Thread by @MnkeDaniel

Howard Marks Memos from 1996-2000

The Key Learnings Summarized in 1 to 2 Tweets each.

Here we Go 👇🏼

1996 - Will it be different this Time

“There is no natural law that says we have to have a recession.”

Whenever things go well, there is the narrative of a paradigm change.

This time it’s different because *insert reason*

In the end, history has always shown us that markets are cyclical.

What comes, eventually goes, and the other way around.

As long as humans are in the markets, this won’t change.

The main reason for cycles is human nature.

1997 - Are you an Investor or Speculator?

Investors know two things. Value AND Price.
Both are required to make an intelligent investment decision.

Speculators only know one of the two.
They either focus on value or price.

Speculators also tend to join in exuberant and rising markets.

Investors, on the other hand, tend to do the opposite.

Yet, this is not a rule - more an observation.

1998 - Who Knew?

We’ve talked about the value of predictions in the memos before.
They’re mostly wrong or right and useless.

But there are signs about the ‘markets mood.’
Being aware of those signs when they occur is enough to profit as an investor.

When headlines are positive without exception, it’s time for caution.

When headlines are consistently negative, it’s time to look for bargains.

This approach always has been and, most likely, always will be profitable.

And that’s quite a statement.

1998 - Genius isn’t Enough

“Brilliance, like pride, often goes before the fall.”

There is no silver bullet. No strategy for high returns without risk.

Throughout history, many people have been celebrated as geniuses.
Most of them disappeared when the bull market was over.

The most brilliant investors never think of themselves as geniuses.

And they don’t look like heroes in bull markets.
Quite the opposite.

The most successful investors of all time planted the seeds for success in bear markets.

1999 - How’s the Market

In 1999, bulls joined with the media to interpret everything in a positive light.

Remember when we talked about only positive news in exuberant markets?

That’s what happened in the late 1990s.

A self-reinforcing cycle of bullish news hits investors.
And, at that point, half the population are investors.

A clear sign for the intelligent investor not to participate in the market.

Neither on the buy or on the sell side.

Discovering an exuberant market is not enough to profit by selling short.

You never know when things will turn around. You only know they will. Eventually.

“Being too early is indistinguishable from being wrong.”

2000 - Irrational Exuberance

In the late 1990s, investing without reason was the most prominent investing style.

The reasonable investors who tried to play in the markets lost.
Irrational markets can kill you.

The only sure way to survive is not to participate.

And the only way to do that is to know that this phase will end.

Things will get back to ‘normal’.’ You know why.

The paradigm didn’t change. What comes, eventually goes.

Thanks for reading. I hope you learned something new today.

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