#431: Howard Marks on the US Dollar, Three Ways to Add Defense, and Good Questions

The problem we have now is that there is no history for what we're engaged in [COVID-19]. First of all, we have, I would say, the worst public health crisis to come to America in over 100 years—or certainly one of the worst; the worst economy since the Great Depression—more than 80 years old; the worst collapse of oil in history; and the greatest rescue & stimulus program from the Fed and the Treasury in history.

Gradually, the economy will recover [from COVID-19], and it'll show much better in 2021 than 2020. 2021 may or may not be back to the 2019 levels, but by 2022, we'll be back to or surpass the 2019 levels. And with vaccines and treatments, the coronavirus will be demoted to just another seasonal disease.

Every investor faces two risks every day: the risk of losing money, which is obvious, and the risk of missing opportunity, which is a little more subtle. Now, you can eliminate either risk if you are willing to totally surrender to the other risk.

I say strongly that the Fed and Treasury were right in doing what they did [to stimulate the economy amid COVID-19]. The fact that there may be negative unintended consequence doesn't mean that they weren't right ... We're battling problems we've never seen before with weapons we've never seen before, and we certainly can't say that they don't have negative potential consequences.

Inflation is supposed to work in response to the unemployment rate—the less unemployment there is in the country, the higher the inflation is supposed to be because there's less slack in the economy, and the workers, for example, can demand higher wages. That hasn't happened.

We have 26 million people who have filed for unemployment insurance in the last five weeks. We're expecting a decline of GDP in the second quarter [of 2020] of 20-30%, which would make it the worst quarter in history by an order of magnitude.

What the wise man does in the beginning the fool does in the end.