Howard Marks is a very respected investor and a fantastic writer. I read his newsletters regularly and had also read his first book “The Most Important Thing” – which I consider to be in the top 5 investment books I have ever read. So, I was excited to read his second book.
What is it all about?
The economy and markets go through clear cycles (booms and busts), driven by the people’s tendency to take things to excess. This book tries to help identify where we are in any particular cycle and how to effectively navigate based on that positioning.
What caused me to pause?
There are many very useful investment nuggets throughout the book, but the predominant theme is that the greatest investment decisions are made at the extremes of cycles, which is precisely when it is hardest to take the contrarian view. He says the following words should be removed from every intelligent investor’s vocabulary – “never,” “always,” “forever,” “can’t,” “won’t,” “will,” and “has to.” When investors say “this time is different,” it almost never is.
How will this book change my habits or influence me?
Having experienced many market cycles throughout my career, my usual regrets were not being aggressive enough to be more contrarian when the market is at peaks and valleys. As the book says, “There are three ingredients for success – aggressiveness, timing, and skill – and if you have enough aggressiveness at the right time, you don’t need that much skill”. This was a good reminder to take predominant emotions (greed at the top, fear at the bottom) out of investment decisions.
Add this to your reading list if…
You want an accessible book on the psychology of market cycles distilled by someone who has had great success navigating them over the years. However, this was a rather narrow topic and he borrows many ideas from his first book. If you haven’t read “The Most Important Thing,” I would start there before tackling this one.