To The Moon

Here is a summary of the patterns that precede market crashes - compiled from a recent article by Howard Marks (Oaktree). This is extracted from his 14 Aug 2025 article titled “the Calculus of value”.

​Market crashes are not random but are often the culmination of recurring historical patterns. Four key indicators consistently appear:

• ​Overvaluation: The price of assets is driven by narratives and belief rather than by fundamental value and profitability.

• ​Leverage: The use of borrowed money to fund growth creates a fragile structure that is vulnerable to shifts in economic conditions like rising interest rates.

• ​Complacency: A prolonged period of calm markets leads investors to assume risk has vanished, making them unprepared for potential downturns.

• ​Euphoria: Markets are driven by sentiment and hype, with investors chasing the "next big thing" without regard for a company's actual business model or ability to generate profit.

​These patterns are present in today's market, with overvaluation in many stocks, hidden leverage in private credit, complacency despite inflation, and euphoria in sectors like AI.

​For investors, a prudent approach involves:

• ​Avoiding hype and focusing on a company's fundamentals.

• ​Shunning leverage and margin debt.

• ​Remaining skeptical and cautious, even during calm market periods.

Can we look before the overvaluation, leverage, complacency and euphoria to take a realistic look of the market? From this, are we able to hedge or pivot accordingly to take advantage of the market?

Wishing all success and happy research.

​ @TigerStars

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