Howard Marks

Howard Marks built his reputation primarily in distressed debt and credit investing rather than in stocks, but his memos to clients have made him one of the most widely read voices in all of value-oriented investing, admired for applying the discipline's core logic — buying below intrinsic worth, respecting risk, resisting crowd psychology — to markets far removed from traditional equity picking.

Who He Was

Marks was born in 1946 in New York City. He earned a bachelor's degree in finance from the Wharton School at the University of Pennsylvania and, in 1969, an MBA in accounting and marketing from the University of Chicago's Booth School of Business, where he was exposed early to the efficient-market theories that dominated academic finance at the time — ideas he would spend much of his later career pushing back against in practice. He began his career at Citicorp in 1969, working as an equity research analyst and eventually becoming the firm's director of research.

In the mid-1980s Marks moved to the TCW Group, where he and colleague Bruce Karsh built one of the earliest dedicated distressed-debt investment operations on Wall Street, alongside work in high-yield bonds and convertible securities. In 1995 Marks, Karsh, and several colleagues left TCW to found Oaktree Capital Management in Los Angeles, an investment firm built around credit, distressed debt, and other less-efficient corners of the market. Oaktree grew into one of the largest alternative investment managers in the world, raising the largest distressed-debt fund in history during the 2008 financial crisis, and Marks has continued writing and publishing his views as the firm's co-chairman. He is the author of The Most Important Thing (2011) and Mastering the Market Cycle (2018), and his client memos, published regularly since the early 1990s, are read closely across the investment industry, including, famously, by Warren Buffett.

Key Ideas

Marks's writing returns again and again to a small number of themes about risk, cycles, and independent thinking.

• Risk isn't volatility. Marks has argued at length that the academic habit of equating risk with price volatility misses the point for a real investor; what actually matters is the risk of a permanent loss of capital, which is a very different thing from a security's price simply moving around in the short term.
• Market cycles. Marks emphasizes that markets move in recurring cycles driven by shifts in investor psychology between greed and fear, and between excessive optimism and excessive pessimism. He argues that precisely forecasting the future is far less useful than honestly gauging where the market currently sits within its cycle, and adjusting one's caution or aggressiveness accordingly — much the way Benjamin Graham's Mr. Market swings unpredictably between euphoria and despair.
• Second-level thinking. Marks distinguishes between "first-level thinking," which stops at an obvious conclusion about a company or the market, and "second-level thinking," which asks how that conclusion compares with what everyone else already believes, and where consensus expectations might be wrong. He argues that only second-level thinking, applied consistently, can produce returns better than the market's average — since any insight everyone already shares is already reflected in price.

Marks is candid that markets cannot be timed with precision, a point he distilled in a widely read 2001 memo: "You can't predict. You can prepare." That philosophy — building a portfolio and a temperament resilient to whatever the cycle brings, rather than betting on forecasts — runs through nearly everything else he has written.

Marks's memos are frequently cited alongside Buffett's shareholder letters as some of the most useful publicly available education in investing, not because they offer stock tips, but because they repeatedly show how a disciplined, probabilistic, risk-aware temperament can be applied to markets well beyond the traditional value-investing territory of cheap stocks.