Howard Marks Quotes

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I like to say, “Experience is what you got when you didn’t get what you wanted.
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
He pulls free before we make contact. “A moment, please. Allow me to bask in your devotion.” He’s referring to my ankle tattoo. I blush. “I’ve told you a hundred times. It’s only a set of wings.” “Nonsense.” Morpheus grins. “I know a moth when I see one.” I groan in frustration, and he surrenders, letting me press our markings together. A spark rushes between them, expanding to a firestorm through my veins. His gaze locks on mine, and the bottomless depths flicker—like black clouds alive with lightning. For that instant, I’m bared to the bone. He looks inside my heart; I look inside his. And the similarities there terrify me.
A.G. Howard (Unhinged (Splintered, #2))
Morpheus’s gaze flashes to mine, then back to the chess piece wrapped in his magic. “Stop crying,” his quirky voice scolds. “Queens don’t cry. I taught you better than that.” I bite my quivering lip, and tiny Alice strokes the caterpillar’s face. “But you’re crying . . .” Morpheus lowers a wing and shades his cheek along with the transparent glimmer of his jeweled markings. “Well”—his shrill voice cracks slightly—“contrary to my preferences for lace and velvet, I’m not the queen. So I can cry all I like.
A.G. Howard (Ensnared (Splintered, #3))
There are old investors, and there are bold investors, but there are no old bold investors.
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
Prices are too high” is far from synonymous with “the next move will be downward.” Things can be overpriced and stay that way for a long time . . . or become far more so.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
Maxim 34: If you're leaving scorch-marks, you need a bigger gun. -The Seventy Maxims of Maximally Effective Mercenaries
Howard Tayler
Forgetfulness is the catalytic germ of spontaneous creativity
Howard Marks
An I must drink sour ale, I must, but never have I yielded to a man before, and that without would or mark upon my body. Nor, when I bethink me, will I yield now.
Howard Pyle (The Merry Adventures of Robin Hood)
Investment success doesn’t come from “buying good things,” but rather from “buying things well.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
We have to practice defensive investing, since many of the outcomes are likely to go against us. It’s more important to ensure survival under negative outcomes than it is to guarantee maximum returns under favorable ones.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
A man is a man, no more, no less. The awareness of this fact marks the supreme moment of human dignity.
Howard Thurman (Jesus and the Disinherited)
There’s a big difference between probability and outcome. Probable things fail to happen—and improbable things happen—all the time.” That’s one of the most important things you can know about investment risk.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
Here’s the key to understanding risk: it’s largely a matter of opinion.
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
Don't ask what the world needs. Ask what makes you come alive, and go do it. Because what the world needs is people who have come alive. —HOWARD THURMAN
Mark Nepo (The Book of Awakening: Having the Life You Want by Being Present to the Life You Have)
Voltaire: “The perfect is the enemy of the good.” This
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
She needs to wake up," said Boots. "Hazard is crying. When does she wake up?" Gregor could not find it within him to give his standard reply. To pretend that in a short time Thalia would be back with them, laughing and happy. And somehow it seemed wrong to try. Boots was getting older. Very soon, she would begin to realize the truth on her own, anyway. "She's not going wake up," he told her. "She's dead." "She doesn't wake up?" said Boots. "No, not this time," said Gregor. "This time, she had to go away." Boots looked around at all their faces, at Hazard crying. "Where did she go?" No one had an answer. "Where is Thalia when she doesn't wake up?" The question hung in the air for an eternity. Finally, it was Howard who spoke up. "Why, she's in your heart, Boots." "My heart?" said Boots, putting both hands on her chest. "Yes. That's where she lives now," said Howard. "She can fly away?" asked Boots, pressing her palms tightly against her heart as if to keep Thalia from escaping. "Oh, no, she will stay there forever," said Howard.
Suzanne Collins (Gregor and the Marks of Secret (Underland Chronicles, #4))
Jeb and Morpheus have landed and are rounding up the toys they marked—the ones that got by me and Mom. Morpheus uses blue magic to walk the zombies like puppets toward Jeb, who then swings a golf club, driving them into a net they’ve propped open. Leave it to guys to make a game out of a life-and-death situation. 
A.G. Howard (Unhinged (Splintered, #2))
She looked as though everything that she didn't like had happened to her.
Elizabeth Jane Howard (Marking Time (Cazalet Chronicles, #2))
Being too far ahead of your time is indistinguishable from being wrong.” So
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
people should like something less when its price rises, but in investing they often like it more.
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
The mark of spiritual maturity is not how much you understand, but how much you use. In the spiritual realm, the opposite of ignorance is not knowledge but obedience.
Howard G. Hendricks (Living By the Book: The Art and Science of Reading the Bible)
Here is an appropriate use of the exclamation mark: The last thing he expected when the elevator door opened was the snarling tiger that leapt at him. "Ahhhhh!" ... In almost all situations that do not involve immediate physical danger or great surprise, you should think twice before using an exclamation mark. If you have thought twice and the exclamation mark is still there, think about it three times, or however many times it takes until you delete it.
Howard Mittelmark (How Not to Write a Novel: 200 Classic Mistakes and How to Avoid Them—A Misstep-by-Misstep Guide)
Covering up with one of his wings, I surround myself with the scent of licorice and honey. “You want to hold me while I sleep. You want to watch my face as I dream like you never have—from the outside.” He traces my eye markings with an elegant fingertip. “That will be my memory to cling to, until you’re mine forever at last, both in waking hours and sleep. The question is, do you trust me enough to give me that? To rest in my arms tonight?” I hold his soft palm against my cheek. “Will you sing me my lullaby?” He weaves his fingers through my hair and presses my forehead to his. “Forever and always,” he whispers. As he hums the tune that has been inside my mind and heart all my life, I close the waterfall canopy, cocooning us within our own frozen pocket of time.
A.G. Howard (Ensnared (Splintered, #3))
While waiting for promised blessings, one should not mark time, for to fail to move forward is to some degree a retrogression. Be anxiously engaged in good causes, including your own development.
Howard W. Hunter
The most dangerous thing is to buy something at the peak of its popularity. At that point, all favourable facts and opinions are already factored into its price and no new buyers are left to emerge
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
Investing is a popularity contest, and the most dangerous thing is to buy something at the peak of its popularity. At that point, all favorable facts and opinions are already factored into its price, and no new buyers are left to emerge.
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
Warren Buffett tells us, “The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
Everything you needed to know in the years leading up to the crash could be discerned through awareness of what was going on in the present.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
There's only one way to describe most investors: trend followers.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
The biggest investing errors come not from factors that are informational or analytical, but from those that are psychological. Investor
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
There’s only one way to describe most investors: trend followers. Superior investors are the exact opposite. Superior investing, as I hope I’ve convinced you by now, requires second-level thinking—a way of thinking that’s different from that of others, more complex and more insightful.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
Expensive illogicalities and inefficiencies do not worry the monsters of American bureaucracy, and the taxpayers are enthusiastic and eager to spend fortunes in the name of fighting crime. Prison places cost the US taxpayer more than university places. The American belief that prisons are the best way to combat crime has led to an incarceration rate that is at least five times that of almost any industrialised nation. Overcrowding is endemic. Conditions are appalling, varying from windowless, sensory-deprived isolation to barren futile brutality.
Howard Marks (Mr. Nice)
I crumple, my palm skating along the tree’s frozen face as I plop to the ground. “Alyssa?” Morpheus crouches beside me in an instant. He catches my chin and forces me to look at him. “Are you feeling anemic again?” I struggle to breathe. It grates inside my chest, like inhaling angry bees. Blood creeps into my throat and gags me. Morpheus’s jeweled markings flash through an anxious kaleidoscope of colors.
A.G. Howard (Ensnared (Splintered, #3))
Selling for more than your asset’s worth. Everyone hopes a buyer will come along who’s willing to overpay for what they have for sale. But certainly the hoped-for arrival of this sucker can’t be counted on. Unlike having an underpriced asset move to its fair value, expecting appreciation on the part of a fairly priced or overpriced asset requires irrationality on the part of buyers that absolutely cannot be considered dependable.
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
Why is dissatisfaction taken to be a mark of failing powers and patience, when it might just as easily be understood as a proper judgment on a foolish world?
Howard Jacobson
It is widely believed that the snails did not even know they overthrew the shiners, so nonexistent was the resistance," said Howard.
Suzanne Collins (Gregor and the Marks of Secret (Underland Chronicles, #4))
An accurate estimate of intrinsic value is the essential foundation for steady, unemotional and potentially profitable investing.
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
If one is approached with a deal predicated on cycles having ceased to occur, remember that invariably that’s a losing bet.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
There’s a big difference between probability and outcome. Probable things fail to happen—and improbable things happen—all the time.” That
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
Risk means uncertainty about which outcome will occur and about the possibility of loss when the unfavorable ones do.
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
What the wise man does in the beginning, the fool does in the end.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
He had a week’s growth of a beard on his face and round wire-rimmed glasses on. This was what he pictured a film director to look like—a cross between Ron Howard and Steven Spielberg.
