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SALE, WHAT DOES THIS SAY NOT ONLY ABOUT THIS FIELD SPECIFICALLY, BUT HIGH-YIELD MARKETS? HOWARD: IT SAYS THERE ARE LIMITS TO WHAT CAN BE DONE. AND THAT BUYING APPETITES ARE NOT INFINITE. SKEPTICISM IS IN PLACE AND PEOPLE WHO HAD ONLY THE FEAR OF MISSING OPPORTUNITY NOW ARE BALANCING THAT WITH THE FEAR OF LOSING MONEY. THIS IS ALL VERY HEALTHY. STEPHANIE: FOR THE BANK. HOWARD: OR THE ISSUER. MARKETS ARE ONLY SAFE AND SANE WHEN PEOPLE APPLY RISK AVERSION. WHEN NOT EVERYTHING CAN GET DONE AND NOT EVERY DEAL IS FEASIBLE AND INVESTORS ARE DEMANDING. THIS IS WHAT WE WELCOME SEEING. STEPHANIE: YOU COULD POTENTIALLY HAVE DEALS THAT NEED TO GET FUNDED, THAT ARE IN THE WORKS, AND YOU SEE WHAT JUST HAPPENED WHAT HAPPENED -- WHAT JUST HAPPENED WITH CARLISLE. HOWARD: WE ARE NOT IN ISSUER NEARLY AS OFTEN AS WE ARE A BUYER. THE BUYER WANTS TO SEE SECURITIES COME DOWN IN PRICE. THEY WANT TO SEE SOME RESISTANCE. STEPHANIE: SO THIS IS A POSITIVE FOR YOU? HOWARD: THAT IS RIGHT. DAVID: ARE WEAKEN US SEE MORE BANKS LEFT OUT THERE WHO HAVE COMMITTED ON THESE THINGS AND CANNOT SELL THEM? HOWARD: AND "THE NEW YORK TIMES" TODAY, THE FIRST PAGE OF THE BUSINESS SECTION TO THAT EFFECT. THEY SAY IT IS 600 MILLION IN THEIR, WHICH IS NOT A LOT OF MONEY. IT CAN GET BIGGER. WHAT NORMALLY HAPPENS IS, THEY SAY THE LAST DEAL WE PRICED AT ASK AND COULD NOT GET IT DONE -- PRICED AT X, AND COULD NOT GET IT DONE SO WE WILL PRICE THIS AT A HIGHER YIELD WITH BETTER STRUCTURE AND BETTER COVENANTS AND THE BUYER GETS A BETTER DEAL. STEPHANIE: CAN'T THAT KNOCK A BUNCH OF PROCESS -- INVESTORS OUT OF THE MARKET? IF HIGH-YIELD STARTS TO BACK OUT, THEY WILL RETREAT. WE ARE ONLY GOING TO BE STUCK WITH A FEW BIG GUYS. HOWARD: THEY SHOULD LIKE MORE WHEN THE YIELDS ARE HIGHER, NOT LESS. STEPHANIE: SHOULD, BUT THAT IS NOT HOW THE MARK OF -- HOW THE MARKET WILL WORK. MATT, WHAT DOES THE TERMINAL TELL US? MATT: I REMEMBER TALKING TO HOWARD IN CANADA AND AT THE TIME NO ONE COULD BELIEVE HE WAS SAYING THERE IS NOT ENOUGH OPPORTUNITY OUT THERE. THIS IS THE BLOOMBERG HIGH-YIELD CORPORATE DEBT INDEX, AND YOU CAN SEE OVER THE LAST FIVE YEARS, WE HAVE CLIMBED UP HERE BUT NOW WE ARE STARTING TO SEE IT KIND OF BREAK DOWN FOR LITTLE BIT FOR THE SECOND TIME IN A YEAR. I WONDER IF YOU THINK PEOPLE ARE -- WHAT DO YOU CALL IT, OVERLY EXUBERANT? HOWARD: I THINK THAT WHEN PEOPLE ARE AFRAID OF BEING LEFT BEHIND AND AFRAID OF NOT GETTING A DEAL, AND AFRAID OF NOT -- STEPHANIE: FEAR OF MISSING OUT. HOWARD: