The Calculus of Value

In his latest memo, Howard Marks sets forth the essence of value
and price, as well as the critical relationship between the
two. He posits that value exerts a ‘‘magnetic’’ influence on
price, meaning the relationship of price to value should be
expected to strongly influence investment performance in the long
run, with high valuations presaging low subsequent returns, and
vice versa. In the context of today’s elevated U.S. equity
valuations and widespread investor optimism, he advises us to
consider going to an ‘‘Investment Readiness Condition’’ in which
investors shift their portfolios somewhat in the direction of
increased defense.


You can read the memo here
(https://www.oaktreecapital.com/insights/memo/the-calculus-of-value).