Mark Lukens (Sightings)
Every once in a while, an up-or-down-leg goes on for a long time and/or to a great extreme and people start to say "this time it's different." They cite the changes in geopolitics, institutions, technology or behaviour that have rendered the "old rules" obsolete. They make investment decisions that extrapolate the recent trend. And then it turns out that the old rules still apply and the cycle resumes. In the end, trees don't grow to the sky, and few things go to zero.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
If everyone likes it, it's probably because it has been doing well. Most people seem to think that outstanding performance to dates presages outstanding future performance. Actually, it's more likely that outstanding future performance to date has borrowed from the future and thus presages subpar performance from her on out.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
Once in a while, however, the future turns out to be very different from the past. It’s at these times that accurate forecasts would be of great value. It’s also at these times that forecasts are least likely to be correct. Some forecasters may turn out to be correct at these pivotal moments, suggesting that it’s possible to correctly
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
He stretches languorously under me, and the silvery scar on his abdomen catches the light, that telltale mark from Sister Two when he fought her inside Butterfly Threads just weeks ago. When he almost died to help me and Jeb escape. But I didn’t let him die, because I couldn’t imagine a world without him. I can’t imagine a future without him, either. Not anymore.
A.G. Howard (Ensnared (Splintered, #3))
Buying something for less than its value. In my opinion, this is what it’s all about—the most dependable way to make money. Buying at a discount from intrinsic value and having the asset’s price move toward its value doesn’t require serendipity; it just requires that market participants wake up to reality. When the market’s functioning properly, value exerts a magnetic pull on price.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
the three stages of a bull market”: the first stage, when only a few unusually perceptive people believe things will get better, the second stage, when most investors realize that improvement is actually taking place, and the third stage, when everyone concludes things will get better forever.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
Most people strive to adjust their portfolios based on what they think lies ahead. At the same time, however, most people would admit forward visibility just isn't that great. That's why I make the case for responding to the current realities and their implications, as opposed to expecting the future to be made clear.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
He spins us both, wrapping us in his wings until I’m dazed and giggling. “I wanted to lift you above me and swing you in circles until we were both dizzy and laughing,” he murmurs against my neck as we tumble to the ground, trapped beneath his tented wings. My body aches on impact—but it’s a delicious ache. I can hardly breathe with the weight of his ribs covering mine, with the scent of his tobacco surrounding me, smothering and intoxicating. The curve of his smiling mouth glides along my collarbone and I gasp at the velvety sensation. I force his head up so I can look at him . . . break the spell. He slips the bejeweled headband from my hair, sweeping stray strands from my face. The slickness of his gloves grazes my eye markings. “I wanted to kiss your lips and share your breath,” he says softly as he leans close.
A.G. Howard (Ensnared (Splintered, #3))
•Scepticism and pessimism aren’t synonymous. Scepticism calls for pessimism when optimism is excessive. But it also calls for optimism when pessimism is excessive.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
I’m convinced that no idea can be any better than the action taken on it,
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
There are three ingredients for success—aggressiveness, timing and skill—and if you have enough aggressiveness at the right time, you don’t need that much skill.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
Experience is what you got when you didn’t get what you wanted.
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
History doesn’t repeat itself, but it does rhyme.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
Skepticism and pessimism aren’t synonymous. Skepticism calls for pessimism when optimism is excessive. But it also calls for optimism when pessimism is excessive.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
Idiot, yes. All my life I struggled. That is the mark of an idiiot.
Howard Barker (The Possibilities)
As Sir John Templeton put it, “To buy when others are despondently selling and sell when others are greedily buying requires the greatest fortitude and pays the greatest reward.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
The superior investor is mature, rational, analytical, objective and unemotional.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
Will Rogers said, “You’ve got to go out on a limb sometimes because that’s where the fruit is.” None of us is in this business to make 4 percent.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
Patient opportunism, buttressed by a contrarian attitude and a strong balance sheet, can yield amazing profits during meltdowns.
Howard Marks (The Most Important Thing: Uncommon Sense for The Thoughtful Investor)
the risk-free rate should be normalized in some way before being used to assess riskier investments.
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
when risk bearing doesn’t work, it really doesn’t work, and people are reminded what risk’s all about.
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
Here’s the key to understanding risk: it’s largely a matter of opinion. It’s hard to be definitive about risk, even after the fact. You
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
It’s frightening to think that you might not know something, but more frightening to think that, by and large, the world is run by people who have faith that they know exactly what’s going on.
Howard Marks (The Most Important Thing: Uncommon Sense for The Thoughtful Investor)
Nothing less than a great daring in the face of overwhelming odds can achieve the inner security in which fear cannot possibly survive. It is true that a man cannot be serene unless he possesses something about which to be serene. Here we reach the high-water mark of prophetic religion, and it is of the essence of the religion of Jesus of Nazareth. Of course God cares for the grass of the field, which lives a day and is no more, or the sparrow that falls unnoticed by the wayside. He also holds the stars in their appointed places, leaves his mark in every living thing. And he cares for me! To be assured of this becomes the answer to the threat of violence—yea, to violence itself. To the degree to which a man knows this, he is unconquerable from within and without.
Howard Thurman (Jesus and the Disinherited)
The fact that your brain becomes more risk seeking in bull markets and more conservative in bear markets means that you are neurologically predisposed to violate the first rule of investing, “buy low and sell high.” Our flawed brain leads us to subjectively experience low levels of risk when risk is actually quite high, a concept that Howard Marks refers to as the “perversity of risk.
Daniel Crosby (The Behavioral Investor)
Risk is incredibly important to investors. It’s also ephemeral and unmeasurable. All of this makes it very hard to recognize, especially when emotions are running high. But recognize it we must.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
An accurate opinion on valuation, loosely held, will be of limited help. An incorrect opinion on valuation, strongly held, is far worse. This one statement shows how hard it is to get it all right.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
Mark Twain knew the importance of making the correct word choice. He said, “The difference between the right word and the almost-right word is the difference between lightning and the lightning bug.
Carolyn Howard-Johnson (Great Little Last-Minute Editing Tips for Writers)
Decisi di diventare un beatnik a tutti gli affetti[...]. Fumai tutta la marijuana che mi passava tra le mani, lessi Kerouac, ascoltai Bob Dylan e Roland Kirk e andai a vedere film francesi che non capivo.
Howard Marks (Mr. Nice)
It's worth noting that the assumption that something can't happen has the potential to make it happen, since people who believe it can't happen will engage in risky behaviour, and thus alter the environment.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
As I’ve indicated earlier, the riskiest thing in the world is the belief that there’s no risk. By the same token, the safest (and most rewarding) time to buy usually comes when everyone is convinced there’s no hope.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
In good years, defensive investors have to be content with the knowledge that their gains, although perhaps less than maximal, were achieved with risk protection in place, even though it turned out not to be needed.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
It follows from the above that risk is high when investors feel risk is low. And risk compensation is at a minimum just when risk is at a maximum (meaning risk compensation is most needed). So much for the rational investor!
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
In bubbles, infatuation with market momentum takes over from any notion of value and fair price, and greed (plus the pain of standing by as others make seemingly easy money) neutralises any prudence that might otherwise hold sway.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
A Philippine-brothel-owning member of the House of Lords was staying at the house of a Spanish Chief Inspector of Police. The Lord was being watched by an American CIA operative who was staying at the house of an English convicted sex offender. The CIA operative was sharing accommodation with an IRA terrorist. The IRA terrorist was discussing a Moroccan hashish deal with a Georgian pilot of Colombia's Medellín Cartel. Organising these scenarios was an ex-MI6 agent, currently supervising the sale of thirty tons of Thai weed in Canada and at whose house could be found Pakistan's major supplier of hashish. Attempting to understand the scenarios was a solitary DEA agent. The stage was set for something.
Howard Marks (Mr. Nice)
Love is neither a conditional business nor an ever-fixed mark arrangement. People always know somewhere inside them if they are not loved. No gestures, talk, conciliation, pronouncements can prevail over that deep instinctual knowledge.
Elizabeth Jane Howard
The key turning point in my investment management career came when I concluded that because the notion of market efficiency has relevance, I should limit my efforts to relatively inefficient markets where hard work and skill would pay off best.
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
Prosperity brings expanded lending, which leads to unwise lending, which produces large losses, which makes lenders stop lending, which ends prosperity, and on and on. . . . Look around the next time there’s a crisis; you’ll probably find a lender.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
the first stage, when only a few unusually perceptive people believe things will get better, the second stage, when most investors realize that improvement is actually taking place, and the third stage, when everyone concludes things will get better forever.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
They were the children of the Jackie Robinson elite, whose parents rose up out of the ghettos, and the sharecropping fields, went out into the suburbs, only to find that they carried the mark with them and could not escape. Even when they succeeded, as so many of them did, they were singled out, made examples of, transfigured into parables of diversity. They were symbols and markers, never children or young adults. And so they come to Howard to be normal—and even more, to see how broad the black normal really is.
