Money and Finance
By Howard Marks,
Author of The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor
Accepting the broad concept of contrarianism is one thing; putting it into practice is another. On one hand, we never know how far the pendulum will swing, when it will reverse, and how far it will then go in the opposite direction.
On the other hand, we can be sure that, once it reaches an extreme position, the market eventually will swing back toward the midpoint (or beyond). Investors who believed that the pendulum would move in one direction forever -- or, having reached an extreme, would stay there -- are inevitably disappointed.
On the third hand, however, because of the variability of the many factors that influence markets, no tool -- not even contrarianism -- can be relied on completely.
- It’s Our Job As Contrarians To Catch Falling Knives...
Given some of Howard Marks' more recent comments, as well as some of Oaktree's recent investments in the distressed energy space, this excerpt from The Most Important Thing seemed worth revisiting:Skepticism is usually thought to consist of saying,...
- Howard Marks' Crystal Ball Proved Accurate
Link to article: Howard Marks' Crystal Ball Proved Accurate Ten years ago, veteran investor and writer Howard Marks sent a contrarian -- and prescient -- memo to clients of his firm, Oaktree Capital Management, assessing the state of the hedge...
- Howard Marks Quote On Contrarianism
From The Most Important Thing:…it’s not enough to bet against the crowd. Given the difficulties associated with contrarianism just mentioned, the potentially profitable recognition of divergences from consensus thinking must be based on reason and...
- Speech Notes: Howard Marks At Nyssa
Via Distressed Debt Investing: On April 5, Howard Marks, legendary investor and Chairman of Oaktree Capital Management, spoke at New York Society of Securities Analysts. He is also the author of the book, “The Most Important Thing: Uncommon Sense for...
- The Most Important Thing Illuminated
This looks pretty interesting:Forthcoming! The Most Important Thing Illuminated (digital edition) will be available at Amazon, iTunes, and wherever e-books are sold! ...Now, Columbia Business School Publishing is proud to announce an innovative digital...
Money and Finance
Excerpt from The Most Important Thing Illuminated - by Howard Marks
Contrarianism
By Howard Marks,
Author of The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor
Accepting the broad concept of contrarianism is one thing; putting it into practice is another. On one hand, we never know how far the pendulum will swing, when it will reverse, and how far it will then go in the opposite direction.
On the other hand, we can be sure that, once it reaches an extreme position, the market eventually will swing back toward the midpoint (or beyond). Investors who believed that the pendulum would move in one direction forever -- or, having reached an extreme, would stay there -- are inevitably disappointed.
On the third hand, however, because of the variability of the many factors that influence markets, no tool -- not even contrarianism -- can be relied on completely.
- Contrarianism isn't an approach that will make you money all of the time. Much of the time there aren't great market excesses to bet against.
- Even when an excess does develop, it's important to remember that "overpriced" is incredibly different from "going down tomorrow."
- Markets can be over- or underpriced and stay that way -- or become more so -- for years.
- It can be extremely painful when the trend is going against you.
- It can appear at times that "everyone" has reached the conclusion that the herd is wrong. What I mean is that contrarianism itself can appear to have become too popular, and thus contrarianism can be mistaken for herd behavior.
- Finally, it's not enough to bet against the crowd. Given the difficulties associated with contrarianism just mentioned, the potentially profitable recognition of divergences from consensus thinking must be based on reason and analysis. You must do things not just because they're the opposite of what the crowd is doing, but because you know why the crowd is wrong. Only then will you be able to hold firmly to your views and perhaps buy more as your positions take on the appearance of mistakes and as losses accrue rather than gains.
Excerpted from, The Most Important Thing Illuminated by Howard Marks. Copyright (c) 2012 Howard Marks. Used by arrangement with Columbia University Press.
Author Bio
Howard Marks, author of The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor, is chairman and cofounder of Oaktree Capital Management, a Los Angeles-based investment firm with $80 billion under management. He holds a Bachelor's Degree in finance from the Wharton School and an MBA in accounting and marketing from the University of Chicago. He is the author of The Most Important Thing: Uncommon Sense for the Thoughtful Investor, published by Columbia Business School Publishing.
Author Bio
Howard Marks, author of The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor, is chairman and cofounder of Oaktree Capital Management, a Los Angeles-based investment firm with $80 billion under management. He holds a Bachelor's Degree in finance from the Wharton School and an MBA in accounting and marketing from the University of Chicago. He is the author of The Most Important Thing: Uncommon Sense for the Thoughtful Investor, published by Columbia Business School Publishing.
For more information please visit http://www.cup.columbia.
- It’s Our Job As Contrarians To Catch Falling Knives...
Given some of Howard Marks' more recent comments, as well as some of Oaktree's recent investments in the distressed energy space, this excerpt from The Most Important Thing seemed worth revisiting:Skepticism is usually thought to consist of saying,...
- Howard Marks' Crystal Ball Proved Accurate
Link to article: Howard Marks' Crystal Ball Proved Accurate Ten years ago, veteran investor and writer Howard Marks sent a contrarian -- and prescient -- memo to clients of his firm, Oaktree Capital Management, assessing the state of the hedge...
- Howard Marks Quote On Contrarianism
From The Most Important Thing:…it’s not enough to bet against the crowd. Given the difficulties associated with contrarianism just mentioned, the potentially profitable recognition of divergences from consensus thinking must be based on reason and...
- Speech Notes: Howard Marks At Nyssa
Via Distressed Debt Investing: On April 5, Howard Marks, legendary investor and Chairman of Oaktree Capital Management, spoke at New York Society of Securities Analysts. He is also the author of the book, “The Most Important Thing: Uncommon Sense for...
- The Most Important Thing Illuminated
This looks pretty interesting:Forthcoming! The Most Important Thing Illuminated (digital edition) will be available at Amazon, iTunes, and wherever e-books are sold! ...Now, Columbia Business School Publishing is proud to announce an innovative digital...