During this interview with BQ Prime, Howard Marks explained why companies should have to make difficult capital allocation decisions. Here’s an excerpt from the interview:
Marks: Zero interest rates tend to keep companies alive that shouldn’t stay alive. One of the beauties of capitalism is that it’s Darwinian. It’s survival of the of the fittest. But in a zero rate environment the unfit can stay alive. That’s not a good thing.
I once said in one of my memos that fear of bankruptcy is to capitalism as fear of hell is to Catholicism. And people should have to make difficult capital allocation decisions and not get money for nothing.
And the last thing I’ll say is that most people in the financial community are optimistic by nature.
Charlie Munger, Warren Buffett’s partner, always quotes the philosopher Demosthenes who said, for that which a man wishes that he will believe. So there’s a lot of wishful thinking. So yes I think that people are holding to optimism and belief that we’re going back to the ways of the teens, when I think we’re not.
You can listen to the entire discussion here:
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