Howard Marks Interview With Tim Ferriss on Mastering the Market Cycle

Tim Ferriss recently interviewed Oaktree Capital's Howard Marks on his popular podcast as part of Marks' press tour for his new book that's coming out: Mastering the Market Cycle: Getting the Odds on Your Side. Here are some notes/summary as well as the full audio below.


Howard Marks Interview on Tim Ferriss Podcast

- "You can't predict, you can prepare."  This quote is from one of Marks' memos from way back in the 1990s. He uses this to note that he didn't predict the housing crash, but he was prepared because of cautious preparation in advance.

-  His previous book The Most Important Thing outlines the concept that you have to know where we are in the cycle.  "And where you are in the cycle is the primary determinant of risk."  So his new book, Mastering the Market Cycle, focuses on that aspect because just knowing the position in the cycle is a huge advantage.

- The book focuses on looking at the future not as the past or something that's already happened that might repeat, but look at it as a range of possibilities, a probability distribution.

-  "Most of us have an inherent bias, (we're) essentially cautious or essentially aggressive."  He notes it's very important to assess your personal bias as that affects so much of your success in investing.

-  "One of the keys to successful investing is to either be unemotional or at a minimum, act like you are.  The great investors I know behave in an unemotional fashion."  The problem of course is teaching yourself to be unemotional is counter to human behavior.  So part of it is being born with that predisposition.

-  " 'I don't know.'  It's a great thing to say and not enough people say it."

-  Marks recommends people read Nassim Taleb's book, Fooled by Randomness

-  "There's nothing more dangerous in life than being sure you know something that you don't know."

-  Marks thinks the most useful chapter of his new book is the one that talks about one's attitude toward risk.  From the book: "If I could ask only one question about each investment I had under consideration, it would be, 'how much optimism is factored into the price?'"

-   "We make money from favorable surprises.  If the positive conviction is so high then by definition there can never be a favorable surprise."  Marks labeled this as a number one concept.

-  He says the greatest thing he was ever taught was about stages of a bull market and how people shift from not believing things will get better, to people accepting things are improving, to finally people believing the good times will go on forever.  Buying in the first phase gives cheapest prices because there's not much optimism in the price.  The second phase is when the favorable surprise happens.  Then you reach the phase where there's so much optimism in the price that it's unlikely to yield a profit.

-  Marks thinks we're in the 8th inning of the markets.  However, we don't know how many innings there are in the game.  In a normal game, the good times could be close to ending.  "I think this is a time for more caution than usual."

-  Marks likes playing backgammon since probability is the name of the game.

-  On cycles: the biggest mistake you can make is to ignore the repetitive nature of the cyclical pattern.

-  Marks likes reading Grant's Interest Rate Observer.  Another book that Marks has enjoyed: Factfulness, which he recommends as it takes qualitative viewpoints commonly held and debunks them with data.

- Marks believes bitcoin can't be valued.


Podcast Audio:  Here is the link to stream the podcast episode (mp3 format): click here



Be sure to also check out Marks' new book: Mastering the Market Cycle.

Chris Mayer Interview: World According to Boyar Podcast

Boyar Value Group recently started doing a podcast entitled The World According to Boyar.  In it, they'll conversations with top investors, authors, and businesspeople.  Their first guest was Chris Mayer, author of How Do You Know as well as the investing book: 100 Baggers.  He is the Chief Investment Strategist of Bonner & Partners.  Here's some notes from the podcast as well as the full podcast audio embedded below:


Chris Mayer Interview on Boyar Podcast

- On 100 Baggers, it's basically taking the concept of a 10x return on a stock from Peter Lynch and adding a zero to it, to find the cream of the crop in terms of investment returns.  Mayer looked at all stocks that returned 100x from 1962 to 2014 to find common characteristics.  It returned 365 stocks and the best performing stock of all was Berkshire Hathaway.

- His biggest takeaway was that: return on invested capital is the most important factor.  If you compound at 25% a year for 25 years, that's a 100 bagger.  But that's also an extremely large feat.

-  The returns can often be back-end loaded so patience is one of the most important factors.  The psychology of watching prices head higher and higher and being tempted to sell often keeps people from holding on.  On the other side of the equation, the other problem is during those 100 baggers, you have to often survive multiple big drawdowns.  So psychology plays a big part in being able to withstand the swings.

- Coffee Can Portfolio:  Idea from Journal of Portfolio Management.  Investor just bought a small portfolio of stocks and just didn't touch them for 10 years and performed extremely well, much better than someone who bought the same stocks but actively sold positions.  Mayer named Howard Hughes (HHC) as a stock that could be an example today.  He bought it in 2011 and hasn't sold any shares since.  Another he likes is Fairfax Financial in Canada.

- How Do You Know: A Guide to Clear Thinking About Wall Street, Investing & Life is his new book that's not necessarily a traditional investing book but it's about how you know what you know.  You shouldn't try to know or explain every single little move a stock makes.

Embedded below is the full podcast of Boyar's interview with Chris Mayer:



We also recently posted up some complimentary equity research from Boyar if you missed it.  They've analyzed three stocks they feel have high upside and those reports are available for free: CHTR, BEN, STKL.