look at a situation, whether it's a stock, a company, a bond, a building - whatever it might be - and you try to figure out its intrinsic value. And then you see how the price today compares to that intrinsic value," he said."But if you're doing bitcoin or gold or diamonds or paintings, there is no intrinsic value," he added.Marks noted that while gold (GC00) has had a strong year, it has lagged behind the S&P 500 SPX going back to 2010, with returns of about 7.7% per year versus 12.7% per year for the U.S. equity index. "So it's not that gold was a disaster, but you shouldn't be distracted by the gains of the last month. It has been a lackluster," Marks said.Ever-volatile bitcoin (BTCUSD) has declined 4% this year and is off 29% from its late October peak.As a bond-market investor, Marks has been inclined first to avoid companies that he said are likely to fail.He recalled first getting angry reading the description by Benjamin Graham and David Dodd that bond investing was a "negative art" - but then he agreed. "If there are 100 bonds out there, and they're all 8% bonds, and you know that 90 will pay and 10 will default, it doesn't matter which of the 90 that pay you buy because they're all 8% bonds, they all give the same return. The only thing that matters is that you don't buy any of the 10 that default," he said.Marks's most recent memo, released last week, focused on whether the current AI mania was a bubble. He clearly, though not definitely, argued that it was.One key difference now between the dot-com bubble is that people had a stronger sense about how the technology would be disruptive, he said."So it just feels to me like we had a vision of how that was going to work out and it mostly came true. Today, I think we have less of that," said Marks. "I've never heard anybody tell me how AI is going to change the world. We know it's a powerful source that can think. It can process data. It has access to all the data that's ever been compiled. Exactly what it's going to do, how that's going to be a business, how people are going to make money at it, how it's going to impact life, I think is less clear," he said.Even if the main way AI will change the economy is as a labor saver, it's not yet clear who will profit from that, he added.-Steve GoldsteinThis content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.