Why do we listen to Howard Marks? Because Warren Buffett does.
WHY BONDS ARE BETTER THAN STOCKS RIGHT NOW
Howard Marks, legendary value investor and co-chair of Oaktree Capital Management, has a clear message for people investing today: buy bonds, not stocks.
His thesis is straightforward:
Money is harder to borrow because interest rates are higher. Businesses need money for continuing operations, as well as continued growth.
Bonds (also called “credit”) can be thought of as loans you make to companies. These companies are legally obligated to pay back these loans, with interest. (If they don’t pay it back, they lose the company.) In contrast, stocks are small pieces of companies.
Because money is harder to borrow, companies are offering higher rates on their bonds. Good, well-managed companies now pay bond-holders more, and only because interest rates have gone up, not because their businesses have changed, making these bonds a good value.
WHY BONDS? THREE SIMPLE REASONS:
1. Bonds pay more right now: High-yield bonds pay about 8% interest. That means if you put in $100, you get $8 back each year, plus your $100 at the end.
2. Bonds make promises: When you own a bond, the company promises to pay you. With stocks, no one promises anything. Your money goes up or down based on what other people think. Important: When a company breaks their promise to pay bond-holders, they go into bankruptcy, and the bankruptcy court distributes their assets to bond-holders.
3. Stocks are too expensive: Stocks have given, on average, 10% per year over the last 100 years. But Marks says when stocks are priced high, like they are today (at an average price-earnings ratio of 19 or so), history shows they only return 1-7% per year.
Thus, Marks is saying you can get higher returns from bonds than stocks, and at lower risk, since the issuing company is legally required to pay you interest.
YIELD-SPREAD RISK?
Some people worry that bond interest rates are too low compared to “risk-free” government bonds. This difference (“spread”) is only about 2.9% right now, which is lower than normal.
Marks says not to worry. Even at the worst possible time to buy bonds in history (right before the 2008 crash), people who held their bonds for 5+ years still made good money.
His simple answer: “You can't eat spread. You need returns.”
HOW TARIFFS CHANGE THINGS
President Trump’s new tariffs have caused big market drops. Marks calls this “the biggest change I've seen in my career.”
The good news? Bonds now pay EVEN MORE than before (8% vs. 7.2% pre-tariffs), while stocks dropped 17% before rebounding, causing investors all over the world to be filled with extreme uncertainty.
Bonds remove nearly all of this uncertainty.
HOW TO INVEST $10,000 TODAY
Based on Marks’ advice, here's how he’d allocate $10,000 right now:
Put $6,000-$7,000 in bond funds:
High-yield bond funds or ETFs
Senior loan funds
Some private credit funds, if available to you
Put $2,000-$3,000 in careful stock picks:
Companies that can raise prices if costs go up
Companies with very little debt and good value
Keep $1,000 in cash:
For when prices drop more and good deals appear
TYPES OF BONDS
Marks mentions these specific types of bonds to sort through for good values:
High-yield bonds
Senior loans
Mezzanine debt
Asset-backed loans
CLOs (special packages of loans)
Private lending
THE BOTTOM LINE
Marks says this difficult market is like having “everything on sale.” Prices are down, which makes it a good time to buy — especially bonds.
With bonds, you know what you'll get: about 8% per year if companies keep their promises. And history shows that about 99% of the time, they do.
For regular people with money to invest today, Marks’ message is clear: buy bonds that promise ~8% returns (or more) over stocks. It’s less risk, more certain, and a good overall value.
This article summarizes the investment views of Howard Marks based on his memos “Sea Change” (2022), “Further Thoughts on Sea Change” (2023), “Gimme Credit” (2025), and a recent Bloomberg interview (April 2025). This article is not investment advice and does not constitute an endorsement of these views by Blockchainsure.