Ta-Nehisi Coates (Between the World and Me)
If your behavior is conventional, you’re likely to get conventional results—either good or bad. Only if your behavior is unconventional is your performance likely to be unconventional, and only if your judgments are superior is your performance likely to be above average.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
The correctness of a decision can’t be judged from the outcome. Nevertheless, that's how people assess it. A good decision is one that’s optimal at the time it’s made, when the future is by definition unknown. Thus, correct decisions are often unsuccessful, and vice versa.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
SETH KLARMAN: Most of these characteristics are not permanent. Something broadly accepted can become controversial or even taboo. Information can become more or less available. Thus, an asset class deemed close to efficient at one point may become quite inefficient at another. European
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
the first stage, when just a few thoughtful investors recognize that, despite the prevailing bullishness, things won’t always be rosy, the second stage, when most investors recognize that things are deteriorating, and the third stage, when everyone’s convinced things can only get worse.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
Like so many other things in the investment world that might be tried on the basis of certitude and precision, waiting for the bottom to start buying is a great example of folly. So if targeting the bottom is wrong, when should you buy? The answer’s simple: when price is below intrinsic value.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
If you've settled on the value approach to investing and come up with an intrinsic value for a security or asset, the next important thing is to hold it firmly. That's because in the world of investing, being correct about something isn't at all synonymous with being proved correct right away.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
When private bands of fanatics commit atrocities we call them "terrorists," which they are, and have no trouble dismissing their reasons. But when governments do the same, and on a much larger scale, the word "terrorism" is not used, and we consider it a sign of our democracy that the acts become subject to debate. If the word "terrorism" has a useful meaning (and I believe it does, because it marks off an act as intolerable, since it involves the indiscriminate use of violence against human beings for some political purpose), then it applies exactly to the bombings of Hiroshima and Nagasaki.
Howard Zinn (The Bomb)
little known and not fully understood; fundamentally questionable on the surface; controversial, unseemly or scary; deemed inappropriate for “respectable” portfolios; unappreciated, unpopular and unloved; trailing a record of poor returns; and recently the subject of disinvestment, not accumulation.
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
Achieving gains usually has something to do with being right about events that are on the come, whereas losses can be minimized by ascertaining that tangible value is present, the herd’s expectations are moderate and prices are low. My experience tells me the latter can be done with greater consistency.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
The last four and a half years have been carefree, halcyon times for investors. That doesn’t mean it’ll stay that way. I’ll give Warren Buffett the last word, as I often do: “It’s only when the tide goes out that you find out who’s been swimming naked.” Pollyannas take note: the tide cannot come in forever.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
My intruder leaned into the dim light, revealing a face both beautiful and terrifying. He wasn’t human. No, he was far too perfect and mystical for that. Markings, resembling tattoos, flashed with jeweled colors beneath his dark, fathomless eyes. His blue hair swayed, out of sync with the wind gushing through my window.
A.G. Howard (Untamed (Splintered, #3.5))
Risk arises as investor behaviour alters the market. Investors bid up assets, accelerating into the present appreciation that otherwise would have occurred in the future, and thus lowering prospective returns. The ultimate irony lies in the fact that the reward for taking incremental risk shrinks as more people move to take it.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
The desire for more, the fear of missing out, the tendency to compare against others, the influence of the crowd and the dream of the sure thing—these factors are near universal. Thus they have a profound collective impact on most investors and most markets. The result is mistakes, and those mistakes are frequent, widespread and recurring.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
On the end of WWII in Europe: Few comments matched those of Bennie Smith, Howard K. Smith’s wife, who told her husband: “No matter what terrible things happen in the future, we must remember this: we won. We might not have. They might have won. Think of what the world would have been like if they had won. Nothing can ever be as terrible as that.
Mark Bernstein
This paradox exists because most investors think quality, as opposed to price, is the determinant of whether something's risky. But high quality assets can be risky, and low quality assets can be safe. It's just a matter of the price paid for them...Elevated popular opinion, then, isn't just the source of low return potential, but also of high risk.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
As the war went on, opposition grew. The American Peace Society printed a newspaper, the Advocate of Peace, which published poems, speeches, petitions, sermons against the war, and eyewitness accounts of the degradation of army life and the horrors of battle. The abolitionists, speaking through William Lloyd Garrison’s Liberator, denounced the war as one “of aggression, of invasion, of conquest, and rapine—marked by ruffianism, perfidy, and every other feature of national depravity . . . ” Considering the strenuous efforts of the nation’s leaders to build patriotic support, the amount of open dissent and criticism was remarkable. Antiwar meetings took place in spite of attacks by patriotic mobs.
Howard Zinn (A People's History of the United States: 1492 to Present)
There’s only one form of intelligent investing, and that’s figuring out what something’s worth and buying it for that price or less. You can’t have intelligent investing in the absence of quantification of value and insistence on an attractive purchase price. Any investment movement that’s built around a concept other than the relationship between price and value is irrational.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
In business, financial and market cycles, most excesses on the upside — and the inevitable reactions to the downside, which also tend to overshoot — are the result of exaggerated swings of the pendulum of psychology. Thus understanding and being alert to excessive swings is an entry-level requirement for avoiding harm from cyclical extremes, and hopefully for profiting from them.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
We conclude that most of the time, the future will look a lot like the past, with both up cycles and down cycles. There is a right time to argue that things will be better, and that's when the market is on its backside and everyone is selling things at giveaway prices. It's dangerous when the market's at record levels to reach for a positive rationalisation that has never held true in the past.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
“Is Jeb alive?” I ask Morpheus. White bleeds into his jeweled markings—the color of indifference. “I didn’t kill him, if that’s what you’re implying.” “You know it’s not. Could you for once just give me a straight answer?” He gazes up at the smoky gray sky. “Your mortal is alive and well. In fact, you will no doubt be seeing him very soon.” Relieved tears spring into my eyes. “So, that means you know where he is?” Is it possible Morpheus took Jeb under his wings after all? Dad stops stuffing the fabric in the bag, as if waiting to hear the answer. Appraising his cane, Morpheus growls. “I do know where he is.” Before I can respond, he lifts his eyes to mine, jewels now bordering on emerald green. “I suppose I should be grateful his name wasn’t the first thing that came out of your mouth.”
A.G. Howard (Ensnared (Splintered, #3))
The best foundation for a successful investment—or a successful investment career—is value. You must have a good idea of what the thing you’re considering buying is worth. There are many components to this and many ways to look at it. To oversimplify, there’s cash on the books and the value of the tangible assets; the ability of the company or asset to generate cash; and the potential for these things to increase.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
Charlie Munger gave me a great quotation on this subject, from Demosthenes: “Nothing is easier than self-deceit. For what each man wishes, that he also believes to be true.” The belief that some fundamental limiter is no longer valid—and thus historic notions of fair value no longer matter—is invariably at the core of every bubble and consequent crash. In fiction, willing suspension of disbelief adds to our enjoyment.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
How? Try to travel into the future and look back. In 2023, do you think you’re more likely to say, “Back in 2018, I wish I’d been more aggressive” or “Back in 2018, I wish I’d been more defensive”? And is there anything today about which you’d be likely to say, “In 2018, I missed the chance of a lifetime to buy xyz”? What you think you might say a few years down the road can help you figure out what you should do today.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
If the market were a disciplined calculator of value based exclusively on company fundamentals, the price of a security wouldn’t fluctuate much more than the issuer’s current earnings and the outlook for earnings in the future. In fact, the price generally should fluctuate less than earnings, since quarter-to-quarter changes in earnings often even out in the long run and, besides, don’t necessarily reflect actual changes in the company’s long-term potential.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
Most economic forecasts consist of extrapolations of current levels and long-term trends. And since the economy usually doesn’t depart much from those levels and trends, most extrapolation forecasts turn out to be correct. But those extrapolation forecasts are likely to be commonly shared, already reflected in the market prices for assets, and thus not generators of superior performance—even when they come true. Here’s how Nobel Prize–winning economist Milton Friedman put it:
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
Although the guilty verdict surprised few, the size of the resulting fine stunned the company and the country. For each of the 1,462 carloads of oil that had enjoyed an illegal rebate, Landis levied the highest possible fine, $20,000, generating a spectacular cumulative total of $29,240,000. Commenting on the hefty charge, Mark Twain drolly remarked that the sum evoked the bride’s proverbial astonishment on the morning after her wedding: “I expected it but didn’t suppose it would be so big.
Doris Kearns Goodwin (The Bully Pulpit: Theodore Roosevelt, William Howard Taft, and the Golden Age of Journalism)
As if rethinking, he stops and laces his fingertips through my gloved hand, pulling me close. “In case I don’t get another chance to tell you . . . One, you look amazing.” He traces my eye markings where they curl out from under the fuzzy edges of my mask. “And two . . .” He turns my hand to kiss my covered palm. “You got this, fairy queen.” Sucking in a sharp breath, I throw my arms around his neck. He hugs me tight, presses his lips to the top of my head, then steps back and pulls his hood into place, vanishing from sight.
A.G. Howard (Ensnared (Splintered, #3))
Mark Twain was neither an anarchist nor a radical. By 1900, at sixty-five, he was a world-acclaimed writer of funny-serious-American-to-the-bone stories. He watched the United States and other Western countries go about the world and wrote in the New York Herald as the century began: “I bring you the stately matron named Christendom, returning bedraggled, besmirched, and dishonored from pirate raids in Kiao-Chou, Manchuria, South Africa, and the Philippines, with her soul full of meanness, her pocket full of boodle, and her mouth full of pious hypocrisies.
