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Notes From Howard Marks


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I was fortunate enough to attend a conference where Howard Marks the other day here are my notes from it.



Investment is best thought of as an exercise in judgement. Difficult to quantify. Probabilistic at best. Can't be reduced to a number. But you can have standards. Judgement is the only way to know you've had too much risk. Sizing is important. No specific rule and is not the same for everyone. Size your capital to benefit from future events.


You need to have you own sense. The emh reflects the average opinion. You have to think different but also have to be smarter. Can't do it all the time can't do it in great numbers......second level thinking can't really be taught.


John Kenneth goberath...read his shit. HMs hero.


When asset prices don't fully reflect reality!!!!!!!!!!!!!!!


Three decision stocks.....buy,sell,buy something else. Can't keep making great decisions....


Why is it hard to tell yourself to sell.....all the days over a great 20year stock.


We don't know where we're going but we do know where we are. We don't know about future markets but it's safe to make some generalizations about where we go


America has 70yeara of great growth has been phenomenal and should not be expected to continue.



The advent of credit is something really new. Marks couldn't spend money he didn't have....Carolla sees it as a right. Increasing use of credit...low growth can be turned to high growth....


No delayed gratification...reliance on high growth in China.....


Growth will be there just more modest.


Inflation...70s no one could stop it now we don't know how to stop it.


Lot of uncertainty....


Sky high yields on stocks vs bonds...especially in history


04-07 can easily be done again....fuck it what's wrong with buying ccc bonds


No raving bulls out there...no one is very excited.


People are not thinking bullish but they are acting/behaving bullish in 0% rates and that's what makes it so difficult...


7/10 on riskiness...7th inning...but could take a long time...not o boom in economy...many have piled up cash and not levered up....closer to the end of the game than the beginning but could take a long time...or not :p



32x to 12x bank leverage then vs now....we don't have rush of a crash right now....no asset bubble.




What to buy where the merits are not fully reflected in the prices. Harder to beat he market today..."unloved".....screen for optimism....where is the reality low....today? .....oil scares the shit out if everything me today....When things go down people stay away...Buffett and hamburgers.prices that go down are not a reason to buy but a place to start listening looking.


Asset that can't produce cash can't be valued. Can't price oil its relative to coal or natty gas. Useable commodities can be quantified. 1999 oil is low compared to today. Gatta have a starting point.No one knows the price of oil is high or low.


We know what we don't know.


We act based on our views of the future. Need a forecast and an estimate of the probability your right....some of your views are better and there a very differ my ranges of outcomes. Respect for uncertainty. Know what you don't know.


Not everything that can be counted counts -Einstein




Learn nothing from good times. Experience is what you got when you didn't get what you want..


Learn from history. What repeated is human behaviors and emotion.


"I think I've grown up and I think I'm still learning. Have to keep you're eyes open."


You have some ideas and you have to build your own philosophy...world is always changing and you have to keep adapting


Read read read and what's the importances and significance of that I went though.


There no one right way. Buffett is emblematic.....


What you can know and can't know...and stay away from what you don't know. Find value in the here and now and


You can loose money in high assets and make money in low assets...





I write memos things I say just come out as I think about them.....


Have to do the probabilities at the time you made the decision...can't go back and re-do them.but you can Learn from mistakes


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I don't think there's any great secret with these value guys....the just operate in a world whe people say "it can't be done" yet they do it all the time with hard work and minimize their reliance on luck. They operate on the attitude that "it can be done"...all the guys who spoke talked about cranking out home runs...some of them talked about theirs failures but general consensus was that they just keep their ear to the ground and with a little hard work Mak some good bets



None of these guys/gals talked about the money....they just enjoy what they do.



One of them was an old Ben graham student...literally took classes with by....he still value invests...he doesn't need the money...he stressed "adding value" to the world.

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I also want to stress these guys/gals are only mortals... I tend to think of them as super heroes.... That they pull rabbits out of their hats.....They're not... They just do what they love to do.....they ravenously search for opertunity....they go the extra mile and are extremely thoughtful..,.thats not a super talent they just devlope it and Operate under the maximum of adding value....that everyone can share in the benefit from making these "investments"...it's really others that shut down their minds and are not receptive to a better at of doing things.....they aren't these monsters that take "huge" positions....now I'm editoralizing

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One of th books recommended, not by Marks was history of the peloponnesian war by thucydides where Thucydides try's to analyze the breakdown between Sparta and Athens.


I'll be honest I tried to read it a number of years ago as a student...ill have to go back...but the older I get the more I think the breakdown in communication is disasterly....this happens all the time n all aspects of life...



These guys/gals are kinda like monks...very thoughtful....I think it was Buffett who said to be a "learning machine"....that's all they do.

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More notes:


Try and figure out what percentage is retail as they don't do the work and usually voter with management so this is a hindrance to activists


Board members generally don't get a chance to sit down into the operations of the businesses. They have other things, can't spend the time learning about the business. They just accept what management kinda sells.


Conceptual inefficiencies.


Exposed to the things we have an opinion about. Circle of competence.


Exploitable anomalies...what is difference from what the world expects


What's the expectation. What's imbedded in the price.


Value investing does better I'm a more skeptical environment.


Activism in the press creates distrust.....Sparta vs Athens.


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One last thought.



What really struck me was when Mr. Marks said "Conceptual Inefficiencies." The older and older I get the more and more that I feel that this is the key to life. This is what seperates the WEBs from other investors. This is what seperates Tom Brady from defenses. Tom Brady sees the inenifficency in the defenders coverage and exploits that by throwing a pass. Sometimes he judges it wrong but he gets it right more often than not.


I sit here at the United Center, 300 level everything else is for the fancy people, and all I see is #88 or #19 just looking for Inefficiencies in Calgarys defense. They look for "Conceptual Inefficiencies" in defense and exploit them. To me that's adaptation. That's some Darwin shit.


For some reason it's dirty in investments..."I think you're wrong, here's why..." People hate being told that they can think better...I've had professors tell me this....maybe they are trying to teach me. That's how I operate...is hard I had some blonde tell me I'm an ass hole for taking advantage of people the other day but that's what #88 and #19 do.



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