A few key notes and many brilliant insights from Howard Marks recent memo "Knowledge Of The Future" which raises important questions for policy makers, government and regulators of financial institutions. (1/n)
Investing is the act of positioning capital so as to profit from future developments. There is no such thing as future developments. (2/n)
There is practically no such thing as meaningful knowledge of future investment environment. (3/n)
There has to be good reason to believe in the past for extrapolation.
Blind faith in the relevance of the past patterns makes no more sense than completely ignoring them. (4/n)
In other words, we may not be able to know the future, but that doesn’t keep us from reaching conclusions about it and holding them firmly. (5/n)
There’s no algorithm for deciding whether to favor life versus economic improvement for millions. (6/n)
Would there be negative effects of this, such as burgeoning inflation, downgrade of U.S. creditworthiness or $ losing its status as reserve currency (8/n)
How will the economy rebound, and at what speed?
If we have stops and starts, and if workers return gradually, is a V-shaped recovery still likely? (9/n)
investment grade debt? And why should the SEC provide relief to leveraged investment vehicles? (10/n)
We have a buyer and lender of last resort, cushioning pain but taking over the role of the free market. (11/n)
If these parties get to enjoy the fruits of their actions when they’re successful but are protected from loss when they fail, risk-taking is encouraged and risk aversion is suppressed. (13/n)
I see no reason why financiers should be bailed out simply because the event they’re being harmed by was unpredictable(14/n)