The Best of . . .

Summary

• Howard Marks released a collection of his best memos to celebrate 35 years of writing them, with the first memo dated October 12, 1990, and the collection including entries through October 12, 2025.
• The memos cover enduring investing truths such as second-level thinking, risk control, market cycles, & the futility of macro forecasting, alongside chronicles of the dot-com bubble, the Global Financial Crisis, & the 2022 interest rate policy shift.
• The 1990 memo "The Route to Performance" established that long-term success comes from consistent good returns & an absence of poor years rather than occasional brilliant successes.
• A 1991 memo noted market swings from extreme pessimism to reasonable sentiment, highlighting the pendulum-like fluctuation between optimism & pessimism as a dependable market feature.
• The 1995 memo used sports metaphors to describe a game plan focused on avoiding strikeouts & achieving a high batting average over time instead of swinging for the fences.
• A 2000 memo described the psychology of market bubbles during the dot-com boom, noting that equity valuations fueled by excessive belief in the "new, new thing" eventually fell.
• The 2001 memo reconciled academic investment theory with real-world reality, stating that accepting the efficient market hypothesis precludes active investing while ignoring it leads to critical mistakes.
• A November 2001 memo focused on economic & market cycles, asserting that investors may never know where they are going but must know where they are to determine their response.
• The May 2002 memo encouraged investors to eschew macro forecasts & focus on evaluating fundamentals & developing specialized expertise.
• A November 2002 memo explained that equity returns come from earnings growth or valuation upgrades, & that relying on the latter may not work long-term.
• The September 2003 memo emphasized that avoiding losers allows winners to take care of themselves, using tennis & baseball anecdotes to illustrate this philosophy.
• A May 2004 memo contrasted the "I know" school of investors with the "I don't know" school, which is consistent, risk-conscious, & focused on fundamentals.
• The October 2004 memo on hedge funds stated that no asset class has a birthright to returns & that performance depends on available mispriced opportunities & investor skill.
• A January 2006 memo defined risk as the range of possible outcomes rather than volatility, noting that investors must understand risk & be compensated before bearing it.
• The September 2006 memo discussed how far out on a limb investors should venture to pursue superior results.
• An October 2006 memo warned of increased caution as vast sums in asset classes like buyout funds & real estate ballooned management fees & potential risks.
• A December 2006 memo analyzed the collapse of Amaranth Advisors, attributing it to aggressive bets mistaken for skill rather than short-term luck.
• The February 2007 memo warned that too much money chasing too few investments led to capital market behavior resulting in the subprime mortgage meltdown.
• A July 2007 memo highlighted excessive leverage, untested securitization structures, & easy access to capital as worrisome developments preceding the crisis.
• The July 2007 sequel described how market events initiated a swing back of the market pendulum, noting that while specific triggers are hard to predict, the pattern repeats.
• An October 2007 memo noted a rapid shift in market sentiment due to negative events, leverage, & lack of liquidity, causing risk to bite back.
• The December 2008 memo recorded the collapse of investor psychology following the Lehman Brothers bankruptcy, identifying excessive negativity as a signal for contrarian opportunities.
• A December 2010 memo explained that levered mortgage-backed securities caused the Global Financial Crisis & that prudent leverage depends on asset riskiness & holder staying power.
• The March 2012 memo on gold stated that its value relies solely on collective agreement rather than intrinsic value or cash flow, making it difficult to invest in analytically.
• A June 2012 memo stressed the importance of historical awareness, noting that lessons are often forgotten during periods of excessive optimism or pessimism.
• The March 2013 memo explained that buying at a bargain requires a seller to sell too cheap, as fair prices do not generate alpha.
• A January 2014 memo noted that prospective equity returns cannot be computed & that better recent returns often predict less good near-future returns.
• The April 2014 memo emphasized the role of luck in investing, challenging the idea that success is always the result of hard work & skill.
• A June 2015 memo reiterated that unconventional behavior is the only route to superior results, requiring the courage to be different & wrong.
• The September 2015 memo defined risk as the range of possible unpleasant outcomes rather than volatility, stating it cannot be reduced to a number or managed by algorithm.
• A January 2016 memo titled "None of This is Easy" stressed that superior investing requires superior insight, emotional control, & an emphasis on price.
• The January 2016 memo "On the Couch" analyzed investor irrationality & why obvious things often turn out to be wrong.
• A June 2016 memo addressed the error of taking advice from the market, noting that short-term behavior stems from irrational swings in perception.
• The January 2020 memo discussed the "this time it's different" notion used to justify soaring prices for popular assets & analyzed nine such theories.
• A May 2020 memo built on the principle that decision quality cannot be judged by outcome, noting that luck can swamp skill in the short run.
• The May 2020 memo against the backdrop of the pandemic stated that macro forecasting is futile & that macro knowledge offers no edge because everyone knows it.
• A January 2021 memo noted that most people lack expertise to identify which experts possess it & that macro forecasts are seldom helpful.
• The July 2022 memo argued that value investors should expand their toolbox beyond bottom-fishing to include winners in an environment with fewer bargains.
• A September 2022 memo stated that outperforming requires being more right than most & having the courage to depart from the pack.
• The November 2022 memo argued that macro forecasts are rarely accurate because no algorithm can capture the workings of an incredibly complex world.
• A December 2022 memo identified asymmetry as the cornerstone of investing excellence, requiring returns more than commensurate with risk.
• The July 2023 memo "Sea Change" reviewed the end of 40 years of declining interest rates & noted that strategies must be reviewed when the investing environment undergoes fundamental change.
• The final entry reviewed five main market calls made when markets were crazily elevated or depressed