Friday, March 7, 2014

A few lessons from Howard Marks

These were written when discussing the Internet bubble valuations in January 2000 (from his memo, “”), but I think they are lessons that are true throughout time, maybe even more so today:
1. The positives behind stocks can be genuine and still produce losses if you overpay for them. 
2. Those positives - and the massive profits that seemingly everyone else is enjoying - can eventually cause those who have resisted participating to capitulate. 
3. A “top” in a stock, group or market occurs when the last holdout who will become a buyer does so. The timing is often unrelated to fundamental developments. 
4. “Prices are too high” is far from synonymous with “the next move will be downward.” Things can be overpriced and stay that way for a long time ... or become far more so. 
5. Eventually, though, valuation has to matter.