Although this is how Howard Marks ended his May 2003 Memo “What's Going On?”, I think it is also a perfect way to go about investing in today’s market.
“In recent times we've had several reminders regarding the inevitability of the market pendulum's swing, the propensity of investment popularity to wax and wane, the extremes of fluctuations, and the dramatic influence of cash flows. Some years, these transient influences will benefit us, as they have this year. Other years they're sure to hurt.
We can try to cope by understanding where the pendulum stands at a point in time and striving to anticipate its future swings. Or we can put our energy into emphasizing long-term value under the assumption that we'll be able to ride out the fluctuations if we're right about the values. To help us deal with the short-run developments, we've chosen to do some of each in the affected areas.
- We're being very candid about market conditions.
- We're limiting our assets under management.
- And if market conditions don't take a turn for the better, our clients should expect a reduced ability to profitably employ capital in our markets.
As to the long run, we're confident our adherence to value investing will continue to get us through.”