Excerpts -- Howard Marks:
"The interesting thing about investing is what I call
the perversity. The point is that it is so not intuitive. It is so not
obvious — investing. A great example lies in the fact that, people think that
to be a good investor, you have to understand companies. But the market has an
understanding of companies, and if you understand the company the same as the
market does, even if the market and you are right, you are not going to make
any special profits."
"...when my son comes to me, who is a budding hedge
fund investor, he gives me an idea, a stock, macro trend, or something like
that, the first question I always ask is the same: Who doesn’t know that? That
is really the question. When you think you know something, the question is
whether the market knows it too. And if it does, then your idea has no relative
superiority."
"...[investing] is really not a good business for
people who don’t have some ego because you have to do the things that Dave Swensen
describes as lonely and uncomfortable. I think it was [Jean-Marie] Eveillard
who said it was warmer in the crowd, in the herd. But if you only hold popular
positions, you can’t do better than average, by definition. And I think you
will be very wrong at the extremes."
"The greatest example is this: If you went to the horse
races, would you always bet on the favorite? The favorite, assuming the crowd
is intelligent, which usually it is, is the horse with the highest probability
of winning. That doesn’t mean that the favorite is always the best bet. You
might have another horse that has a lower probability of winning but the odds
are so much higher, that’s the smart bet..."
"[U.S. Treasuries] are a safe investment in the sense
that the outcome is known and not really subject to variation. I think they are
not a good investment because the known outcome is an unattractive one. Today you can buy the ten-year [Treasury] and with no risk,
lock up the certainty of 1.9% return for ten years. Is that really a good thing
to lock up?"
"What the investor has to do is weigh out on the one
hand price and on the other hand reality. Everybody thinks very dire thoughts
about Europe and the Euro, and I would be the last person in the world to argue
against that position. Then the next question is, European assets are lower in
price because of the macro conditions, but are the macro conditions being
viewed too pessimistically?"
"Tenet number three of our investment philosophy says
we are active in less efficient markets only. We probably wouldn’t do a hedge
fund for large-cap New York Stock Exchange firms because the tendencies are
that those would be more efficient than others. But emerging markets, yes.
Japan, yes."