What A 238 Mile Sailboat Race Can Teach About Investing

By Jack M. Forehand —  I have raced sailboats since I was 12 years old. It has always been a passion of mine. The combination of being on the water while doing something competitive at the same time has always been a big draw for me. Over Labor Day weekend, I competed in the Stamford Vineyard Race on a friend’s boat Threebeans. The race includes many exhilarating moments, but also significant down time, and during those down periods, I couldn’t help but think about all the parallels between what it takes to do well in a race like that and […]

Master Investors Marks, Dalio & Gundlach Issue Cautionary Views on Markets

By John P. Reese — The waning days of August leave many parents looking forward to the start of school and many investors bracing for September, the month that is historically the worst of the calendar year for stocks. Add the increasing uncertainty coming out of Washington and stock valuations that look increasingly overheated, and it’s enough for a few prominent investors to warn that a pullback is probably on its way. That may not be a bad thing. The widely watched Dow Jones industrial average has hit more than two dozen record highs this year, blowing past 21,000 in […]

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Investors Who Dare to Be Different Stand a Better Chance for Success

By John P. Reese In 2006, Oaktree Capital co-chairman Howard Marks wrote a memo titled Dare to Be Great in which he delivered a simple but provocative statement about investing: “This just in: you can’t take the same actions as everyone else and expect to outperform.” Being different, he argues, is “absolutely essential if you want a chance at being superior.” Going against the herd, however, runs counter to human nature and can be exceedingly tough for investors. Just ask famed investor James O’Shaughnessy (a market guru who inspired one of the stock screening models I created for Validea) who […]

Howard Marks: It’s Tough to Be Good at Macro Investing

Global macro hedge funds choose positions in various equity, fixed income, currency, commodities and futures markets based primarily on the economic and political views of various countries or their macroeconomic principles. According to last month’s Barron’s, they’ve suffered poor performance of late. Last year, the article notes, the benchmark HFRI Macro Index returned only 1.29%, trailing the overall hedge fund index’s return of 5.51%.”Their relatively good performance amid the financial crisis in 2008 and 2009 helped attract money,” the article says, “but those days are over.” Brian Shapiro, CEO and president of Simplify, a firm that researches hedge funds and […]

Howard Marks on the Post-Election Markets

In last week’s Barron’s, Oaktree Capital’s Howard Marks reflected on the presidential election and offered a wealth of insight regarding both its complexities and its multi-layered and far-reaching implications. With specific regard to the markets, Marks posed the question: “How could the expectation of a Clinton victory make stock prices rise, and then the reality of her defeat make them rise further?” He explained: “The market often fails to act rationally in the short run, primarily because of the role played by people in determining its course.” In his lengthy essay, Marks delved into a range of economic and political […]

Marks: Be Selective in a Heated Market

  Last month, Bloomberg’s Erick Schatzker sat down with Howard Marks, co-chairman of Oaktree Capital, to discuss the fund manager’s investment approach. With respect to whether the now-stretched equity valuations make for what some are calling “treacherous” conditions, Marks comments, ” The riskiest thing in the world is to believe there’s no risk. When people talk about risk in the market, that’s a healthy thing.” According to Marks, however, there is an incongruity between words and actions. “The problem,” he said, “is that even though most people are not thinking bullish, most people are acting bullish.” Many people are still […]

A Sage Investor – Howard Marks – Shares His Wisdom: Part II

This is a continuation of yesterday’s post. Howard Marks is co-founder of Oaktree Capital Management and author of The Most Important Thing: Uncommon Sense for the Thoughtful Investor (2011). His thoughts, ideas and insights have become fodder for many of our blog posts as he is very willing to share them. In an interview with John Mihaljevic, CFA and Managing Editor of the newsletter The Manual of Ideas, Marks shares his views on many issues pertinent to the world of investing: Adjust your level of aggressiveness based on the environment. Marks argues that investors should “adjust your activities based on […]

A Sage Investor – Howard Marks – Shares His Wisdom: Part I

Howard Marks is co-founder of Oaktree Capital Management and author of The Most Important Thing: Uncommon Sense for the Thoughtful Investor (2011). His thoughts, ideas and insights have become fodder for many of our blog posts, as he is very willing to share them. In an interview with John Mihaljevic, CFA and Managing Editor of the newsletter The Manual of Ideas, Marks shares his views on many issues pertinent to the world of investing. The most dangerous thing to neglect is “risk consciousness.” Marks believes that the best accomplishment in investing is “making a lot of money with less-than-commensurate risk.” […]

Howard Marks talks Economy, QE and More

When it comes to investing in less efficient markets, Howard Marks (founder and co-chairman of Oaktree), has plenty of expertise. He also has plenty to say about the state of the economy and the factors influencing our financial outlook. In a recent Barron’s article, Marks shares his views: Central bankers can’t create economic progress; they can only stimulate activity temporarily. Rather, a nation’s productiveness (GDP) is the driver of long-term growth, which is independent of money supply or interest rates. If GDP is weak, a nation’s ability to provide above-average benefits to its workers is compromised. Regulation can’t produce prosperity. […]

How Current and Future Expectations Influence Stock Prices

Company performance and stock price performance, or outcomes, don’t always go hand and hand. In a very good article, Morgan Housel, economics and finance columnist for The Motley Fool, points out that predicting the future for stocks is harder than most people think. The performance of stocks are a function of future fundamentals (i.e. earnings and growth), but also “by performance within the context of expectations”. As Housel points out, one may actually predict future performance but predicting the “outcome” of that performance requires one to judge whether or not “current expectations are reasonable” and “what will future expectations be.” Judging […]

What Yogi Berra, Pete Carroll, and Fantasy Football Can Teach Us About Investing

Can watching sports and playing fantasy football make you a better investor? Definitely, says Oakmark’s Howard Marks – if you take away the right lessons. In a piece for Barron’s, Marks talks about the lessons investors can learn from the consistency of the late Yogi Berra; from the Seattle Seahawks’ controversial playcalling decision at the end of last season’s Super Bowl; and from the world of fantasy sports. Berra, he says, may not have had the tape-measure power of sluggers like Reggie Jackson, but he was remarkably consistent throughout his career, often ranking among the league leaders in games played, fewest passed […]

Marks of Oaktree Capital Advises a Balance Between “Offense and Defense”

Howard Marks, co-chairman of Oaktree Capital, says “the most important thing that an investor has to do . . . is to set the balance in his portfolio between offense and defense.” He continues: “For the last four years, we’ve had a position that can be summed up as ‘move forward, but with caution. . . . I think you have to favor caution.” Regarding high yield bonds, Marks said the inference from recent activity may be that they seem riskier, “but the math is that they are a better buy now” than previously. He does not buy such bonds […]