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Deep Thoughts From Howard Marks On "How Quickly They Forget"

Tyler Durden's picture




 

Not much new in Howard Marks' latest missive which falls back on the Oaktree's boss' economy (and risk perception) as a "swinging pendulum" theory and focuses on what should be the "right approach to today" for the average investor. His advice: "money and nerve." Easier said than done of course when one doesn't have the benefit of tens of billions of "economies of scale" backing up one's conviction. Especially since as he points out, 'what if you had money and nerve in 2006 or early 2007? The results would have been disastrous. In those times you needed caution, conservatism, risk control, discipline and selectivity to stay out of trouble. In short, when the market is defaulting on its job of being a disciplinarian, discernment becomes our individual responsibility." Either way, Marks' always philosophical bottom line: "We can never be sure what will happen – and certainly not when – but it’s important to be prepared for what’s likely to lie ahead. And understanding the inevitable pendulum swing in the way investments are viewed – from weeds to flowers and back – is an essential ingredient in being able to do so."

Full letter (pdf)

How Quickly They Forget 05-25-11

 

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Thu, 05/26/2011 - 13:48 | 1313778 cougar_w
cougar_w's picture

I think that if the advice boils down to "be prepared, it could swing the wrong way" then anyone who is not ready to lose everything they have invested should get the h*ll out.

These guys are usually playing with other peoples' money. They get commissions and fees no matter which way the market goes. They don't give a sh!t at all. So saying "be prepared" is just saying "stay in until you lose everything because without you saps providing liquidity the market goes tits-up and I'm back to selling used cars."

Thu, 05/26/2011 - 14:03 | 1313818 XenoFrog
XenoFrog's picture

So you're saying I should put my life savings into Google?

Thu, 05/26/2011 - 14:13 | 1313842 cougar_w
cougar_w's picture

I don't care where you put it. But this guy is not giving advice, he's talking up his own industry.

Thu, 05/26/2011 - 14:22 | 1313851 Dr. Engali
Dr. Engali's picture

No Netflix....or LinkedIn. Put it in Facebook. I heard it's gonna be worth a trillion dollars:)

Thu, 05/26/2011 - 14:34 | 1313893 XenoFrog
XenoFrog's picture

Max out your credit buying equities. You'll be rich!

Thu, 05/26/2011 - 15:30 | 1314034 disabledvet
disabledvet's picture

no, i said "put your life savings ON google."  you can keep everything else to yourself of course....insofar as "buying opportunities" --well, i have a few ideas.  "it might cost you your life-savings however."

Thu, 05/26/2011 - 16:18 | 1314224 XenoFrog
XenoFrog's picture

Nevermind, I just spent all my money on a pack of magic beans. The door to door salesman who sold them to me said they were amazing, and I was lucky enough to get the last package available.

Thu, 05/26/2011 - 14:21 | 1313781 JW n FL
JW n FL's picture

Thats! BULLSHIT!!

what goes up, just keeps going up and up and yet more up to infinity up!

there is no swing or circle.. that popie cock!

everyone should be out buying stocks at 1000X's earnings in multiples even with out a care in the world..

no matter what stay away from hard assets and any kind of safety!

this is a risk off world! there will never be another crash or ballon and the markets are the last place to look for ballons.. PM's! Now thats a Ballon if I have ever seen one!

Thu, 05/26/2011 - 14:00 | 1313812 Henry Chinaski
Henry Chinaski's picture

Deep thoughts...

Weeds are flowers, too.  Once you get to know them.

Eyore (A A Milne)

there's a garden growing
and a million weeds
with no way of knowing
who has done which deed

Neil Young

long incandescent light bulbs (physical)

Thu, 05/26/2011 - 14:03 | 1313813 GOSPLAN HERO
GOSPLAN HERO's picture

"We are socialists, we are enemies of today’s capitalistic economic system for the exploitation of the economically weak, with its unfair salaries, with its unseemly evaluation of a human being according to wealth and property instead of responsibility and performance, and we are determined to destroy this system under all conditions." -- A. Hitler

Thu, 05/26/2011 - 14:20 | 1313862 Dejean Splicer
Dejean Splicer's picture

Wow, I love all your labels and your Hollywood depicted Hitler garbage.

