Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Howard Marks has another memo out with his latest thoughts on the market. I find his writing very thoughtful and calming in terms of how to approach this particular market.
Over the years I posted many times about Marks. You will never find actionable items but lots of narratives that go both ways.
This article is no difference "Stocks may turn around and head north and you’ll be glad you bought some. Or they may continue down, in which case you’ll have money left to buy more. That’s life for people who accept that they don’t know what the future holds."
"In my opinion, however, there’s simply no room for certainty in investing, and today more than usual."
Over the years I posted many times about Marks. You will never find actionable items but lots of narratives that go both ways.
This article is no difference "Stocks may turn around and head north and you’ll be glad you bought some. Or they may continue down, in which case you’ll have money left to buy more. That’s life for people who accept that they don’t know what the future holds."
"In my opinion, however, there’s simply no room for certainty in investing, and today more than usual."
Please let me know what you learned
Harry Truman said: “Give me a one-handed Economist. All my economists say 'on one hand...', then 'but on the other hand...”
.....And that is what makes investing both a Science--- even if rather uncertain--- and an Art. NOTHING in investing is certain, unless you're talking about performance and other numbers from the PAST. With an eye toward the future, certainty is not part of the picture. Probabilities? Maybe. But that's hardly the case in our current crisis. ... So, one has to be deft, adroit. One must act (or choose not to act) with some level of intellectual AND intuitional legerdemain. "Intuition" is NOT just a wild hunch. It's been demonstrated scientifically that there are some of us who are very much innately skilled in this regard: He/she can walk into a room and instantly gage the mood. No shit. MBTI Myers Briggs Type Indicator. INFJ....
....Sadly, though, that type comprises only 1% of the population at large. And in any case, we all must call upon even our "inferior" function from time to time. MOST folks are more literal-minded, sensate types. Which is why, it seems to me, that the sort of knowledge which Science can provide has come to be the ONLY sort of knowledge recognized as valid and true. (Science-olatry. Measurable, observable visually, double-blind studies.) But what about the Humanities? Ethics? There is a monumentally huge need for society to re-discover what "Ethics" means. ************************************** Equipped with as much relevant information as we can find, investors need to make educated hunches. ALWAYS. All the time. Because the future is uncertain. As I read that latest memo from Howard Marks, it is precisely THAT which he is addressing: "What is Reality?" Answer: All that is, or can be.... Benjamin Graham wrote "The Intelligent Investor." We can equip ourselves with tools and information, but we might find, when the time comes, that we brought the wrong-sized ratchet. Happens all the time, every day. So, don't bet the farm on a single play.
@FD1000: I fail to see how one could read that memo and not take away his recommendation to rotate out of safe havens and start playing offense; that this is in fact a good time to buy, and that one should not be too hung up on buying at the exact bottom. Further, that Marks sees the strong possibility of a double bottom.
Marks is a value investor, BTW, who is wary of "market" behavior, and likes to move in directions contrary to the market.
+1 @Shostakovich, Marks is very clearly saying that he is buying now, though not backing up the truck, and even if it's certainly possible that we'll have another plunge, the prices are already attractive.
His point is that no one can predict the exact bottom, but you can assess when prices are attractive, and he says he is finding some of those.
I agree with you guys, @Shostakovich and @expatsp. The memo is quite clear on Marks' thoughts. That is what is to be learned whether you agree or not, but he was clear with his beliefs and path forward. If not clear to some it probably means they didn't read the memo
@MikeM: I like Marks' letters. In general I like a healthy dose of skepticism and common sense, and Marks brings that. Also like the letters from Buffett, Romick, and Horizon Kinetics. I'm thinking of subscribing to Grant's.
In Central bank manipulated environment, everyone is expert and experts are always wrong. Ouch - SEMMX...0.3....4.9 (ST duration, 3 year SD<1,over 30% IG (investment grade)bonds-good cash sub) - is down 23%.
"These days, people have been asking me whether this is the time to buy. My answer is more nuanced: it’s probably a time to buy. There can be no unique time to buy that we can identify. The only thing we can be sure of today is that stock prices, for example, are a lot lower in the absolute than they were two weeks ago."
