The Memo by Howard Marks Fewer Losers, or More Winners?
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Sep 12, 2023 Howard Marks discusses the choice between more winners or fewer losers in investing. He explores risk control in bond investing and the analogy between tennis and investing. The impact of style and execution on outcomes is examined, along with the challenges of keeping up with equity indices. The relationship between risk and returns, the efficient market hypothesis, and psychological factors in investor behavior are also discussed.
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The Power of Consistency
- Howard Marks recounts David van Benscoten's consistent second-quartile returns at General Mills Pension Fund.
- This consistency, while not flashy, ultimately led to top-percentile overall performance, highlighting the power of avoiding losses.
Fixed Income: A Negative Art
- Graham and Dodd describe fixed income investing as a "negative art".
- Success comes from avoiding defaults, not picking winners, as all paying bonds deliver the same return.
Livermore's Wisdom
- Marks discovered a quote in Jesse Livermore's book, mirroring Oaktree's motto: "Losers never do."
- This emphasizes the importance of avoiding losses, as winners will naturally emerge.