The Memo by Howard Marks The Calculus of Value
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Aug 14, 2025 The podcast delves into the intricate relationship between value and price, illustrating how this connection can shape long-term investment outcomes. It emphasizes the subjective nature of intrinsic value and the impact of investor psychology on market dynamics. Discussion on the limitations of conventional metrics like the P.E. ratio offers a deeper understanding of company valuation. Additionally, it covers recent market fluctuations, including reactions to tariffs and inflation, while providing strategies to navigate these uncertainties for better investment positioning.
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Memo Born On A Flight
- Howard Marks wrote a memo during a Wi-Fi-less flight and found it answered many client questions later.
- He published a memo marking 25 years since Bubble.com and followed up with On Bubble Watch.
Earning Power Defines Value
- Value derives from an asset's earning power today and in the future, including tangible and intangible components.
- Management's ability to combine assets creates synergy that boosts overall earning power.
Price Is Market Consensus
- Price is the market's consensus view of value formed by buyers' and sellers' opinions and votes.
- Short-term prices reflect investor psychology more than fundamentals, causing deviations from intrinsic value.
