Howard Marks - Successful Investing Through Buying Things Well

The most successful investors combine a profound analytical understanding of financial markets and the economy at large with the ability to act on those ideas. My guest today has these two attributes in spades. Today’s conversation is with Howard Marks, the Co-Founder and Co-Chairman of Oaktree Capital Management, which is one of the largest credit investors in the world and certainly the largest investor in distressed securities. Howard started his career at Citicorp as an equity research analyst and then Director of Research, Vice President, and Senior Portfolio Manager overseeing convertible and high yield debt. After leaving Citicorp, he moved to The TCW Group, where once again, he was responsible for investments in distressed debt, high yield bonds, and convertible securities. In 1995 he and another group of partners from TCW founded Oaktree, where he remains today. Howard is known for his penetrating mind and his memos are a must-read for any serious student of the market and I can’t think of anyone better than him to discuss the many complexities of markets and the economy of today.  On this episode, Howard and I discuss how he ended up in the high yields space, why running research at Citicorp was a low point in his career, the concept of “efficientization”, why Graham and Dodd called bond investing a negative art, why complexity and early adoption are your friends, the dominant challenge for investors today, Howard’s prolific writing, and so much more!   Key Topics: Howard’s early life from working adding machines in an accounting office to studying finance at university (3:30) How Howard ended up working at Citicorp for his first job out of school (5:39) Why running research at Citicorp was an extremely unsatisfactory role for Howard (7:25) Howard’s involuntary transition from analyst into the high yield space (9:01) The big difference between the market being efficient and being right (11:37) The concept of “efficientization” (13:14) Two main causes of mistakes in the market? (14:04) Howard’s holy grail in investing (15:12) Why Howard doesn’t use macro forecasting in his decision making (17:24) The dawn of the high yield bond era (18:55) Different approaches to the analysis of equities versus high yield bonds (20:07) Why Graham and Dodd called bond investing a negative art (21:03) Howard’s early days at The TCW Group (23:18) Complexity and early adoption as an investor’s friends (24:53) Why you must work at a firm that is in alignment with your investment philosophy (28:05) Howard’s love for writing (31:49) Using memos to shape the company culture (33:30) Why you should analyze your winners (34:47) The “I know” school versus the “I don’t know” school (36:01) The dominant challenge for investors today (38:46) What Howard thinks is behind consistently low yields (42:13) What surprises me about the politics of populism and financial markets (46:43) The rise of populism as a response to the shifting beliefs of the working class (48:16) And much more!   Mentioned in this Episode: Oaktree Capital Management Memos from Howard Marks Howard Marks’ Book | The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor Benjamin Graham & David Dodd’s Book | Security Analysis Howard Marks’ Memos: Us and Them Coming into Focus Mysterious Economic Reality Political Reality Political Reality Meets Economic Reality   Thanks for Listening! Be sure to subscribe on Apple, Google, Spotify, or wherever you get your podcasts. And feel free to drop us a line at [email protected]. Follow the Heilbrunn Center on social media on Instagram, LinkedIn, and more!

Om Podcasten

Value investing is more than an investment strategy — it’s a fundamental way of thinking about finance. Value investing was developed in the 1920s at Columbia Business School by professors Benjamin Graham and David Dodd, MS ’21. The authors of the classic text, Security Analysis, Graham and Dodd were the very pioneers of their field and their security analysis principles provided the first rational basis for investment decisions. Despite the vast and volatile changes in the economy and securities markets during the last several decades, value investing has proven to be the most successful money management strategy ever developed. Value investors’ success over the second half of the twentieth century proved not only the validity of the value approach, but its preeminence over even the most widely taught and practiced modern investment theory, which was developed in the 1950s and ’60s and remains dominant even today. Our mission today is to promote the study and practice of Graham & Dodd’s original investing principles and to improve investing with world-class education, research, and practitioner-academic dialogue. In this podcast you will hear from some of the world’s greatest investors, their views on the investment management industry, how they developed their investment process and how they see the field changing over time.