This is a follow-up to our article in June about billionaire investor Howard Marks, the Co-Founder and Co-Chairman of Oaktree Capital Management, now controlled by Brookfield Asset Management.
Marks’ generously makes the bullet point hi-lights of his book The Most Important Thing Illuminated available for free.
We’ll be dispensing his invaluable nuggets of investment wisdom over the next while.
Here’s a segment about market bubbles and how they always start with a grain of truth.
- All bubbles start with a grain of truth.
- “To buy when others are despondently selling and to sell when others are euphorically buying takes the greatest courage, but provides the greatest profit.” — John Templeton
Contrarianism means avoiding the repeated mistakes the herd makes at the extremes of the market cycle. The difficulty is in recognizing the extremes and then acting on it, knowing you’ll never time the bottom or top, or that prices can continue moving in the same direction longer than you might think.
- Outside of the extremes, contrarianism is less likely to be profitable.
- Experience might be the greatest teacher in recognizing the extremes of the market cycle.
- “Investment success requires sticking with positions made uncomfortable by their variance with popular opinion.” — David Swensen
“Most people seem to think outstanding performance to date presages outstanding future performance. Actually, it’s more likely that outstanding performance to date has borrowed from the future and thus presages subpar performance from here on out.”
- “There are two primary elements in superior investing: seeing some quality that others don’t see or appreciate (and that isn’t reflected in the price), and having it turn out to be true (or at least accepted by the market).”
- Investors must think in terms of probabilities when dealing with the future — what could happen and how likely is it to happen.
- “Investment is the discipline of relative selection.” — Sid Cottle
- “Our goal isn’t to find good assets, but good buys. Thus, it’s not what you buy; it’s what you pay for it.”
Related stories: Note to Self: Pay Attention to Howard Marks