Howard Zinn (A People's History of the United States)
Seen through the lens of human perception, cycles are often viewed as less symmetrical than they are. Negative price fluctuations are called “volatility,” while positive price fluctuations are called “profit.” Collapsing markets are called “selling panics,” while surges receive more benign descriptions (but I think they may best be seen as “buying panics”; see tech stocks in 1999, for example). Commentators talk about “investor capitulation” at the bottom of market cycles, while I also see capitulation at the top, when previously prudent investors throw in the towel and buy.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
When the same or closely similar circumstances occur again, sometimes in only a few years, they are hailed by a new, often youthful, and always supremely self-confident generation as a brilliantly innovative discovery in the financial and larger economic world. There can be few fields of human endeavor in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present. (A Short History of Financial Euphoria, 1990)
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
The following brief points are like magic moccasins. They guarantee safe guidance through the forest of people. To walk safely, wear them! 1. The most persuasive power you have toward others is a mature self. 2. The mark of greatness is to be superior without feeling superior. 3. "The consciousness of being loved softens the keenest pang." (Joseph Addison) 4. The turning point in all your exterior relations comes when you start changing your inner self. 5. Strong people attract the weak. 6. Possessiveness and dependency are not states of love. 7. Your own level of being attracts the kind of people who enter your life. 8. "He is happy as well as great who needs neither to obey nor command in order to be something." (Goethe) 9. Your True Self cannot be afraid of anyone. 10. You break the cord of painful thought toward another person by snipping the connection within your own mind. 11. It is very painful to pretend to be someone. 12. Any sincere effort at bettering your human relations returns a reward. 13. Don't drain your energy by thinking negatively toward people who harm you. 14. You get along with others to the exact degree that you get along with yourself. 15. A real person stands out like a human being among statues.
Vernon Howard (Psycho-Pictography: The New Way to Use the Miracle Power of Your Mind)
To illustrate the marked atmospheric contrast between the two cities, the writer Frank Carpenter observed that in New York, “a streetcar will not wait for you if you are not just at its stopping point. It goes on and you must stand there until the next car comes along. In Washington people a block away signal the cars by waving their hands or their umbrellas. Then they walk to the car at a leisurely pace, while the drivers wait patiently and the horses rest.” While the capital might lack “the spirit of intense energy” that animated New York, Carpenter concluded that Washington, with its broad, clean streets and fine marble buildings (and its shanties generally hidden from view), offered “the pleasanter place in which to live.
Doris Kearns Goodwin (The Bully Pulpit: Theodore Roosevelt, William Howard Taft, and the Golden Age of Journalism)
So these are the possibilities I see with regard to economic forecasts: Most economic forecasts are just extrapolations. Extrapolations are usually correct but not valuable. Unconventional forecasts of significant deviation from trend would be very valuable if they were correct, but usually they aren’t. Thus most forecasts of deviation from trend are incorrect and also not valuable. A few forecasts of significant deviation turn out to be correct and valuable—leading their authors to be lionized for their acumen—but it’s hard to know in advance which will be the few right ones. Since the overall batting average with regard to them is low, unconventional forecasts can’t be valuable on balance. There are forecasters who became famous for a single dramatic correct call, but the majority of their forecasts weren’t worth following.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
The mood swings of the securities markets resemble the movement of a pendulum. Although the midpoint of its arc best describes the location of the pendulum “on average,” it actually spends very little of its time there. Instead, it is almost always swinging toward or away from the extremes of its arc. But whenever the pendulum is near either extreme, it is inevitable that it will move back toward the midpoint sooner or later. In fact, it is the movement toward an extreme itself that supplies the energy for the swing back. Investment markets make the same pendulum-like swing: between euphoria and depression, between celebrating positive developments and obsessing over negatives, and thus between being overpriced and underpriced. This oscillation is one of the most dependable features of the investment world, and investor psychology seems to spend much more time at the extremes than it does at a “happy medium.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
By the end of 2008, however, the ingredients for a solid market recovery were in place. The over-levered funds that had received margin calls either raised additional capital, sold assets to de-lever as required, or liquidated. Funds and investment managers that received notices from investors desiring to withdraw at year-end either put up “gates” postponing withdrawals or completed the asset sales needed to meet them. The prices of debt securities reached a point where they implied yields so high that selling was unpalatable and buying became attractive. And, ultimately, market participants demonstrated that when negative psychology is universal and “things can’t get any worse,” they won’t. When all optimism has been driven out, and panicked risk aversion is everywhere, it becomes possible to reach a point where prices can’t go any lower. And when prices eventually stop going down, people tend to feel relief, and so the potential for a price recovery begins to arise.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
But most investors do capitulate eventually. They simply run out of the resolve needed to hold out. Once the asset has doubled or tripled in price on the way up — or halved on the way down — many people feel so stupid and wrong, and are so envious of those who’ve profited from the fad or side-stepped the decline, that they lose the will to resist further. My favorite quote on this subject is from Charles Kindleberger: “There is nothing as disturbing to one’s well-being and judgment as to see a friend get rich” (Manias, Panics, and Crashes: A History of Financial Crises, 1989). Market participants are pained by the money that others have made and they’ve missed out on, and they’re afraid the trend (and the pain) will continue further. They conclude that joining the herd will stop the pain, so they surrender. Eventually they buy the asset well into its rise or sell after it has fallen a great deal. In other words, after failing to do the right thing in stage one, they compound the error by taking that action in stage three, when it has become the wrong thing to do. That’s capitulation. It’s a highly destructive aspect of investor behavior during cycles, and a great example of psychology-induced error at its worst.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
I think it’s helpful to take an organized approach to what I call the “twin risks.” What I’m talking about here is the fact that investors have to deal daily with two possible sources of error. The first is obvious: the risk of losing money. The second is a bit more subtle: the risk of missing opportunity. Investors can eliminate either one, but doing so will expose them entirely to the other. So most people balance the two. What should an investor’s normal stance be regarding the two risks: evenly balanced, or favoring one or the other? The answer depends mostly on one’s goals, circumstances, personality and ability to withstand risk (and on the same things with regard to one’s clients, if any). And separate and apart from his normal posture, should the investor alter the balance from time to time? And if so, how? I think investors should try to appropriately adjust their stance if they (a) feel they have the requisite insight and (b) are willing to expend effort and bear the risk of being wrong. They should do this based on where the market is in its cycle. In short, when the market is high in its cycle, they should emphasize limiting the potential for losing money, and when the market is low in its cycle, they should emphasize reducing the risk of missing opportunity.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
A few years ago my friend Jon Brooks supplied this great illustration of skewed interpretation at work. Here’s how investors react to events when they’re feeling good about life (which usually means the market has been rising): Strong data: economy strengthening—stocks rally Weak data: Fed likely to ease—stocks rally Data as expected: low volatility—stocks rally Banks make $4 billion: business conditions favorable—stocks rally Banks lose $4 billion: bad news out of the way—stocks rally Oil spikes: growing global economy contributing to demand—stocks rally Oil drops: more purchasing power for the consumer—stocks rally Dollar plunges: great for exporters—stocks rally Dollar strengthens: great for companies that buy from abroad—stocks rally Inflation spikes: will cause assets to appreciate—stocks rally Inflation drops: improves quality of earnings—stocks rally Of course, the same behavior also applies in the opposite direction. When psychology is negative and markets have been falling for a while, everything is capable of being interpreted negatively. Strong economic data is seen as likely to make the Fed withdraw stimulus by raising interest rates, and weak data is taken to mean companies will have trouble meeting earnings forecasts. In other words, it’s not the data or events; it’s the interpretation. And that fluctuates with swings in psychology.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
The economy is growing, and the economic reports are positive. Corporate earnings are rising and beating expectations. The media carry only good news. Securities markets strengthen. Investors grow increasingly confident and optimistic. Risk is perceived as being scarce and benign. Investors think of risk-bearing as a sure route to profit. Greed motivates behavior. Demand for investment opportunities exceeds supply. Asset prices rise beyond intrinsic value. Capital markets are wide open, making it easy to raise money or roll over debt. Defaults are few. Skepticism is low and faith is high, meaning risky deals can be done. No one can imagine things going wrong. No favorable development seems improbable. Everyone assumes things will get better forever. Investors ignore the possibility of loss and worry only about missing opportunities, No one can think of a reason to sell, and no one is forced to sell. Buyers outnumber sellers. Investors would be happy to buy if the market dips. Prices reach new highs. Media celebrate this exciting event. Investors become euphoric and carefree. Security holders marvel at their own intelligence; perhaps they buy more. Those who’ve remained on the sidelines feel remorse; thus they capitulate and buy. Prospective returns are low (or negative). Risk is high. Investors should forget about missing opportunity and worry only about losing money. This is the time for caution!
