Howard Marks

This note does not have a description yet.

  • Avoiding Losers as an Investment Strategy

    One way to have good returns when investing is to have a few winners and merely avoid losers. Of course, you must have some winners and a plausible way to avoid the losers which is easier said than done. In the world of investing, the winners take care of themselves because they will have an outsized gain compared to everything else.

  • Interest Rates Are the Price of Time

    Author Edward Chancellor neatly summarizes why interest rates are so important, “Interest rates are the price of time.” Since time is a consideration in every financial transaction that makes up the economy, interest rates are a foundational concept to understanding behavior.

  • The Stock Market Is More Volatile Than the Businesses Listed

    The annual percentage changes of the stock market go up and down more than the actual businesses in it. Similarly the profits of the businesses go up and down more than the economy of which it’s comprised.

  • Nobody Grades an Economist

    The reason you shouldn’t rely on what economists say to make decisions (for example in financial decisions) is because nobody grades an economist. As Howard Marks puts it, “Economists are like portfolio manager who don’t mark to market.” In other words, a source of predictions is only useful if it is reliably correct, but there is no way to know that about an economist because they don’t keep score.

  • Lowering the Federal Funds Rate Causes All Asset Classes Increase in Value

    Lowering the interest rate has the effect of decreasing the risk for every asset class. This causes the expected return to go up and thus the value of the asset which leads to more buying of assets (for example getting a mortgage for fear of missing out) and greater optimism in the market (more risk taking). This is how the Fed tries to stimulate the economy.

  • Consensus Macro Forecasts Provide No Value

    Macro forecasting is an area where it is easy to be as right as the consensus, but very hard to be more right. This highlights that consensus macro forecasts provide no value—it doesn’t tell you anything everybody else doesn’t know so there is no information advantage.

  • The Six Foot Man in the Stream That Was Five Feet on Average

    The parable of the six foot man who drowned in the stream that was five feet on average is a reminder to plan for the possibility of low ends when building a portfolio. The average can be misleading because there can be large swings that still average out to something you might mistakenly believe is survivable.

  • Surprise Should Come from the Upside Case Only

    If your investments are good only because of future optimism, you will have surprises in the downside case. If your investments are good without optimism required then you will be surprised in the upside case.

  • Psychology Overwhelms Fundamentals in the Short Run

    In discussing market changes, Howard Marks, remarks that psychology overwhelms fundamentals in the short run as the reason why markets can appear irrational. This is a neat way of holding both the idea that investors are rational and markets are irrational simultaneously.

  • Protect Against the Downside by Enjoying the Upside

    Bill Gurley, GP of Benchmark Capital said, “The best ways to protect against the downside is to enjoy every minute of the upside.” Markets have cycles and it’s difficult to time the market. One way to protect against downside risk is to take full advantage of the upside. That way, your returns cushion the inevitable downturn.