Monday, October 22, 2012

Howard Marks Interview

The interview below is one of the best I have seen lately. Howard Marks, portfolio manager of Oaktree Capital and author of the book "The most important thing" (which can be found here) discusses his investment philosophy and beliefs.

Some outstanding quotes from the interview:
"The interesting thing about investing is what I call the perversity. The point is that it is so not intuitive"
"The success, which is doing better than the market in a risk-return sense, comes from understanding things better than the market. Most people don`t understand things better than the market, and most people don`t understand the need for understanding thins better than the market"
"It is having a correct non-consensus opinion when the consensus is wrong, which is not all the time"
"I think that the people there have to be deep and stimulated and stimulating and interested in discussing. I try very hard to create an environment where one person`s success doesn`t have to come at the expense of another" 
"Almost on the surface, if everybody says "We won`t do that", then that is probably going to be cheap" 
"(...) as long as emotion takes over, then efficiency will not be realized"
"I would say that is one of the things working on the side of the patient investor, is the fact that he has a longer time frame. On te other hand, we don`t explicitly - there is a new phrase - time arbitrage. (...) Having patient capital is a great advantage."
"I think that we always try to stress the danger of overconfidence." 
"The most dangerous thing is to think you got it figured out, or that you can`t make a mistake, or that your estimates are right because they are yours. (...) On the other hand, it is really not a good business for people who don`t have some ego because you to do the things that Dave Swensen describes as lonely and uncomfortable.(...) You have to be strong enough in ego to hold difficult unusual positions and stay with them."
"Taking more risk should not be one`s goal. One`s goal should be to make smart investments even if they involve risk, but not because they involve risk. That is a very important distinction."
"Blindly accepting more risk to get the return you used to get in a high-return world can be a big mistake"
 "You might have another horse that has a lower probability of winning but the odds are so much higher, that`s the smart bet - leaving alone anything specific that you know about the horses" 
This one is just great:
"We don`t want to invest in high quality or safe things because a so-called safe thing at bad odds is a bad investment. Sometimes I think the word "quality" should be banished from the investment business if you want to make money." 
Was he referring to big dividend payers? Or even treasuries?!
"If you buy a cheap stock when the market is high, it is a challenge because, if the market being high is followed by a general decline in prices, then for you to make money in your cheap stock, you have to swim against the tide"
"If you don`t have a superior insight, then how can something be to your advantage?"
"(...) human mind is very good at blotting out bad memories. Unfortunately, most important learning is from bad memories." 
"(...) the most important thing is realistic expectations."
"The people that I think are great investors are really characterized by exceptionally low levels of loss and infrequency of bad years." 

Finally, here is the video: click here for the video

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