Not many outside the investing business have heard of Howard Marks. He is a very successful money manager at Oaktree Capital with a reputation built mostly around distressed debt investing.
He also writes very well and publishes Memos that I eagerly read.
His latest is on the fall in the price of oil and what lessons we can learn from it.
I highly recommend it to anyone who wants clear thinking on the subject.
If you don’t want to read it, here are some quick highlights:
“…what ‘everyone knows’ is usually unhelpful at best and wrong at worst.”
“Not only did the investing herd have the outlook for rates all wrong, but was uniformly inquiring about the wrong thing.”
“Asset prices are often set to allow for the risks people are aware of. It’s the ones they haven’t thought of that can knock the market for a loop.”
“Forecasters usually stick too close to the current level, and on those rare occasions when they call for change, they often underestimate the potential magnitude.”
“This is an example of how hard it can be to appropriately factor all of the relevant considerations into complex real-world analysis.”
“Most people easily grasp the immediate impact of developments, but few understand the ‘second-order’ consequences…as well as the third and fourth.”
“…it’s hard for most people to understand the self-correcting aspects of economic events.”
“If you think markets are logical and investors are objective and unemotional, you’re in for a lot of surprises.”
“A well-known quote from economist Rudiger Dornbusch goes as follows: ‘In economics things take longer to happen than you think they will, and then they happen faster than you thought they could.'”
“The key lesson here may be that cartels and other anti-market mechanisms can’t hold forever.”
“…it’s hard to analytically put a price on an asset that doesn’t produce income.”
Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.