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Kindle Notes & Highlights
by
Howard Marks
Read between
July 12 - August 3, 2025
no idea can be any better than the action taken on it,
Everything should be made as simple as possible, but not simpler. ALBERT EINSTEIN
No rule always works.
success in investing is the antithesis of simple.
Mutual fund companies don’t want you to think you can do it; they want you to think they can do it.
you have to hold nonconsensus views regarding value, and they have to be accurate.
In theory there’s no difference between theory and practice, but in practice there is. YOGI BERRA
To beat the market you must hold an idiosyncratic, or nonconsensus, view.
“you can’t beat the market.” Not only was this conclusion founded logically on the Chicago view of the market, but it was buttressed by studies of the performance of mutual funds.
first test is always the same: “And who doesn’t know that?”
rare insight.
One of the great sayings about poker is that “in every game there’s a fish.
analysis of the company’s attributes, known as “fundamentals,”
Part of the decline of technical analysis can be attributed to the random walk hypothesis, a component of the Chicago theory developed in the early 1960s, primarily by Professor Eugene Fama.
random walk hypothesis says a stock’s past price movements are of absolutely no help in predicting future movements.
“if something cannot go on forever, it will stop.”
estimates must be derived rigorously, based on all of the available information.
financial resources, management, factories, retail outlets, patents, human resources, brand names, growth potential and, most of all, the ability to generate earnings and cash flow.
emphasis in value investing is on tangible factors like hard assets and cash flows. Intangibles like talent, popular fashions and long-term growth potential are given less weight.
establishing the current value of a business requires an opinion regarding its future,
The return for correctly predicting which companies will come up with the best new drug, most powerful computer or best-selling movies should be substantial.
in the world of investing, being correct about something isn’t at all synonymous with being proved correct right away.
It’s hard to consistently do the right thing as an investor. But it’s impossible to consistently do the right thing at the right time.
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.
“Well bought is half sold.”
buying from a forced seller is the best thing in our world,
The key is who likes the investment now and who doesn’t.
Investing is a popularity contest, and the most dangerous thing is to buy something at the peak of its popularity.
John Maynard Keynes pointed out, “The market can remain irrational longer than you can remain solvent.”
Risk means more things can happen than will happen.
“risk-adjusted return.”
risk equals volatility, because volatility indicates the unreliability of an investment.
volatile investments will appear likely to produce higher returns,
losing money is the risk people care about most
When markets are booming, the best results often go to those who take the most risk.
“Risk means more things can happen than will happen.”
Investing consists of exactly one thing: dealing with the future.
gin and backgammon
key to understanding risk: it’s largely a matter of opinion.
investment performance is what happens when a set of developments—geopolitical, macro-economic, company-level, technical and psychological—collide with an extant portfolio.
Occasionally, the improbable does occur.
I tell my father’s story of the gambler who lost regularly. One day he heard about a race with only one horse in it, so he bet the rent money. Halfway around the track, the horse jumped over the fence and ran away. Invariably things can get worse than people expect.
And when risk bearing doesn’t work, it really doesn’t work, and people are reminded what risk’s all about.
Risk arises when markets go so high that prices imply losses rather than the potential rewards they should.
risk will be low only if investors behave prudently.
Worry and its relatives, distrust, skepticism and risk aversion, are essential ingredients in a safe financial system.
only when investors are sufficiently risk-averse will markets offer adequate risk premiums.
When worry is in short supply, risky borrowers and questionable schemes will have easy access to capital, and the financial system will become precarious.
“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.
