Quote for the Week
When you want to understand the perversity of risk, it’s important to recognize that the riskiness of investing comes only partly from the things you invest in. A lot of the risk comes from the behavior of the participants. Almost any asset can be risky or safe, depending on how other investors treat it.
You asked earlier about the formative influences on me. Entering the equity business in 1968 at an institution that practiced nifty-fifty investing was a formative influence because over the next five years or so, we lost 80 or 90 percent of our clients’ money while investing in the best companies in America. That was a pretty good object lesson that the safety or risk in investing doesn’t come from the securities you buy or the companies whose securities they are. Safety and risk come from how the investments are priced. We lost that money because we bought those stocks at price/earnings ratios of 80 and 90, as I recall.
I said in my book that there’s no asset so good that it can’t be overpriced and become a bad investment, and very few assets are so bad that they can’t be underpriced and be a good investment. People just don’t understand this. They say things like, “This is a great company, and you should buy the stock.” If it’s a great company, maybe you should buy the stock — but only at a good price. — Howard Marks (source)
From the Archives
Last Call
- Marks Memo: Taking the Temperature – H. Marks
- Letter #98: Warren Buffett, Shawn Carter (Jay-Z), and Steve Forbes – Letter a Day
- 40 Years, 40 Lessons – Kingswell
- Value Restoration Project w/ Seth Klarman (podcast) – Grant’s Current Yield
- Bill Miller on Markets & Investing (video) – Patient Capital
- GE: Intellectual Laziness – MD&A
- ChatGPT for Finance: Promise and Peril – D. Nadig
- How to Do Great Work – P. Graham
- How to Blow Up a Timeline – Remains of the Day
