Howard Marks Quotes
100 Howard Marks Quotes
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Inflows of cash to mutual funds that require portfolio managers to buy.
Howard Marks
The safest and most profitable thing is to buy something when no one likes it. Given time, it’s popularity, and thus it’s price, can only go one way: up.
Howard Marks
[On why money managers are not successful] Unconventionality – Along similar lines, there’s the risk of being different. Stewards of other people’s money can be more comfortable turning in average performance, regardless of where it stands in absolute terms, than with the possibility that unconventional actions will prove unsuccessful and get them fired… Concern over this risk keeps many people from superior results, but it also creates opportunities in unorthodox investments for those who dare to be different.
Howard Marks
So a prime element in risk creation is a belief that risk is low, perhaps even gone altogether. That belief drives up prices and leads to the embrace of risky actions despite the lowness of prospective returns. (Perceptions of risk already priced in – when feel no issue then prices start up. Keep going because they moved up.)
Howard Marks
Decades of consistency and absence of disasters, not just their high returns.
Howard Marks
I think it’s essential to remember that just about everything is cyclical. There’s little I’m certain of, but these things are true: Cycles always prevail eventually. Nothing goes in one direction forever. Tree’s don’t grow to the sky. Few things go to zero. And there’s little that’s as dangerous for investor health as insistence on extrapolating today’s events into the future.
Howard Marks
There are two concepts we can hold to with confidence: - Rule No. 1: Most things will prove to be cyclical. – Rule No. 2: Some of the greatest opportunities for gain and loss come when other people forget Rule No. 1.
Howard Marks
When people feel good about the way things are going and optimistic about the future, their behavior is strongly impacted. They spend more and save less. They borrow to increase their enjoyment or their profit potential, even though doing so makes their financial position more precarious (of course, concepts like precariousness are forgotten in optimistic times). And they become willing to pay more for current value or a piece of the future. All of these things are capable of reversing in a second.
Howard Marks
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
[In 2011] The last several years have provided an unusually clear opportunity to witness the swing of the pendulum… and how consistently most people do the wrong thing at the wrong time. When things are going well and prices are high, investors rush to buy, forgetting all prudence. Then, when there’s chaos all around and assets are on the bargain counter, they lose all willingness to bear risk and rush to sell. And it will ever be so.
Howard Marks
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
Why do mistakes occur? Because investing is an action undertaken by human beings, most of whom are at the mercy of their psyches and emotions. Many people possess the intellect needed to analyze data, but far fewer are able to look more deeply into things and withstand the powerful influence of psychology. To say this another way, many people will reach similar cognitive conclusions from their analysis, but what they do with those conclusions varies all over the lot because psychology influences them differently. The biggest investing errors come not from factors that are informational or analytical, but from those that are psychological. [Human nature]
Howard Marks
Fear is overdone concern that prevents investors from taking constructive action when they should.
Howard Marks
Thoughtful investors can toil in obscurity, achieving solid gains in the good years and losing less than others in the bad. They avoid sharing in the riskiest behavior because they’re so aware of how much they don’t know and because they have their egos in check. This in my opinion, is the greatest formula for long-term wealth creation – but it doesn’t provide much ego gratification in the short run. It’s just not that glamorous to follow a path that emphasizes humility, prudence and risk control. Of course, investing shouldn’t be about glamour, but often it is.
Howard Marks
There are two primary elements in superior investing: a) Seeing some quality that others don’t see or appreciate (and that isn’t reflected in the price), and b) Having it turn out to be true (or at least accepted by the market).
Howard Marks
In dealing with the future, we must think about two things: a) What might happen and b) The probability that it will happen.
Howard Marks
Skepticism is what it takes to look behind a balance sheet, the latest miracle of financial engineering, or the can’t miss story… Only a skeptic can separate the things that sound good and are from the things that sound good and aren’t. The best investors I know exemplify this trait. It’s an absolute necessity.
Howard Marks
Lots of bad things happened to kick off the credit crisis that had been considered unlikely (if not impossible), and they happened at the same time, to investors who’d taken on significant leverage. So the easy explanation is that the people who were hurt in the credit crisis hadn’t been skeptical – or pessimistic – enough.
Howard Marks
The herd applies optimism at the top and pessimism at the bottom. Thus, to benefit we must be skeptical of the optimism that thrives at the top, and skeptical of the pessimism that prevails at the bottom.
Howard Marks
No, that’s too good to be true. But also no, that’s too bad to be true.
Howard Marks
You’ll do better if you wait for investments to come to you rather than go chasing after them. You tend to get better buys if you select from the list of things sellers are motivated to sell rather than start with a fixed notion as to what you want to own. An opportunist buys things because they’re offered at bargain prices. There’s nothing special about buying when prices aren’t low.
Howard Marks
High-return environments… offer opportunities for generous returns through purchases at low prices, and typically these can be earned with low risk. In the crises of 1990, 2002 and 2008, for example, not only did our funds earn unusually high returns, but we feel they did it through investments where loss was unlikely.
Howard Marks
The absolute best buying opportunities come when asset holders are forced to sell, and in those crises they were present in large numbers. From time to time, holders become forced sellers for reasons like these: a) The funds they manage experience withdrawals b) Their portfolio holdings violate investment guidelines such as minimum credit ratings or position maximums. c) They receive margin calls because the value of their assets fails to satisfy requirements agreed to in contracts with their lenders.
Howard Marks
Look around, and ask yourself: Are investors optimistic or pessimistic? Do the media talking heads say the markets should be piled into or avoided? Are novel investment schemes readily accepted or dismissed out of hand? Are securities offerings and fund openings being treated as opportunities to get rich or possible pitfalls? Has the credit cycle rendered capital readily available or impossible to obtain? Are price/earnings ratios high or low in the context of history, and are yield spreads tight or generous? All of these things are important, and yet none of them entails forecasting. We can make excellent investment decisions on the basis of present observations, with no need to make guesses about the future.
Howard Marks
[In a heated market] There were buyouts of firms in highly cyclical industries such as semi-conductor manufacturing. In more skeptical times, investors take a dim view of combining leverage and cyclicality.
Howard Marks
There are old investors, and there are bold investors, but there are no old bold investors.
Howard Marks
Caution can help us avoid mistakes, but it can also keep us from great accomplishments.
Howard Marks
I think the sources of error as being primarily analytical/intellectual or psychological/emotional.
Howard Marks
The failure to correctly anticipate co-movement within a portfolio is a critical source of investment error.
Howard Marks
Too much capital availability makes money flow to the wrong places.
Howard Marks
When capital goes where it shouldn’t, bad things happen.
Howard Marks
When capital is in oversupply, investors compete for deals by accepting low returns and a slender margin for error.
Howard Marks
Widespread disregard for risk creates great risk.
Howard Marks
Inadequate due diligence leads to investment losses.
Howard Marks
In heady times, capital is devoted to innovative investments, many of which fail the test of time.
Howard Marks
Hidden fault lines running through portfolios can make the prices of seemingly unrelated assets move in tandem.
Howard Marks
Psychological and technical factors can swamp fundamentals.
Howard Marks
Markets change, invalidating models.
Howard Marks
Leverage magnifies outcomes, but doesn’t add value.
Howard Marks
Excesses correct.
Howard Marks
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