Howard Marks, co-chairman of Oaktree Capital Management, discusses his investment philosophy and the art of assessing risk and identifying investment opportunities.
On the 2022 market cycle: “I think we're in moderate territory today. Some people started calling bubble two years ago, June of '20. I haven't called bubble at all. I think things are high, but not crazy. I think that valuations have always been reasonable relative to interest rates. It happens that interest rates couldn't stay as low as they were, so valuations have proved to be vulnerable. But I just don't think it's crazy. And now I think that the events of the last six months have taken the bloom off the rose, that most of the excesses have been driven out.”
On guarding against overpriced markets and bubbles: “As long as you realize that nothing is sure to happen in this business -- every irrationality can be exceeded, that means that you should try to bullet proof your affairs so that it may be likely to happen, but you want to be able to last long enough so that you're around when it happens.”
On the keys to successful investing: “In order to outperform, by definition, you have to depart from the crowd. You have to hold a different position. And you have to have resolve to do it … Tomorrow's winners are usually found on the pile of today's losers, not on today's pile of today's winners. But to prospect in today's pile of losers -- the things that everybody else [thinks] are junk, you have to be idiosyncratic. And you have to take on idiosyncratic positions. And it's a rare person who can do that and not feel some discomfort … In order to be a great investor, you have to dare to be different … You have to be willing to do some things that are unpopular.”
On the power of failure and humility: “I believe strongly that success carries within itself the seeds of failure. And failure carries the seeds of success. What do you learn from success? ‘I can do it. I can do it again. It's easy. I can do it in other fields. I can do it with more money. I can do it alone. It was me; it wasn't a team.’ And these are horrible lessons. So, I think that success teaches terrible lessons, because it plays to our egos. And I think you learn more from your failures. And hopefully, you learn humility.”
This episode was recorded on June 1, 2022