Been to Communist China lately? The place has more capitalist entrepreneurs per township than anywhere in AmeriKa...

(yes, township is a unit of measure)

In Amerika we have a few entrepreneurs but mostly we have dependents crying about handouts.

Thu, 05/26/2011 - 14:40 | 1313913 dracos_ghost
dracos_ghost's picture

"Eva, this gun isn't loaded, right?!" -- A. Hitler

Thu, 05/26/2011 - 14:12 | 1313829 plocequ1
plocequ1's picture

Deep thoughts. I have a lot of those. Thank god for Seymore Butts.

Thu, 05/26/2011 - 14:14 | 1313836 Piranhanoia
Piranhanoia's picture

Sounds kind of like a preacher trying to admit it doesn't believe what it's saying, then remembering to include;  "but pay me anyway cuz its dogs work I'ma doing fur yeah". 

Thu, 05/26/2011 - 14:21 | 1313860 Bob Sacamano
Bob Sacamano's picture

"'what if you had money and nerve in 2006 or early 2007? The results would have been disastrous."

No.  The nervey trade in 2007 was to short lots of things and the results would have been spectacular.

Thu, 05/26/2011 - 14:52 | 1313935 lookma
lookma's picture

FOFOA thinks you should just some "honest money" instead - http://fofoa.blogspot.com/2011/05/return-to-honest-money.html

Thu, 05/26/2011 - 14:58 | 1313947 Clowns on Acid
Clowns on Acid's picture

Provides no some nice granular data to back up his obvious observations and conclusions. Just repeats the obvious too many times.

I already know that if my uncle had tits he'd be my aunt. One can go into the whole biological/physiological impact, but I already know the conclusion.

Now if the author had relayed some hard timelines/turning points that would possibly bring value.

Thu, 05/26/2011 - 15:11 | 1313987 camoes
camoes's picture

I bought some SPY put in Sept and Aug just in case The Bernank goes crazy and decide to stop buying treasuries to scare shitless the market and everybody comes begging for more QE

Thu, 05/26/2011 - 15:44 | 1314082 disabledvet
disabledvet's picture

for those wondering why the "market keeps rising" again:  "you're fighting the Fed."  if interest rates rise via "QE ending" --we're talking what?  One percent?  If you've been sitting with your million in cash for the past two years "here comes your 500 dollar tire sir!"  let the market respond because "Mr. Ford doesn't like 500 dollar tires unless they're for his race team."  In the meantime "TIPs could be good here"--but it's hard because to me when you go from "newly formed US states competing against one another" (1860-1940) over a Greenback to "all the major powers of Europe" (1940-present) i think you have the makings of true price discovery "screaming and shouting every step of the way."  doesn't hurt to have the transportation fuel of the past,present and future either of course in "outrageous supply."

Thu, 05/26/2011 - 16:03 | 1314169 Smiddywesson
Smiddywesson's picture

     "And that's the point of this memo.   Asset prices fluctuate more than the fundamentals.  This happens because rather than ...investors tend to oscillate widely between the extremes."  

That sounds a lot like the idiots that claimed the people today were more greedy because they owned an SUV, whereas their parents owned a station wagon, had no second home, whereas their parents had summer houses, limited themselves to two kids, whereas their parents had many, and slaved longer hours at two jobs, whereas their parents had one income.  Inbeciles like to blame people, who are exactly like the people of yesteryear.  They are not more stupid or greedy, they are victims.

If investors are oscillating between extremes, it's because that's what investors have always done.  I think I'll puke if I hear another egg head blame the sheep.  It's the system that is broken, and that's why the oscillations are getting closer together and more violent.

Thu, 05/26/2011 - 21:04 | 1315112 Jasper M
Jasper M's picture

Clearly I am missing something here.

I had $ And nerve in 2007-8 . . . and I ended up with the biggest returns of my life! 

Or was the author equating "nerve" with being long?

Mon, 05/30/2011 - 19:08 | 1323380 kamyarhazaveh
kamyarhazaveh's picture

couldn't agree more with Howard Marks.

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