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
The economy is slowing; reports are negative. Corporate earnings are flat or declining, and falling short of projections. Media report only bad news. Securities markets weaken. Investors become worried and depressed. Risk is seen as being everywhere. Investors see risk-bearing as nothing but a way to lose money. Fear dominates investor psychology. Demand for securities falls short of supply. Asset prices fall below intrinsic value. Capital markets slam shut, making it hard to issue securities or refinance debt. Defaults soar. Skepticism is high and faith is low, meaning only safe deals can be done, or maybe none at all. No one considers improvement possible. No outcome seems too negative to happen. Everyone assumes things will get worse forever. Investors ignore the possibility of missing opportunity and worry only about losing money. No one can think of a reason to buy. Sellers outnumber buyers. “Don’t try to catch a falling knife” takes the place of “buy the dips.” Prices reach new lows. The media fixate on this depressing trend. Investors become depressed and panicked. Security holders feel dumb and disillusioned. They realize they didn’t really understand the reasons behind the investments they made. Those who abstained from buying (or who sold) feel validated and are celebrated for their brilliance. Those who held give up and sell at depressed prices, adding further to the downward spiral. Implied prospective returns are sky-high. Risk is low. Investors should forget about the risk of losing money and worry only about missing opportunity. This is the time to be aggressive!
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
Hardy reinforces his narrative with stories of heroes who didn’t have the right education, the right connections, and who could have been counted out early as not having the DNA for success: “Richard Branson has dyslexia and had poor academic performance as a student. Steve Jobs was born to two college students who didn’t want to raise him and gave him up for adoption. Mark Cuban was born to an automobile upholsterer. He started as a bartender, then got a job in software sales from which he was fired.”8 The list goes on. Hardy reminds his readers that “Suze Orman’s dad was a chicken farmer. Retired General Colin Powell was a solid C student. Howard Schultz, the CEO of Starbucks, was born in a housing authority in the Bronx … Barbara Corcoran started as a waitress and admits to being fired from more jobs than most people hold in a lifetime. Pete Cashmore, the CEO of Mashable, was sickly as a child and finished high school two years late due to medical complications. He never went to college.” What do each of these inspiring leaders and storytellers have in common? They rewrote their own internal narratives and found great success. “The biographies of all heroes contain common elements. Becoming one is the most important,”9 writes Chris Matthews in Jack Kennedy, Elusive Hero. Matthews reminds his readers that young John F. Kennedy was a sickly child and bedridden for much of his youth. And what did he do while setting school records for being in the infirmary? He read voraciously. He read the stories of heroes in the pages of books by Sir Walter Scott and the tales of King Arthur. He read, and dreamed of playing the hero in the story of his life. When the time came to take the stage, Jack was ready.
Carmine Gallo (The Storyteller's Secret: From TED Speakers to Business Legends, Why Some Ideas Catch On and Others Don't)
Putting it all together, fluctuations in attitudes and behavior combine to make the stock market the ultimate pendulum. In my 47 full calendar years in the investment business, starting with 1970, the annual returns on the S&P 500 have swung from plus 37% to minus 37%. Averaging out good years and bad years, the long-run return is usually stated as 10% or so. Everyone’s been happy with that typical performance and would love more of the same. But remember, a swinging pendulum may be at its midpoint “on average,” but it actually spends very little time there. The same is true of financial market performance. Here’s a fun question (and a good illustration): for how many of the 47 years from 1970 through 2016 was the annual return on the S&P 500 within 2% of “normal”—that is, between 8% and 12%? I expected the answer to be “not that often,” but I was surprised to learn that it had happened only three times! It also surprised me to learn that the return had been more than 20 percentage points away from “normal”—either up more than 30% or down more than 10%—more than one-quarter of the time: 13 out of the last 47 years. So one thing that can be said with total conviction about stock market performance is that the average certainly isn’t the norm. Market fluctuations of this magnitude aren’t nearly fully explained by the changing fortunes of companies, industries or economies. They’re largely attributable to the mood swings of investors. Lastly, the times when return is at the extremes aren’t randomly distributed over the years. Rather they’re clustered, due to the fact that investors’ psychological swings tend to persist for a while—to paraphrase Herb Stein, they tend to continue until they stop. Most of those 13 extreme up or down years were within a year or two of another year of similarly extreme performance in the same direction.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
At Oaktree, we strongly reject the idea of waiting for the bottom to start buying. First, there’s absolutely no way to know when the bottom has been reached. There’s no neon sign that lights up. The bottom can be recognized only after it has been passed, since it is defined as the day before the recovery begins. By definition, this can be identified only after the fact. And second, it’s usually during market slides that you can buy the largest quantities of the thing you want, from sellers who are throwing in the towel and while the non-knife-catchers are hugging the sidelines. But once the slide has culminated in a bottom, by definition there are few sellers left to sell, and during the ensuing rally it’s buyers who predominate. Thus the selling dries up and would-be buyers face growing competition. We began to buy distressed debt immediately after Lehman filed for bankruptcy protection in mid-September 2008 as described on page 235, and we continued through year-end, as prices went lower and lower. By the first quarter of 2009, other investors had collected themselves, caught on to the values that were available, and gathered some capital for investment. But with the motivated sellers done selling and buying having begun, it was too late for them to buy in size without pushing up prices. Like so many other things in the investment world that might be tried on the basis of certitude and precision, waiting for the bottom to start buying is a great example of folly. So if targeting the bottom is wrong, when should you buy? The answer’s simple: when price is below intrinsic value. What if the price continues downward? Buy more, as now it’s probably an even greater bargain. All you need for ultimate success in this regard is (a) an estimate of intrinsic value, (b) the emotional fortitude to persevere, and (c) eventually to have your estimate of value proved correct.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
The Global Financial Crisis of 2007–08 represented the greatest financial downswing of my lifetime, and consequently it presents the best opportunity to observe, reflect and learn. The scene was set for its occurrence by a number of developments. Here’s a partial list: Government policies supported an expansion of home ownership—which by definition meant the inclusion of people who historically couldn’t afford to buy homes—at a time when home prices were soaring; The Fed pushed interest rates down, causing the demand for higher-yielding instruments such as structured/levered mortgage securities to increase; There was a rising trend among banks to make mortgage loans, package them and sell them onward (as opposed to retaining them); Decisions to lend, structure, assign credit ratings and invest were made on the basis of unquestioning extrapolation of low historic mortgage default rates; The above four points resulted in an increased eagerness to extend mortgage loans, with an accompanying decline in lending standards; Novel and untested mortgage backed securities were developed that promised high returns with low risk, something that has great appeal in non-skeptical times; Protective laws and regulations were relaxed, such as the Glass-Steagall Act (which prohibited the creation of financial conglomerates), the uptick rule (which prevented traders who had bet against stocks from forcing them down through non-stop short selling), and the rules that limited banks’ leverage, permitting it to nearly triple; Finally, the media ran articles stating that risk had been eliminated by the combination of: the adroit Fed, which could be counted on to inject stimulus whenever economic sluggishness developed, confidence that the excess liquidity flowing to China for its exports and to oil producers would never fail to be recycled back into our markets, buoying asset prices, and the new Wall Street innovations, which “sliced and diced” risk so finely, spread it so widely and placed it with those best suited to bear it.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
Can you send stuff out from Nepal by air, John?’ ‘Ooh! No. No. I can’t do anything like that. No. No. No. Now, I know a man. He knows a man who might know.’ ‘How much would it cost?’ ‘Well, money is the thing, and they always do things for a fair and honest price, I promise you.’ ‘What’s a fair price, John?’ ‘You will tell me, I’m quite sure.’ ‘What will you want out of it, John?’ ‘If I help you do business, I’m sure you will give me a drink.’ ‘A drink?’ ‘Yes. If a man does something for you, you give him a drink. Please, if everything goes well, give me a drink.’ ‘Can you check that the quality will be all right?’ ‘I only smoke Tom Thumb, but I know a man who has a knife.’ I took this as a yes. ‘Can you make it smell-proof?’ ‘Not if God made it smell.’ ‘Do you know a man who can?’ ‘No. But if you do, let him come and do it, or give me instructions.’ ‘How much can they send?’ ‘I should think it depends on when you want to do it by.’ ‘Well, John, the Americans will want to do a ton as soon as possible.’ ‘Now I was in America once, and the thing is that Americans will always want more, and there is no end to their madness. Lovely people, for sure, but you have to keep them in line. When my visa ran out, the Immigration asked me why I wanted to extend it, and I said it was because I hadn’t run out of money. He stamped it and said, “Have a nice day.” So, if the Americans ask for a ton tomorrow, say you will do half a ton when Wales win the Triple Crown. That will deal with their madness, and everyone can get on with their lives. It saves all that tidding.’ ‘Tidding?’ ‘Talking Imaginary Deals.’ Accurately conveying the contents of my conversation with Old John to Ernie wasn’t easy. I told Ernie hashish could be exported from Nepal for about the same price as Robert Crimball charged in Bangkok, but 500 kilos was the most they could do at one time, and someone would have to be sent out to ensure the consignment was smell-proof. Ernie sent his right-hand man, Tom Sunde, with money, instructions, and smell-proof know-how. Tom came to London first before going to Kathmandu to meet Old John. He had been authorised by Ernie to keep nothing from me regarding the intricacies of the New York scam.
Howard Marks (Mr. Nice)
A high-quality asset can constitute a good or bad buy, and a low-quality asset can constitute a good or bad buy. The tendency to mistake objective merit for investment opportunity, and the failure to distinguish between good assets and good buys, get most investors in trouble.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
There aren’t always great things to do, and sometimes we maximize our contribution by being discerning and relatively inactive. Patient opportunism – waiting for bargains – is often your best strategy.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
forecast key events, but it’s unlikely to be the same people consistently. The sum of this discussion suggests that, on balance, forecasts are of very little value.
