Getting the Odds on Your Side
0358108489
Howard Marks
Notes
The future should be viewed not as a single fixed outcome that’s destined to happen and capable of being predicted, but as a range of possibilities and – hopefully on the basis of insight into their perspective likelihoods – as a probability distribution… People try hard to predict annual variation as a source of potential investing profit. But few people do it right consistently; few do it that much better than everyone else; and few correctly predict the major deviations from the trend.
Operating leverage – in general, it’s higher for companies for whom a larger percentage of costs are fixed and lower for the ones whose costs are more variable.
The vast majority of the highly superior investors I know are unemotional by nature. In fact, I believe their unemotional nature is one of the great contributions to their success.
Skepticism calls for pessimism when optimism is excessive. But it also calls for optimism when pessimism is excessive.
The slammed-shut phase of the credit-cycle probably does more to make the bargains available than any other single factor.
The investor’s goal is to position capital so as to benefit from future developments.
Between the extremes of “rich” and “cheap” – when the cycle is in the middle ground of “fair” – the state of the relationship between price and value is, by definition, nowhere as clear-cut as at the extremes. Distinctions in the middle ground aren’t as potentially profitable as at the extremes, and those distinctions can’t be expected to work out as dependably.
When there is nothing clever to do, the mistake lies in trying to be clever.
It can’t be “the investor’s default position that the market knows more than he does… (on the other hand) he mustn’t always assume he is right and the market is wrong – and thus hold or add without limitation and without rechecking his facts and reasoning.
There is little that can make investing as easy as having a market largely to oneself.