On March 3rd the SP500 was less than 7% down for year-to-date. Marks started buying way too early and what is known as falling knives. Marks claims that he is using intrinsic valuation, after just 7% drop for the longest bull market, how much intrinsic valuation can you find?
But my main problem that you will find anything you like in most of his memos. Do nothing, it's too expensive, buy now, prices can go lower/higher and many what ifs to cover any angle.
BTW, buying on the way down isn't recommended, IMO a better way if to start buying and keep buying only on the way up. When you buy lower and lower and the price goes down you will lose more money.
Do You realized that Marks hardly ever quantify his memos because when you do that you actually have to put the time and analyze the numbers
I was trained from an early age at school that saying no isn't enough, you must come up with a good example or a solution. With that in mind, see below.
If you want to read great memos from a manager that actually manages money please read David R. Giroux who manages PRWCX. Giroux can invest in stocks + bonds and navigate market extremely well and why PRWCX performance for 3 thru 15 years is in the top 3%. The following (link) is PRWCX 12/31/2019 annual report. You will find so many specific ideas and additional numbers/estimates.
@FD100: my wife is actually in PRWCX, so I read Giroux's letters (I like his contrarian, market-sceptic, value-tilt; for sure he's no market-indexer).
I'm pleased that when Marks' sees ambiguity he labels it as such. Oakmark / Harris have done the same, as has Klarman, and others. I would not expect an investment advisor to give away his or her picks in a free missive which can be downloaded by anyone as well as paying clients.
I would find your comments about Marks' "putting in the time" pretty funny, if I wasn't so sure that you developed a robust methodology for deterministically identifying market bottoms and for-real up drafts. Very cool that you've been able to do that. Very, very cool. I look forward to you publishing the details of that methodology here in this free forum.
@FD1000: I fail to see how one could read that memo and not take away his recommendation to rotate out of safe havens and start playing offense; that this is in fact a good time to buy, and that one should not be too hung up on buying at the exact bottom. Further, that Marks sees the strong possibility of a double bottom.
Marks is a value investor, BTW, who is wary of "market" behavior, and likes to move in directions contrary to the market.
There’s an old saying –variously attributed –to the effect that “capitalism without bankruptcy is like Catholicism with out hell.” It appeals to me strongly. Markets work best when participants have a healthy fear of loss. It shouldn’t be the role of the Fed or the government to eradicate it.
I agree, @bee, with your linking the Erin Bromage paper. It’s the most sensible thing I’ve read in weeks. I’m going to try to reduce my wife’s fear of supermarket shopping. She hates the mask, but the chances of catching the virus at unpopular shopping hours are remote, if this research is correct.
Bottom line from the commentary: “The more I think about it, the bottom line is clear: • The world is an uncertain place. • It’s more uncertain today than at any other time in our lifetimes. • Few people know what the future holds much better than others. • And yet investing deals entirely with the future, meaning investors can’t avoid making decisions about it. • Confidence is indispensable in investing, but too much of it can be lethal. • The bigger the topic (world, economy, markets, currencies and rates), the less possible it is to achieve superior knowledge. • Even our decisions about smaller things (companies, industries and securities) have to be conditioned on assumptions regarding the bigger things, so they, too, are uncertain. • The ability to deal intelligently with uncertainty is one of the most important skills. • In doing so, we should understand the limitations on our foresight and whether a given forecast is more or less dependable than most. • Anyone who fails to do so is probably riding for a fall.”
Comments
This article is no difference
"Stocks may turn around and head north and you’ll be glad you bought some. Or they may continue down, in which case you’ll have money left to buy more. That’s life for people who accept that they don’t know what the future holds."
"In my opinion, however, there’s simply no room for certainty in investing, and today more than usual."
Please let me know what you learned
“Give me a one-handed Economist. All my economists say 'on one hand...', then 'but on the other hand...”