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
have
Howard Marks (The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing))
Most people view risk taking primarily as a way to make money. Bearing higher risk generally produces higher returns...But it can’t always work that way, or else risk investments wouldn't be risky. And when risk bearing doesn't work, it really doesn't work, and people are reminded what risk's all about.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
Most people view risk taking primarily as a way to make money. Bearing higher risk generally produces higher returns...But it can’t always work that way, or else risky investments wouldn't be risky. And when risk bearing doesn't work, it really doesn't work, and people are reminded what risk's all about.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
o In bubbles, infatuation with market momentum takes over from any notion of value and fair price, and greed (plus the pain of standing by as others make seemingly easy money) neutralises any prudence that might otherwise hold sway.
Howard Marks (The Most Important Thing: Uncommon Sense for the Thoughtful Investor)
No asset class or investment has the birthright of a high return. An asset is only attractive if it’s priced right.
Howard Marks
An accurate opinion on valuation, loosely held, will be of limited help. An incorrect opinion on valuation, strongly held, is far worse. This one statement shows how hard it is to get it all right
Howard Marks
Our days are numbered. At this very moment, many thousands are born into the world, some destined to live only a few days or weeks, and then tragically succumb to illness or other misfortune. Others are destined to push through to the century mark, perhaps even a bit beyond, and savor every taste life has to offer: triumph, despair, joy, hatred, and love. We never know. But whether we live a day or a century, a central question always remains: What is the purpose of our life? What makes our lives meaningful?
Howard C. Cutler (The Art of Happiness)
Isn't that odd?' she continued as they wandered back from the front towards the shops again, 'When you see people in the shops choosing their clothes and shoes and stuff, they take ages - as though each thing they choose will be amazing and perfect. And then, look at them. They mostly look simply terrible - or just ordinary They might just as well have chosen their clothes out of a bran tub.
Elizabeth Jane Howard (Marking Time (Cazalet Chronicles, #2))
Her time with him had very quickly started to feel unreal so that she could hardly believe her own memory of it.
Elizabeth Jane Howard (Marking Time (Cazalet Chronicles, #2))
But they must bear in mind what John Maynard Keynes is reputed to have said: “The market can remain irrational longer than you can remain solvent.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
Ganz allgemein sind mir Bücher inzwischen lieber als Menschen und Menschen in Büchern lieber als Menschen, die woanders sind.
Elizabeth Jane Howard (Marking Time (Cazalet Chronicles, #2))
Du musst einfach dranbleiben,' sagte er. 'Es sollte kein Zeitvertreib sein und keine Pflicht und nichts Ungewöhnliches. Es sollte das Normalste auf der Welt für dich sein.
Elizabeth Jane Howard (Marking Time (Cazalet Chronicles, #2))
Aber ich weiß, dass deine Maßstäbe unglaublich hoch sind. Ich glaube, die meisten Menschen könnten ihnen nicht genügen. Nicht ständig. Und genauso kann ich kritisch sein und dich trotzdem sehr gern haben. Ich kann nicht anders, als es zu bemerken, aber das ändert nichts an meinen wirklichen Gefühlen.
Elizabeth Jane Howard (Marking Time (Cazalet Chronicles, #2))
Das schönste an einer Freundschaft ist,' sagte sie, 'zu tun, wozu man Lust hat, ohne mit dem anderen reden zu müssen.
Elizabeth Jane Howard (Marking Time (Cazalet Chronicles, #2))
Es war herrlich, frei zu sein, ihr Zuhause verlassen zu können, allmählich Dinge herauszufinden über Menschen, die nicht zur Familie gehörten. Alles kann passieren, dachte sie, wirklich alles! Und ich will auch, dass es passiert - was immer es ist.
Elizabeth Jane Howard (Marking Time (Cazalet Chronicles, #2))
Wohltätigkeit ist nur einer andere Art, dafür zu sorgen, dass Menschen nicht nach mehr streben.
Elizabeth Jane Howard (Marking Time (Cazalet Chronicles, #2))
Aus Liebe verschweigt man anderen bestimmte Dinge. Aber eigentlich finde ich, dass man Menschen, je mehr man sie liebt, desto mehr sagen sollte - sogar die schwierigen Sachen. Ich glaube, es ist der beste Liebesbeweis, ihnen alles zu erzählen.
Elizabeth Jane Howard (Marking Time (Cazalet Chronicles, #2))
The superior investor resists psychological excesses and thus refuses to participate in these swings. The vast majority of the highly superior investors I know are unemotional by nature. In fact, I believe their unemotional nature is one of the great contributors to their success.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
since dawn and was utterly exhausted with efforts to make the squash court a place in which people could not only sleep, but keep their personal effects. The cooking had proved extremely difficult, as the kitchen utensils from Mill Farm had been moved to Pear Tree Cottage, and the Babies’ Hotel equipment – brought down in a Cazalet lorry – had lost its way and did not turn up until nine in the evening. They had to make the meal at Pear Tree Cottage and Villy took it down with them in a car. This meant cooking under the almost offensively patronising eye of Emily, whose view of ladies and their children was, of course, that they couldn’t boil an egg to save their lives; she was also unwilling to tell them where anything was on the twofold grounds that she didn’t know whether she was on her head or her heels with all the upset, and didn’t want them using her things anyway. Louise had to admit that Nora was wonderfully tactful and apparently insensitive to slights. They made two huge shepherd’s pies and Louise a batch of real Bath buns because she had just learned how to do them and was particularly good at it. The supper had been most gratefully received and Matron had called them two little bricks. Babies could be heard crying as they reached the house. Nora said that they
Elizabeth Jane Howard (Marking Time (Cazalet Chronicles, #2))
Richard Feynman, the noted physicist, wrote, “Imagine how much harder physics would be if electrons had feelings!” That is, if electrons had feelings, they couldn’t be counted on to always do what science expects of them, so the rules of physics would work only some of the time. The
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
Risk-averse investors limit quantities issued and demand high quality. High-quality issuance leads to low default rates. Low default rates cause investors to become complacent and risk-tolerant. Risk tolerance opens investors to increased issuance and lower quality. Lower-quality issuance eventually is tested by economic difficulty and gives rise to increased defaults. Increased defaults have a chilling effect, making investors risk-averse once more. And so it resumes.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
Of course, “conventional wisdom” at the time held that there could never be a pickup in demand for homes. Instead, most people were convinced that the American dream of home ownership was over; demand for homes would remain depressed forever; and thus the overhang of unsold homes would be absorbed only very slowly. They cited the trend among young people — having been burnt by the collapse of the housing and mortgage bubbles — to rent rather than buy, and as usual they extrapolated it rather than question its durability. As in so many of the examples in this book, for most people, psychology-driven extrapolation took the place of an understanding of and belief in cyclicality. It was clear to me and my Oaktree colleagues, from the graph and from our knowledge of the data behind it, that because the greatest economic crash in almost eighty years had halted additions to the housing supply, home prices could recover strongly if there was any material increase in demand. And, rejecting conventional wisdom, we were convinced that housing demand would prove cyclical as usual, and thus would pick up sometime in the intermediate-term future. This conclusion — supported by other data and analysis — contributed to our decision to invest heavily in non-performing home mortgages and non-performing bank loans secured by land for residential construction, and to purchase North America’s largest private homebuilding company. These investments worked out quite well. (It’s interesting in this context to note what the Wall Street Journal said in a May 12, 2017 article headlined “Generation of Renters Now Buying”: “In all [first-time home buyers] have accounted for 42% of buyers this year, up from 38% in 2015 and 31% at the lowest point during the recent housing cycle in 2011.” So much for extrapolating widespread abandonment of home ownership.)
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
What the wise man does in the beginning, the fool does in the end" tells you 80% of what you have to know about market cycles and their impact. Warren Buffett has said much the same thing even more concisely: "First the innovator, then the imitator, then the idiot.
Howard Marks, Mastering The Market Cycle: Getting the odds on your side
the way investors fluctuate rather than hold firmly to rational thinking and the resulting rational decisions; the tendency of investors to hold distorted views of what’s going on, engaging in selective perception and skewed interpretation; quirks like confirmation bias, which makes people accept evidence that confirms their thesis and reject that which doesn’t, and the tendency toward non-linear utility, which causes most people to value a dollar lost more highly than a dollar made (or a dollar of potential profit forgone); the gullibility that makes investors swallow tall tales of profit potential in good times, and the excessive skepticism that makes them reject all possibility of gains in bad times; the fluctuating nature of investors’ risk tolerance and risk aversion, and thus of their demands for compensatory risk premiums; the herd behavior that results from pressure to fall into line with what others are doing, and as a result the difficulty of holding non-conformist positions; the extreme discomfort that comes from watching others make money doing something you’ve rejected; thus the tendency of investors who have resisted an asset bubble to ultimately succumb to the pressure, throw in the towel and buy (even though — no, because — the asset that is the subject of the bubble has appreciated substantially); the corresponding tendency to give up on investments that are unpopular and unsuccessful, no matter how intellectually sound, and finally, the fact that investing is all about money, which introduces powerful elements such as greed for more, envy of the money others are making, and fear of loss.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
The stock market crash of 1929, which marked the beginning of the Great Depression of the United States, came directly from wild speculation which collapsed and brought the whole economy down with it. But, as John Galbraith says in his study of that event (The Great Crash), behind that speculation was the fact that “the economy was fundamentally unsound.” He points to very unhealthy corporate and banking structures, an unsound foreign trade, much economic misinformation, and the “bad distribution of income” (the highest 5 percent of the population received about one-third of all personal income). A socialist critic would go further and say that the capitalist system was by its nature unsound: a system driven by the one overriding motive of corporate profit and therefore unstable, unpredictable, and blind to human needs. The result of all that: permanent depression for many of its people, and periodic crises for almost everybody. Capitalism, despite its attempts at self-reform, its organization for better control, was still in 1929 a sick and undependable system. After the crash, the economy was stunned, barely moving. Over five thousand banks closed and huge numbers of businesses, unable to get money, closed too. Those that continued laid off employees and cut the wages of those who remained, again and again.
