1 The Story
The memo writer
Howard Marks (born 1946) co-founded Oaktree Capital Management in 1995, building it into a leader in distressed debt and credit. His widely read memos to clients made him one of investing's most respected voices — Warren Buffett has said he reads them the day they arrive.1
He distilled his thinking in The Most Important Thing (2011) and Mastering the Market Cycle (2018).1
2 The Big Idea
Risk first, second-level thinking, mind the cycle
You can't predict, but you can prepare — and know where you stand in the cycle.
Marks teaches that superior results require second-level thinking — going beyond the obvious, consensus view — and an obsession with risk, since the future is unknowable. Above all: gauge where the market sits in its cycle, because risk is highest exactly when it feels safest.1
3 The Method
The Marks approach
Second-level thinking
Ask what everyone else is missing — consensus is already in the price.
Risk is the main event
Control risk first; returns follow. The future can't be predicted, only prepared for.
Know the cycle
Sentiment swings from euphoria to despair. Be cautious when others are greedy; aggressive when they're fearful.
Buy well
'Well bought is half sold' — price paid relative to value is what determines return.
4 Try It Today
Test the idea for yourself
A no-risk exercise
Read the financial headlines and ask Marks's question: does the mood feel euphoric, fearful, or somewhere between? Then ask the second-level question — what is everyone assuming, and what would surprise them? Practising that gap between the obvious and the non-obvious is the whole skill.
5 In Their Words
Howard Marks, quoted
"You can't predict. You can prepare."— Howard Marks1
6 The Books & Their Big Ideas
What they wrote — and what to take from it
7 Watch & Read
Go deeper
- TRADERBenjamin Graham & Warren Buffett — the value tradition.
- CONCEPTRisk & Position Sizing
- BOOKThe Most Important Thing
§ Sources
- "Howard Marks (investor)," Wikipedia — en.wikipedia.org/wiki/Howard_Marks_(investor)