Howard Marks: Oaktree Capital Memos 1990 – 2009

Single pdf link to all the memo of Howard Marks of Oaktree Capital

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Couldn’t stop myself from copy-pasting this snippet from the same memo and safal niveshak blog. This is just awsome !!

  1. When economic growth is slow or negative and markets are weak, most people worry about losing money and disregard the risk of missing opportunities. Only a few stout-hearted contrarians are capable of imagining that improvement is possible.
  2. Then the economy shows some signs of life, and corporate earnings begin to move up rather than down.
  3. Sooner or later economic growth takes hold visibly and earnings show surprising gains.
  4. This excess of reality over expectations causes security prices to start moving up.
  5. Because of those gains â along with the improving economic and corporate news â the average investor realizes that improvement is actually underway. Confidence rises. Investors feel richer and smarter, forget their prior bad experience, and extrapolate the recent progress.
  6. Skepticism and caution abate; optimism and aggressiveness take their place.
  7. Anyone whoâs been sitting out the dance experiences the pain of watching from the sidelines as assets appreciate. The bystanders feel regret and are gradually sucked in.
  8. The longer this process goes on, the more enthusiasm for investments rises and resistance subsides. People worry less about losing money and more about missing opportunities.
  9. Risk aversion evaporates and investors behave more aggressively. People begin to have difficulty imagining how losses could ever occur.
  10. Financial institutions, subject to same influences, become willing to provide increased financing. In the words of Citibankâs Chuck prince, when the musicâs playing, they see no choice but to dance. Thus they compete for market share by reducing the return they demand and by willing to finance riskier deals.
  11. Easier financing â along with the recent gains â encourages investors to make greater use of leverage. Borrowed capital increase their buying power, and they move to put it to work.
  12. Leveraged investors report the greatest gains, consistent with the old Las Vegas maxim: âthe more you bet, the more you win when you win.â This causes others to emulate them.
  13. The market takes on the appearance of a perpetual-motion machine. Appreciation accelerates, possibly leading to a mania or bubble. Everyone concludes that things can only get better forever. They forget about the risk of losing money and fixate on not missing opportunities. Leveraged buyers become convinced that the things they buy with borrowed money are certain to appreciate at a rate above their borrowing cost.
  14. Eventually things get as good as they can get, the last skeptic capitulates, and the last potential buyer buys.

Thatâs the way the cycle of attitudes towards risk ascends. The skeptic in times of moderation becomes a true believer at the top.

Then the down cycle beginsâ

  1. Once the last potential buyer has bought, thereâs nobody left to take prices higher.
  2. A few unemotional, disciplined and foresighted investors conclude that things have gone too far and a correction is in the cards.
  3. Economic activity and corporate earnings turn down, or they begin to fall short of peopleâs irrationally expanded expectations.
  4. The error of those expectations becomes obvious, causing security prices to start declining. Perhaps someone is daring enough to point out publicly that the emperor of limitless growth has no clothes. Sometimes thereâs a catalyzing event. Or sometimes (see early 2000) security prices begin to fall of their own accord, simply because they had moved too high.
  5. The first price declines cause investors to rethink their analysis, conclusions, commitment to the market and risk tolerance. It becomes clear that appreciation will not go on_ad infinitum._âIâd buy at any priceâ is replaced by âhow can I know what the right price is?â
  6. Weak economic news takes the place of positive reports.
  7. The average investor realizes that things are getting worse.
  8. Interest in investing declines. Selling replaces buying.
  9. Investors who sat out the dance â or who just underweighted the depreciating assets â are lionized for their wisdom, and holders start to feel stupid.
  10. Giddy enthusiasm is replaced by sober skepticism. Risk tolerance declines and risk aversion is on the upswing. People switch from worrying about missing opportunity to worrying about losing money.
  11. Financial institutions become less willing to extend credit to investors. At the extremes, investors receive margin calls.
  12. Investors who borrowed to buy are heavily penalized, and the media report on leveraged entitiesâ spectacular meltdowns. Forced selling in response to margin calls and covenant violations causes price declines to accelerate.
  13. Eventually we hear some familiar refrains: âI wouldnât buy at any price,â âThereâs no negative case that canât be exceeded on the downside,â and âI donât care if I ever make another penny in the market; I just donât want to lose any more.â
  14. The last believer loses faith in the market, selling accelerates, and prices reach their nadir. Everyone concludes that things can only get worse forever.

I have prepared a summary of Howard memo’s right from 1990-2012, which organises Howard thoughts into various topics. This is basically a copy and paste of ideas at one place. you can download it from the comments section of this post.

The pdf link Anil is talking about here.

I love Howard Marks’ approach to investing. I have been reading his book, “The Most Important Thing” over the last 2 months (not getting any time these days to read!!). I think it is an excellent book to read. Also, his collection of letters to investors is fabulous to say the least. I have learnt and reinforced a lot of concepts from him.

Anil - great effort in compiling the document; Subhash - thanks for the link. Enjoying the reading and the learning.

excellent effort subash and anil.

downloaded the pdf file of letters to investors.

I think its worth reading again and again.




I have just started summarizing Howard Marks’ memo in a single PPT. I am able to do it from 2 quarter till now. Will be adding for more quarters slowly. Please go through it and give me your esteemed feedback.

In his latest memo, Howard Marks is seeing an increase in risky behavior and compares it to the 2007 days. Below is the link if you don’t have it bookmarked already -

In conclusion, he points to his Feb 2007 memo -

Hereâs my conclusion from The Race to the Bottom. Iâll let it stand â another case of âditto.â

. . . thereâs a race to the bottom going on, reflecting a widespread reduction in the level of prudence on the part of investors and capital providers. No one can prove at this point that those who participate will be punished, or that their long-run performance wonât exceed that of the naysayers. But that is the usual pattern.

Hi Subash

File missing

Can you please post a new link




I have just started summarizing Howard Marks’ memo in a single PPT. I am able to do it from 2 quarter till now. Will be adding for more quarters slowly. Please go through it and give me your esteemed feedback. Link:

Latest Memo from Howard Marks on Economic Reality - beautifully explains the economics and impact of central bank actions as well as (proposed) government policies in the 21st century.

Total howard marks collections. Thanks to all for sharing this knowledge.


“The Most Important Thing by Howard Marks” teaches us the most important thing which we need to develop for becoming a wise investor.

*Due to the size of file is not permissible so that I have to share link of it.