Howard Zinn (A People's History of the United States)
A company may issue a favorable earnings report, but whether its stock rises or falls as a result will be influenced by how its competitors do, whether the central bank chooses that week for an interest rate increase, and whether the earnings announcement comes in a good or bad week in the market.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
es difícil hacer predicciones precisas, especialmente si se refieren al futuro
Howard Marks (Lo más importante para invertir con sentido común)
Milton Friedman put it: All these people see the same data, read the same material, and spend their time trying to guess what each other is going to say. [Their forecasts] will always be moderately right — and almost never of much use.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
John Kenneth Galbraith said, “We have two classes of forecasters: those who don’t know — and those who don’t know they don’t know.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
la rentabilidad de una inversión es lo que se obtiene cuando una serie de acontecimientos —geopolíticos, macroeconómicos, a nivel de la empresa, técnicos y psicológicos— interactúan con una cartera diseñada a priori.
Howard Marks (Lo más importante para invertir con sentido común)
El resultado esperado se calcula ponderando la rentabilidad que se obtendría en cada escenario por su probabilidad de ocurrencia
Howard Marks (Lo más importante para invertir con sentido común)
It is certain that one who studies the scriptures every day accomplishes far more than one who devotes considerable time one day and then lets days go by before continuing.”—Howard W. Hunter
Mark Bacera (The Latter-day Morning: Create a Happier, More Successful, Spiritual Life Before Breakfast)
Aunt Zoë gave her a pot of Elizabeth Arden Eight Hour Cream. ‘Put it on your mouth at night,’ she said. ‘It’s wonderful for stopping chapped lips.
Elizabeth Jane Howard (Marking Time (Cazalet Chronicles, #2))
The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
An accident of birth had signed her death warrant. He could mark her name off his to-do list.
Linda Howard (Blood Born (Vampire, #1))
So many of us are hungry to restore a collective sense of pride in our nation. And we have what it takes to do so. Yet many people have become numb, even accepting, to the shockingly cruel rhetoric we sometimes hear from our neighbors and leaders. But we should remember there are more Americans who speak out against intolerance than those who spew it. Just because anger and fear are louder than kindness and optimism does not mean that anger and fear must prevail, or define a new American identity. The negativity that streams through our media and social feeds is a false—or at least incomplete—narrative. Every time harsh Tweets dominate news cycles, we can remind ourselves of Mary Poole’s empathy in Montana, or the compassion of Rebecca Crowder in West Virginia, or Bryan Stevenson’s adamant calls for justice in our courts. Countless acts of dignity are unfolding offline, away from earshot, and they matter. We already have what it takes to rise above divisiveness and the vitriol of a hurtful few and steer the country toward an even better “us.” Not so we can be great again, but so we can become an even stronger, safer, more fair, prosperous, and inclusive version of ourselves. Those who champion common-sense problem solving, and there are legions of us, are eager to keep fixing, reinventing, improving. In these pages, I tried to amplify our existing potential to eclipse dysfunction by recounting Mark Pinsky’s collaborative spirit, for example, and Michael Crow’s innovative bent, and Brandon Dennison’s entrepreneurial gumption, and Dakota Keyes’ steadfast belief in her young students, and in herself. They are reminders that the misplaced priorities of President Trump and his administration do not represent the priorities of the majority of Americans. And while there are heroes who hold office, members of both parties, Democrats and Republicans, have been complicit in the fracturing of trust that has plagued our political system for years now. In fact, I believe that the American people as a whole are better than our current political class.
Howard Schultz (From the Ground Up: A Journey to Reimagine the Promise of America)
What do value investors do? They strive to take advantage of discrepancies between “price” and “value.” In order to do that successfully, they have to (a) quantify an asset’s intrinsic value and how it’s likely to change over time and (b) assess how the current market price compares with the asset’s intrinsic value, past prices for the asset, the prices of other assets, and “theoretically fair” prices for assets in general.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
The second is Warren Buffett’s bedrock reminder of the need to adjust our financial actions based on the investor behavior playing out around us. Fewer words, but probably even more useful: The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
And it’s only if we know more than others (whether that consists of having better data; doing a superior job of interpreting the data we have; knowing what actions to take on the basis of or our interpretation; or having the emotional fortitude required to take those actions) that our forecasts will lead to outperformance.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
Superior investors are people who have a better sense for what tickets are in the bowl, and thus for whether it’s worth participating in the lottery. In other words, while superior investors — like everyone else — don’t know exactly what the future holds, they do have an above-average understanding of future tendencies.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
Warren Buffett once told me about his two criteria for a desirable piece of information: it has to be important, and it has to be knowable. Although “everyone knows” that macro developments play a dominant role in determining the performance of markets these days, “macro investors” as a whole have shown rather unimpressive results.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
Legendary investor Charlie Munger often points to the benefits of reading broadly; history and processes in other fields can add greatly to effective investment approaches and decisions.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
In investing, there is nothing that always works, since the environment is always changing, and investors’ efforts to respond to the environment cause it to change further
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
In investing, there is nothing that always works, since the environment is always changing, and investors’ efforts to respond to the environment cause it to change further.
Howard Marks (Mastering The Market Cycle: Getting the odds on your side)
A while back I put together a concise synopsis of the way the cycle in bond issuance underlays the rise and fall of the distressed debt cycle. Here it is: Risk-averse investors limit quantities issued and demand high quality. High-quality issuance leads to low default rates. Low default rates cause investors to become complacent and risk-tolerant. Risk tolerance opens investors to increased issuance and lower quality. Lower-quality issuance eventually is tested by economic difficulty and gives rise to increased defaults. Increased defaults have a chilling effect, making investors risk-averse once more. And so it resumes.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
As you can see, the rise and fall of opportunities in the market for distressed debt stems from the interaction of other cycles: in the economy, investor psychology, risk attitudes and the credit market. The economic cycle influences investor psychology, company profitability and the incidence of default. The cycle in psychology contributes to fluctuations in credit market conditions and the desire of investors to lend, buy and sell. The cycle in attitudes toward risk facilitates the issuance of weak bonds at the top and denies capital for refinancing at the bottom. The credit cycle has a profound effect on the availability of refinancing and the degree to which would-be debt issuers are subjected to stringent credit standards. Hopefully it’s clear that multiple underlying cycles have effects on the distressed debt market that are far from discrete and isolated. As I wrote earlier, each of these cycles rises and falls; each causes the others to rise and fall; and each is affected by the rise and fall of others. But the result of all of this is a dramatic cycle in distressed debt opportunities, and one that is subject to explanation.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
As a social psychologist, I have long been amused by economists and their curiously delusional notion of the “rational man.” Rational? Where do these folks live? Even 50 years ago, experimental studies were demonstrating that people stay with clearly wrong decisions rather than change them, throw good money after bad, justify failed predictions rather than admit they were wrong, and resist, distort or actively reject information that disputes their beliefs.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
Risk aversion is an essential element in investing. People’s aversion to loss causes them to police the markets. Because most people are averse to risk: they approach investing with caution, they perform careful analysis when considering investments, and especially risky ones, they incorporate conservative assumptions and appropriate skepticism into their analysis, they demand greater margins of safety on risky investments to protect against analytical errors and unpleasant surprises, they insist on healthy risk premiums—the expectation of incremental returns—if they’re going to undertake risky investments, and they refuse to invest in deals that make no sense.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
When positive events occur as described in the last chapter and euphoria, optimism and greed rise, investors tend to become less risk-averse than usual and less risk-averse than they should be. What are the effects (following on from the list of the functions investors perform on page 106–107)? Since they feel better about the environment and are more optimistic about likely outcomes, they reduce the amount of caution they bring to the investing process. Since they no longer consider investing to be risky, they don’t see the need for painstaking analysis. They tend to make assumptions that are more generous, and they replace skepticism with credulousness. They’re willing to make do with a reduced margin of safety. Viewing risk as less worrisome, they no longer demand risk premiums as cushy as in the past. They behave less as sticklers, since they’re more attracted to the returns on risky investments and less leery of the risk they involve.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
For me, the bottom line of all this is that the greatest source of investment risk is the belief that there is no risk. Widespread risk tolerance—or a high degree of investor comfort with risk—is the greatest harbinger of subsequent market declines. But because most investors are following the progression described just above, this is rarely perceived at the time when perceiving it—and turning cautious—is most important.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
When investors in general are too risk-tolerant, security prices can embody more risk than they do return. When investors are too risk-averse, prices can offer more return than risk.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
Contributing to . . . euphoria are two further factors little noted in our time or in past times. The first is the extreme brevity of the financial memory. In consequence, financial disaster is quickly forgotten. In further consequence, when the same or closely similar circumstances occur again, sometimes in only a few years, they are hailed by a new, often youthful, and always supremely self-confident generation as a brilliantly innovative discovery in the financial and larger economic world. There can be few fields of human endeavor in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
