Howard Marks’ latest memo came out yesterday. It was insightful and objective.
The usual stuff.
In the memo, he mentioned that he was writing a book about cycles. I am eagerly waiting for that book to come out.
There was another Howard Marks’ memo that I re-read from time to time, which was also about cycles. It is titled “You Can’t Predict. You Can Prepare.” It was written in Nov 2001, when the US experienced its first recession since 1991.
In this post I will liberally take excerpts from the 2001 memo.
It’s mostly a reminder for myself the inevitability of cycles amidst the current environment. Continue reading
“Risk means more things can happen than will happen.” Elroy Dimson
One of the most important lessons that I had early on in my investing experience is that it is more productive and profitable to think in probabilities, rather than absolutes. Unfortunately, it is a lesson that I sometimes need to re-learn. What I mean by that is thinking through the buying decision not as “is this stock definitely undervalued?” or “is this stock going to double?”, but rather as “is it more likely than not to be undervalued?” or “is the business more likely to be better in the future than it is now?” It is a subtle difference, but it re-focused my emphasis on not just the upside potential, but on the downside risk. Continue reading