....Sadly, though, that type comprises only 1% of the population at large. And in any case, we all must call upon even our "inferior" function from time to time. MOST folks are more literal-minded, sensate types. Which is why, it seems to me, that the sort of knowledge which Science can provide has come to be the ONLY sort of knowledge recognized as valid and true. (Science-olatry. Measurable, observable visually, double-blind studies.) But what about the Humanities? Ethics? There is a monumentally huge need for society to re-discover what "Ethics" means.
**************************************
Equipped with as much relevant information as we can find, investors need to make educated hunches. ALWAYS. All the time. Because the future is uncertain. As I read that latest memo from Howard Marks, it is precisely THAT which he is addressing: "What is Reality?" Answer: All that is, or can be.... Benjamin Graham wrote "The Intelligent Investor." We can equip ourselves with tools and information, but we might find, when the time comes, that we brought the wrong-sized ratchet. Happens all the time, every day. So, don't bet the farm on a single play.
Marks is a value investor, BTW, who is wary of "market" behavior, and likes to move in directions contrary to the market.
His point is that no one can predict the exact bottom, but you can assess when prices are attractive, and he says he is finding some of those.
"These days, people have been asking me whether this is the time to buy. My answer is more nuanced: it’s probably a time to buy. There can be no unique time to buy that we can identify. The only thing we can be sure of today is that stock prices, for example, are a lot lower in the absolute than they were two weeks ago."
On March 3rd the SP500 was less than 7% down for year-to-date. Marks started buying way too early and what is known as falling knives. Marks claims that he is using intrinsic valuation, after just 7% drop for the longest bull market, how much intrinsic valuation can you find?
But my main problem that you will find anything you like in most of his memos. Do nothing, it's too expensive, buy now, prices can go lower/higher and many what ifs to cover any angle.
BTW, buying on the way down isn't recommended, IMO a better way if to start buying and keep buying only on the way up. When you buy lower and lower and the price goes down you will lose more money.
Do You realized that Marks hardly ever quantify his memos because when you do that you actually have to put the time and analyze the numbers
I was trained from an early age at school that saying no isn't enough, you must come up with a good example or a solution. With that in mind, see below.
If you want to read great memos from a manager that actually manages money please read David R. Giroux who manages PRWCX. Giroux can invest in stocks + bonds and navigate market extremely well and why PRWCX performance for 3 thru 15 years is in the top 3%. The following (link) is PRWCX 12/31/2019 annual report. You will find so many specific ideas and additional numbers/estimates.
I'm pleased that when Marks' sees ambiguity he labels it as such. Oakmark / Harris have done the same, as has Klarman, and others. I would not expect an investment advisor to give away his or her picks in a free missive which can be downloaded by anyone as well as paying clients.
I would find your comments about Marks' "putting in the time" pretty funny, if I wasn't so sure that you developed a robust methodology for deterministically identifying market bottoms and for-real up drafts. Very cool that you've been able to do that. Very, very cool. I look forward to you publishing the details of that methodology here in this free forum.
https://erinbromage.com/post/the-risks-know-them-avoid-them
Other Memos can be found here:
https://oaktreecapital.com/insights/howard-marks-memos
https://www.oaktreecapital.com/docs/default-source/memos/uncertainty.pdf
Bottom line from the commentary:
“The more I think about it, the bottom line is clear:
• The world is an uncertain place.
• It’s more uncertain today than at any other time in our lifetimes.
• Few people know what the future holds much better than others.
• And yet investing deals entirely with the future, meaning investors can’t avoid
making decisions about it.
• Confidence is indispensable in investing, but too much of it can be lethal.
• The bigger the topic (world, economy, markets, currencies and rates), the less
possible it is to achieve superior knowledge.
• Even our decisions about smaller things (companies, industries and securities) have to be conditioned on assumptions regarding the bigger things, so they, too, are uncertain.
• The ability to deal intelligently with uncertainty is one of the most important skills.
• In doing so, we should understand the limitations on our foresight and whether a given forecast is more or less dependable than most.
• Anyone who fails to do so is probably riding for a fall.”