The economic theory propounded by John Maynard Keynes in the 1930s dwelled heavily on the role of governments vis-à-vis cycles. Keynesian economics focuses on the role of aggregate demand in determining the level of GDP, in contrast with earlier approaches that emphasized the role of the supply of goods. Keynes said governments should manage the economic cycle by influencing demand. This, in turn, could be accomplished through the use of fiscal tools, including deficits. Keynes urged governments to aid a weak economy by stimulating demand by running deficits. When a government’s outgo—its spending—exceeds its income—primarily from taxes—on balance it puts funds into the economy. This encourages buying and investing. Deficits are stimulative, and thus Keynes considered them helpful in dealing with a weak economy. On the other hand, when economies are strong, Keynes said governments should run surpluses, spending less than they take in. This removes funds from the economy, discouraging spending and investment. Surpluses are contractionary and thus an appropriate response to booms. However, the use of surpluses to cool a thriving economy is little seen these days. No one wants to be a wet blanket when the party is going strong. And spending less than you bring in attracts fewer votes than do generous spending programs. Thus surpluses have become as rare as buggy whips.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
One of the most important foundational elements of my investment philosophy is my conviction that we can’t know what the “macro future” has in store for us in terms of things like economies, markets or geopolitics. Or, to put it more precisely, few people are able on balance to know more about the macro future than others. And it’s only if we know more than others (whether that consists of having better data; doing a superior job of interpreting the data we have; knowing what actions to take on the basis of our interpretation; or having the emotional fortitude required to take those actions) that our forecasts will lead to outperformance.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
The longer I’m involved in investing, the more impressed I am by the power of the credit cycle. It takes only a small fluctuation in the economy to produce a large fluctuation in the availability of credit, with great impact on asset prices and back on the economy itself.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
In my view, the greatest way to optimize the positioning of a portfolio at a given point in time is through deciding what balance it should strike between aggressiveness and defensiveness. And I believe the aggressiveness/defensiveness balance should be adjusted over time in response to changes in the state of the investment environment and where a number of elements stand in their cycles.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
Thus I dismiss macro prediction as something that will bring investment success for the vast majority of investors, and I certainly include myself in that group. If that’s so, what’s left? While there are lots of details and nuances, I think we can most gainfully spend our time in three general areas: trying to know more than others about what I call “the knowable”: the fundamentals of industries, companies and securities, being disciplined as to the appropriate price to pay for a participation in those fundamentals, and understanding the investment environment we’re in and deciding how to strategically position our portfolios for it.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
The Global Financial Crisis shows the credit cycle at the greatest extreme since the Great Depression. Debt markets historically had been marked by general conservatism, meaning excesses on the upside were limited and most bubbles took place in the equity market. Certainly it was the site of the Great Crash of 1929. But the creation of the high yield bond market in the late 1970s kicked off a liberalization of debt investing, and the generally positive economic environment of the subsequent three decades provided those who ventured in with a favorable overall experience. This combination led to a strong trend toward acceptance of low-rated and non-traditional debt instruments. There were periods of weakness in debt in 1990–91 (related to widespread bankruptcies among the highly levered buyouts of the 1980s) and in 2002 (stemming from excessive borrowing to fund overbuilding in the telecom industry, which led to prominent downgrades that coincided with several high-profile corporate accounting scandals). But the effects of these were limited because of the isolated nature of their causes. It wasn’t until 2007–08 that the financial markets witnessed the first widespread, debt-induced panic, with ramifications for the entire economy. Thus the GFC provided the ultimate example of the credit cycle’s full effect.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
The events in the life of a cycle shouldn’t be viewed merely as each being followed by the next, but—much more importantly—as each causing the next.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
But it’s equally significant to note that while cycles occur in a variety of areas due to these serial events, cyclical developments in one area also influence cycles in others. Thus the economic cycle influences the profit cycle. Corporate announcements determined by the profit cycle influence investor attitudes. Investor attitudes influence markets. And developments in markets influence the cycle in the availability of credit . . . which influences economies, companies and markets.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
Rather, the themes that provide warning signals in every boom/bust are the general ones: that excessive optimism is a dangerous thing; that risk aversion is an essential ingredient for the market to be safe; and that overly generous capital markets ultimately lead to unwise financing, and thus to danger for participants.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
The greatest lessons regarding cycles are learned through experience . . . as in the adage “experience is what you got when you didn’t get what you wanted.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
As suggested in the citation just above, the credit cycle can be easily understood through the metaphor of a window. In short, sometimes it’s open and sometimes it’s closed. And, in fact, people in the financial world make frequent reference to just that: “the credit window,” as in “the place you go to borrow money.” When the window is open, financing is plentiful and easily obtained, and when it’s closed, financing is scarce and hard to get. Finally, it’s essential to always bear in mind that the window can go from wide open to slammed shut in just an instant. There’s a lot more to fully understanding this cycle—including the reasons for these cyclical movements and their impact—but that’s the bottom line.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
In making investments, it has become my habit to worry less about the economic future—which I’m sure I can’t know much about—than I do about the supply/demand picture relating to capital. Being positioned to make investments in an uncrowded arena conveys vast advantages. Participating in a field that everyone’s throwing money at is a formula for disaster.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
As I described it in “Open and Shut,” the capital market cycle is simple in its operation, and its message is easy to perceive. An uptight, cautious credit market usually stems from, leads to or connotes things like these: fear of losing money heightened risk aversion and skepticism unwillingness to lend and invest regardless of merit shortages of capital everywhere economic contraction and difficulty refinancing debt defaults, bankruptcies and restructurings low asset prices, high potential returns, low risk and excessive risk premiums Taken together, these things are indicative of a great time to invest. Of course, however, because of the role played by fear and risk aversion in their creation, most people shy away from investing while they are in force. That makes it difficult for most people to invest when the capital cycle is negative, just as it is potentially lucrative.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
The ultimate purpose of this book isn’t to help you understand cycles after they’ve taken place, like the Global Financial Crisis as described at such great length. Rather it is to enable you to sense where we stand in the various cycles in real time, and thus to take the appropriate action.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
Prosperity brings expanded lending, which leads to unwise lending, which produces large losses, which makes lenders stop lending, which ends prosperity, and on and on.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
On the other hand, a generous capital market is usually associated with the following: fear of missing out on profitable opportunities reduced risk aversion and skepticism (and, accordingly, reduced due diligence) too much money chasing too few deals willingness to buy securities in increased quantity willingness to buy securities of reduced quality high asset prices, low prospective returns, high risk and skimpy risk premiums It’s clear from this list of elements that excessive generosity in the capital markets stems from a shortage of prudence and thus should give investors one of the clearest red flags. The wide-open capital market arises when the news is good, asset prices are rising, optimism is riding high, and all things seem possible. But it invariably brings the issuance of unsound and overpriced securities, and the incurrence of debt levels that ultimately will result in ruin. The point about the quality of new issue securities in a wide-open capital market deserves particular attention. A decrease in risk aversion and skepticism—and increased focus on making sure opportunities aren’t missed rather than on avoiding losses—makes investors open to a greater quantity of issuance. The same factors make investors willing to buy issues of lower quality. When the credit cycle is in its expansion phase, the statistics on new issuance make clear that investors are buying new issues in greater amounts. But the acceptance of securities of lower quality is a bit more subtle. While there are credit ratings and covenants to look at, it can take effort and inference to understand the significance of these things. In feeding frenzies caused by excess availability of funds, recognizing and resisting this trend seems to be beyond the ability of the majority of market participants. This is one of the many reasons why the aftermath of an overly generous capital market includes losses, economic contraction, and a subsequent unwillingness to lend. The bottom line of all of the above is that generous credit markets usually are associated with elevated asset prices and subsequent losses, while credit crunches produce bargain-basement prices and great profit opportunities. (“Open and Shut”)
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)
As you can see from the above, virtually all the conditions on which the GFC was built were endogenous to the financial system and the credit cycle. The developments that constituted the foundation for the Crisis weren’t caused by a general economic boom or a widespread surge in corporate profits. The key events didn’t take place in the general business environment or the greater world beyond that. Rather, the GFC was a largely financial phenomenon that resulted entirely from the behavior of financial players. The main forces that created this cycle were the easy availability of capital; a lack of experience and prudence sufficient to temper the unbridled enthusiasm that pervaded the process; imaginative financial engineering; the separation of lending decisions from loan retention; and irresponsibility and downright greed.
Howard Marks (Mastering the Market Cycle: Getting the Odds on Your Side)