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Alternative Market Briefing

Marks delves into what really matters

Thursday, December 01, 2022

B. G., Opalesque Geneva:

Howard Marks, co-founder and co-chairman of Oaktree Capital Management, weighs what should and should not matter for investors in his latest memo last week.

Among the things that do not matter, he lists short-term events, the trading mentality, short-term performance, hyper-activity, and volatility. Giving too much importance to the latter, he says, resulted in investors piling into hedge funds these last 20 years or so. Citing Warren Buffet liberally, he makes a case for keeping one's composure as opposed to fidgeting with one's portfolio.

Short term events

One of the first things that don't matter to investors is short-term events. "Most forecasts are extrapolations, and most of the time things don't change, so extrapolations are usually correct, but not particularly profitable," Howard Marks says in the memo. " On the other hand, accurate forecasts of deviations from trend can be very profitable, but they're hard to make and hard to act on."

Security pricing is not a dependable process that accurately follows a set of rules because events are unpredictable and investors' reactions to the events are unpredictable. "In the short term, the ups and downs of (security) prices are influenced far more by swings in investo......................

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