Mastering The Market Cycle Quotes

“Our caution sometimes caused us to lag a bit behind our benchmarks, but we considered that a small price to pay for being prepared for what we thought might come.”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“After 28 years at this post, and 22 years before this in money management, I can sum up whatever wisdom I have accumulated this way: The trick is not to be the hottest stock-picker, the winningest forecaster, or the developer of the neatest model; such victories are transient. The trick is to survive! Performing that trick requires a strong stomach for being wrong because we are all going to be wrong more often then we expect. The future is not ours to know. But it helps to know that being wrong is inevitable and normal, not some terrible tragedy, not some awful failing in reasoning, not even bad luck in most instances. Being wrong comes with the franchise of an activity whose outcome depends on an unknown future . . . (Jeff Saut, “Being Wrong and Still Making Money,” Seeking Alpha, March 13, 2017, emphasis added)”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“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

“In my experience, times of laxness have always been followed eventually by corrections in which penalties are imposed. It may not happen this time, but I’ll take that risk.”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“To describe risk aversion, I say most people prefer safety and disprefer risk—even though I’ve never seen the word “disprefer” in a dictionary. (There’s a big difference of opinion regarding the propriety of that word, with the linguistic establishment railing against it, but I think it’s a great word. If it doesn’t exist, it should.)”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“the first step is to realize that success or failure sometimes arises neither from great skill nor from great incompetence but from, as the economist Armen Alchian wrote, “fortuitous circumstances.” Random processes are fundamental in nature and are ubiquitous in our everyday lives, yet most people do not understand them or think much about them.”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“It all seems so obvious: investors rarely maintain objective, rational, neutral and stable positions. First they exhibit high levels of optimism, greed, risk tolerance and credulousness, and their resulting behavior causes asset prices to rise, potential returns to fall, and risk to increase. But then, for some reason—perhaps the arrival of a tipping point—they switch to pessimism, fear, risk aversion and skepticism, and this causes asset prices to fall, prospective returns to rise, and risk to decrease. Notably, each group of phenomena tends to happen in unison, and the swing from one to the other often goes far beyond what reason might call for.”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“You Can’t Predict. You Can Prepare.”):”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“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

“opportunities for investment gains improve when: the economy and company profits are more likely to swing upward than down, investor psychology is sober rather than buoyant, investors are conscious of risk or—even better—overly concerned about risk, and market prices haven’t moved too high.”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“Most people think the way to deal with the future is by formulating an opinion as to what’s going to happen, perhaps via a probability distribution. I think there are actually two requirements, not one. In addition to an opinion regarding what’s going to happen, people should have a view on the likelihood that their opinion will prove correct.”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“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

“Calibrating one’s portfolio position is what this book is mostly about.”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“security analysis” and “value investing”:”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“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 odds change as our position in the cycles changes. If we don’t change our investment stance as these things change, we’re being passive regarding cycles; in other words, we’re ignoring the chance to tilt the odds in our favor.”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“The Most Important Thing,”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“Oscar Schafer, Jim Tisch and Ajit Jain to”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“The Most Important Thing and others, including Seth Klarman, Charlie Munger, Warren Buffett, Bruce Newberg, Michael Milken, Jacob Rothschild, Todd Combs, Roger Altman, Joel Greenblatt, Peter Kaufman and Doug Kass.”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“Peter Bernstein, John Kenneth Galbraith, Nassim Nicholas Taleb and Charlie Ellis.”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“But I also think people who are inherently unemotional will have it much easier. A lack of emotionality is a gift (in investing, that is, but perhaps not in other areas, like marriage). It’s not my point that emotional people can’t be good investors, but it will require a great deal of self-awareness and self-restraint.”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“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

“I fear that people may look back at the decline of 2008 and the recovery that followed and conclude that declines can always be depended on to be recouped promptly and easily, and thus there’s nothing to worry about from down-cycles. But I think those are the wrong lessons from the Crisis, since the outcome that actually occurred was so much better than some of the “alternative histories” (as Nassim Nicholas Taleb calls them) that could have occurred instead. And if those incorrect lessons are the ones that are learned, as I believe they may have been, then they’re likely to bring on behavior that increases the amplitude of another dramatic boom/bust cycle someday, maybe one with more serious and long-lasting ramifications for investors and for all of society.”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“It’s time for another aside: If you look at the last two tables—those showing big losses in 2008 and big gains in 2009—it’s easy to conclude that the two years together were something of a non-event. For example, if you put $100 into the Credit Suisse Leveraged Loan Index on the first day of 2008, you would have lost 29% over the course of the year and had only $71 left at the end. But then you would have gained 45% in 2009 and ended up with $103 at the conclusion of the two-year period, for a net gain of $3. The two-year results in the asset classes listed above ranged from moderate net losses to moderate net gains. It matters enormously, however, what you did in between. Yes, holding on would have enabled you to recoup most or all of your losses and end up well, with results as described above. But if you lost your nerve and sold at the trough—or if, having bought with borrowed money, you received a margin call you couldn’t meet and saw your positions sold out from under you—you experienced the decline but not the recovery, and your net result in this “non-event” two-year period was disastrous. For this reason, it’s important to note that exiting the market after a decline—and thus failing to participate in a cyclical rebound—is truly the cardinal sin in investing. Experiencing a mark-to-market loss in the downward phase of a cycle isn’t fatal in and of itself, as long as you hold through the beneficial upward part as well. It’s converting that downward fluctuation into a permanent loss by selling out at the bottom that’s really terrible. Thus understanding cycles and having the emotional and financial wherewithal needed to live through them are essential ingredients in investment success.”
― 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

“My point here is that not all the details are important. Rather, the key is to (a) figure out which are the important ones, (b) make inferences about what’s going on from the important ones (and then perhaps consider as many of the less-important ones as we can), and (c) conclude from those inferences what are the one or two things that most characterize the investment environment and what action they call for.”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“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

“Here are the most important influences: 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

“Our job as investors is simple: to deal with the prices of assets, assessing where they stand today and making judgments regarding how they will change in the future. Prices are affected primarily by developments in two areas: fundamentals and psychology.”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side

“The cycle in real estate illustrates and exemplifies the ways in which cyclical factors lead to and cause each other, as well as the tendency of cycles to go to extremes. It’s not for nothing that they often say cynically—in tougher times, when optimistic generalizations can no longer be summoned forth—that “only the third owner makes money.” Not the developer who conceived and initiated the project. And not the banker who loaned the money for its construction and then repossessed the project from the developer in the down-cycle. But rather the investor who bought the property from the bank amid distress and then rode the up-cycle.”
― Howard Marks, Mastering The Market Cycle: Getting the Odds on Your Side