Ratlinks Redux: Thoughts on the Market from a veteran investor
Musings on the market and how to think with help from legendary investor and Oaktree co-founder Howard Marks
Market Update
He who lives by a crystal ball soon learns to eat ground glass - Edgar Fiedler
I try to avoid giving stock tips and/or market prognostications, living by the above quote.
I attempt to rarely discuss finance, save for a few prior editions like: “Guess What, It’s Gonna Be May”
If you have no interest in finance, the stock market, how to identify a good business or business cycles, feel free to skip this edition
I had the good fortune to spend some time with Howard Marks a few months ago. For those who are unfamiliar with Howard Marks, he is the plain-spoken co-founder and co-chairman of the investment firm, Oaktree Capital.
Howard Marks’ memos are required reading on Wall Street and a recent memo is linked below.
Roughly 25-30 people attended this meeting in the library of a fancy hotel, the same one Chuck Bass used to live in.
The market today can be characterized as one of low prospective returns, where market participants are constantly chasing returns.
Today is not a time for massive risk-taking but is also not the time for max defense. It is a market characterized as move forward with caution.
When deploying capital, investors should look to purchase resilient businesses with good growth prospects, bought with a margin of safety.
Investing performance can be defined as: Return = Opportunity + Skill
There are two components of market performce: alpha and beta.
Beta = the return of the market or benchmark
Alpha = performance earned by a manager in excess of the market
There are four ways to make money in investing:
Buy an asset for less than it is worth
Sell an asset for more than it is worth
Lever up winners - borrowing to enhance gains
Add value as a manager
*Note 3 & 4 are more common characteristics of the private market and private equity participants but do occur in public markets via the use of derivatives and leverage or in hedge fund strategies like activism.
Remember, there is no birthright for returns. Skill requires actual skill. Investors with the ability to understand cycles will find opportunities for profit.
On the Other Hand - Why it’s hard to be the fed chair or how to make a decision when every choice may be wrong
Latest Update - Thoughts on COVID-19
Calibrating - More thoughts on COVID-19