THEN THE MARKET IS NOT A STRICT DISCIPLINARIAN. WHEN THEY BALANCE THAT WITH FEAR OF LOSING MONEY, THE MARKET IS MUCH HEALTHIER, AND I THINK THAT IS WHERE WE ARE. I THINK THE EVENTS OF AUGUST ON TOP OF A SLUGGISH REST OF 2015 I NEVER MINDED PEOPLE, THERE IS RISK. -- REMINDED PEOPLE, THERE IS RISK. STEPHANIE: WE ARE NOW ENTERING A PHASE HE CALLS SOHO, -- FOHO, FEAR OF GETTING HOSED. IT MIGHT BE A TIME TO START LOOKING AT CERTAIN DEALS TOO SHORT, DO YOU BELIEVE THAT? HOWARD: WE DO NOT SHORT, BUT IT MIGHT THE. THE POINT IS, THAT IS SO MUCH HEALTHIER. THE OPPOSITE OF WHEN YOU HAVE THOSE FEARS, AND BALANCE IS MUCH HEALTHIER THAN WHEN YOU ONLY HAVE FALLOUT. THAT TURNS INTO A BUBBLE. I AM AFRAID I'M GOING TO MISS A DEAL, I HAVE TO BUY IT REGARDLESS OF PRICE IS EQUIVALENT TO A LACK OF DISCIPLINE. DAVID: I WONDER IF THERE IS ANOTHER THING THAT MAY BE HEALTHIER. THERE IS A WAY TO ADJUST THIS BY HAVING THE COMPANIES THAT ARE ON MONEY TO NOT BE AS LEVERAGED. I WONDER IF THIS MAY BE AN EARLY INDICATION THAT WE ARE OVER LEVERAGING COMPANIES. HOWARD: THESE ARE ALL INDICATIONS OF A MORE SOBER MARKET, WHICH IS SAYING THERE IS SUCH A THING AS TOO MUCH DEBT IN SHOE, SO EACH THING -- SUCH THING AS TOO WEAK A STRUCTURE, AND THESE THINGS ARE ALL HEALTHY. THE RISKIEST THING IN THE WORLD IS THE BELIEF THAT THERE IS NO RISK, AND THAT IS NOT ON RIGHT NOW. STEPHANIE: DO YOU THINK THIS IS GOING TO MARK -- NOT HEDGE FUND PLAYERS -- KNOCK HEDGE FUND PLAYERS OUT OF THE MARKET? WHEN WE GO INTO 2016, ARE WE GOING TO SEE LESS FUNDS? HOWARD: I AM ON RECORD AS SAYING THERE ARE PROBABLY MORE HEDGE FUNDS THAN WE NEED AND PROBABLY NOT ALL OF THEM ARE RUN BY GENIUSES. AND I SAID IN PRINT ESSENTIALLY THERE WOULD BE A LEADING OUT. OF COURSE, I SAID IT IN 2004 SO I AM NOT WRONG YET, I AM JUST EARLY. STEPHANIE: COULD YOU START OAKTREE TODAY? HOWARD: I THINK WE COULD BECAUSE WHEN WE STARTED OVER THREE WE HAD A 10 YEAR RECORD -- WHEN WE STARTED A COUNTRY WE HAD ATTENDED -- OAKTREE WE HAD A TEN-YEAR RECORD AND A GROUP OF CLIENTS WE WERE ABLE TO BRING OVER. WE STARTED THE FIRST DAY WITH ZERO AND WE ENDED THE FIRST YEAR WITH 5 BILLION. STEPHANIE: BUT YOUR BACKGROUND IS RESEARCH AND WE HAVE SEEN A LOT OF HEDGE FUNDS LAUNCHED IN THE PAST THAT WERE TRADING BASED. THEY DO NOT HAVE A RESEARCH BACKGROUND. IS THAT GOING TO BE THE PROBLEM WE FACE NOW THAT THERE IS REAL VOLATILITY? HOWARD: VOLATILITY HELPS THE TRAITOR, BUT I AM NOT A FAN OF TRADING. IT IS WHAT YOU DO TO IMPLEMENT HERE -- STEPHANIE: HOWARD MARKS, NOT A TRAITOR, AND INVESTOR. ♪