Summary of talk by Howard Marks in India. The talk was mostly around Marks’ investment philosophy over the years. It did not really have new material that he hasn’t covered in his book (The most important thing), and quarterly memos, but still good to hear the timeless principles that have worked for him over 21 years at Oaktree (they have compounded at 19% net, since 1995):
• Most important criteria for an investment firm’s success is that all team members should have the same investment framework and value system and complementary skill sets. Else it doesn’t work over the long term. The partners at Oaktree are so closely aligned with each other that they have never had to take a vote in 21 years
• They have been successful in identifying the 3 large bubbles in the last 3 decades by avoiding accesses. They don’t know the timing of the bubble, but when they see over-generalization in the market (Eg. “tech stocks are not expensive at any price” or “mortgages are risk free investments”), they think it’s time to be super cautious
• They don’t think the market is in a bubble right now, but is nearing one, although timing can never be known for sure. They are sitting on $21B cash of their $100B corpus. In a 0% interest rate world, people are happy buying junk bonds at 5-6% yield. This doesn’t make sense to Oaktree, because they think junk bonds should yield 12-20% for them to make sense.
• At the time of making an investment, ask yourself – “how much optimism or pessimism is already factored into this price”
• Buying good companies DOES NOT EQUAL buying companies well…Entry price is the most important criteria for making any investment decision, be it a high quality company or a junk bond. At the right price, even a junk bond is AAA
• You can never time the bubble’s peak. You should just increase the level of caution and discipline if you find market to be frothy
• If you are not confused, you are doing it wrong. No good investor is 100% sure of the future outcome. You have to be unsure and skeptical. If something is obviously great, then it won’t be a bargain. I am always worried when I make an investment decision. That’s the only way there is. You can never be totally confident of a thesis.
• If someone says where are interest rates, currency etc headed, they have no idea what they are talking about. In 1982 Fed Chairman said in an interview – “If someone asks me if interest rates will go up or down, my answer is YES” 
• Investing is like being an airline pilot – hours of boredom punctuated by moments of terror
• When there is nothing clever to do, mistakes lie in trying to do something clever
• High risk DOES NOT EQUAL High return. If high risk means high return, then it’s not high risk by definition. In fact, in investing - LOW Risk = HIGH Return…Always think of the downside or the worst case scenario. Avoid downside and the upside will take care of itself. Unless you are a professional tennis player – avoiding unforced errors is more important than hitting aces. Just keep the ball in the play, and you will win
• Advice for investors – 1) be unemotional and 2) read anything and everything you can lay your hands on.
• He is writing his second book which is on asset selection and market cycles and will be out this year.
. Thank you for the link.