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B. G., Opalesque Geneva: In his latest memo, Taking the Temperature, Howard Marks, co-chairman at global investment manager Oaktree Capital, reviewed five memos he had written between 2000 and 2020 that contained market calls that turned out to be right. This was to lay the groundwork for a discussion of how one can make useful observations regarding the status of the markets.
One of the things to do is to avoid making macro calls too often, he says. "Most of the time, you have nothing to lose by abstaining from trying to adroitly get in and out of the markets: you merely participate in their long-term trends, and those have been very favourable."
Furthermore, when markets are at extreme highs or lows, the essential requirement for achieving a superior view of their future performance lies in understanding what's responsible for the current conditions. "To do that, the essential inputs aren't economic data or financial statement analysis. The key lies in understanding prevailing investor psychology."
He lists the things one must do to take the temperature of the market:
1. Engage in pattern recognition. Study market history in order to better understand the implications of today's events. "Ironically, when viewed over the long term, investor psychology and thus market cycles fluctuate in ways that approach dependability."
2. Und...................... To view our full article Click here
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