Howard Marks

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  • 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.

  • 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.