Howard Marks

Well, guess what?

When you go to an auction and you sit down, take your seat and you see there are no other bidders, that's usually a good thing.

So the point is open-mindedness was really the most important single theme of the memo, I think, along with continuing to evolve your thinking as you get older.

No, Milken was.

No, Mike had been interested in low-rated bonds, I think, all along.

He got out of Wharton the same year I got out of Chicago, 69.

And I think that he immediately found, among other things, he wasn't dedicated to one area, but I think he found low rate of debt.

And there's a famous book called Hickman, which talks about bond experience from 1900 to 19, I think, 43.

And supposedly, Mike found that book and he read in it that the lower a bond's rating was, the higher its actual rate of return was.

Not its promised yield, but its realized total return.

Because yes, there had been some defaults and bankruptcies.

And let's remember that that period included the Great Depression.

But nevertheless, the excess yield, you got...

as an inducement was more than sufficient to offset the credit losses.

And that was like an aha moment for him.

And at that point in time, it was impossible to issue a low-rated bond.

They were called non-investment grade, speculative grade, and you just couldn't issue them.

So the big banks weren't doing it.

Right.

And the big investment banks, which in those days were separate, the big underwriters.