10/04/2026
Q: How do you know a property is expensive? A: You don't.
But there are hints and a thinking person can use them to gain some perspective. And the same logic applied to investments more generally. In amongst the turmoil of an investment decision are markets and indicators that the wide-eyed can use for better decision-making.
In this post, I'm going to share a slice of Howard Marks' latest quarterly memo. This legend of Wall Street writes about prices, and trends and the way people always see "this time is different" but eventually, it's see that this is just the same as before but wrapped differently.
Right now, there are arguments that "markets" are expensive. We won't know whether that is true until quite some time from now, when we can all look back with smug faces and point to how obvious it must have been at the time.
Is Perth residential property 'expensive'?
Are the companies listed on the ASX 'expensive'?
Is the current price of gold, 'expensive'?
Are Australian Government bonds, 'expensive'?
These are all excellent questions. And much like any reasonably informed financial person, I can provide you with material that 'proves' these areas are expensive. And I can provide you with material that 'proves' these areas are prices exactly as they should be.
It's no wonder a non-financial person finds all of this confusing and confronting.
Back to Howard Marks. His latest memo includes observations on times when prices look to be, and eventually turn out to be, 'expensive'. Here's the text.. when reading it, I'd ask that you think of people you know, and their attitudes to money and to how they see their financial position versus how they see that of their neighbours, their friends, their work colleagues and their heroes. And think about how you see, and talk about money, markets, and the price of any investment today.
[from Howard Mark's quarterly newsletter : 9 April 2026]
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"Extreme upsurges in the popularity of novel forms of investment invariably share certain features:
🔹 The Essential Element is Newness
When something is new, it’s easy for proponents to tout merits while the flaws remain hidden. Untested assets allow fads to grow into bubbles.
🔹 The "Grain of Truth"
The Nifty Fifty were great companies. The internet did change the world. These truths provide the foundation for what eventually becomes a destructive bubble.
🔹 The Reward of Early Entry
Early investors succeed because they buy before popularity elevates the price.
🔥 The Power of Envy
As Kindleberger wrote: “There is nothing so disturbing to one’s well-being and judgment as to see a friend get rich.” Envy is often the strongest force in the market.
📈 Hype vs. Reality
Possibility is confused with probability, then morphs into certainty. Skepticism and risk aversion go out the window.
❓ The Critical Question
Rarely asked in the heat of the moment: "What price is safe to pay to participate?" FOMO and excitement are the mortal enemies of caution.
🤡 The Three Stages
Latecomers swallow promises and push prices to the extreme. As Warren Buffett puts it: “First the innovator, then the imitator, then the idiot.”
⚠️ The Inevitable Disillusionment
Flaws and unfulfillable promises lead to loss when optimism turns out to be excessive or prices simply too high.
"History does not repeat itself, but it does rhyme." — Mark Twain
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There have been so many 'novel' forms of investment or investment trends, in the last decade or so. All have looked amazing, and early adopters have often made a lot of money, while late-arrivers have lost a lot of money. Dinosaurs like myself must be careful of assuming every new trend is going to result in disaster. Most probably will, but some might not, and some might represent a genuine opportunity where things really are "different". But who has the crystal ball for that future certainty? Not I. And nobody I've ever encountered.
Is "artificial intelligence" a genuine opportunity? Is it a trend that will follow the stages outlined by Howard Marks?
Is Perth residential property a genuine opportunity? As in, are current prices indicating a great opportunity? Even we Financial Planners are inundated with messages telling us of the great opportunities to be had in residential property right now or in private credit and lending into residential property in one form or another.
If you go back to Howard Mark's notes on these investment trends and cycles, you'll notice that he's not saying some people won't make a lot of money. And he's not saying a lot of people will lose money. But he is saying that there's a bit of a cycle going on here, and stepping back to try and work out what cycles we might be looking at, and where we might be on each of those different cycles, can at least give us some idea of whether we are closer to one 'end' of the cycle than another.
What do you think?
How do you see the price of Perth residential property today? How do you look at the prices of shares listed on the Australian Stock Exchange today? Do you see artificial intelligence as an opportunity - or as a threat? How do you measure threat versus opportunity?
In our office, Simon Tomkinson keeps a crystal ball that he offers to anyone who is uncertain about the future. I think there's a good chance the crystal ball is as accurate as many of the definitive declarations of threat or opportunity that cross my desk on any given day.
The weekend is coming up. Anyone spotting glaring opportunities or threats is welcome to list them in the comments. I'll see if my weekend allows me time to add a few as well.
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Please remember the Great Disclaimer
Nothing in this post is to be interpreted as 'personal financial advice'. It is general and factual advice only, and does not take into account your personal circumstances, expectations or preferences.
LInk to Howard Marks' memo :
https://www.oaktreecapital.com/insights/memo/whats-going-on-in-private-credit
