Marks argues that at cycle extremes investors need money and nerve to spend it, not selectivity.
“you don't need conservatism, caution, risk control, discipline, patience or selectivity. You need money and the nerve to spend it.”
Marks argues risk is hidden because it only becomes visible when negative events occur, like flaws exposed by earthquakes.
“I also believe that risk is hidden and deceptive. This is really important. Loss is what happens when risk, the potential for loss collides with negative events.”
Marks says only six three-year periods in a century were better than the last three years for S&P 500.
“There have been ninety seven or ninety eight three year periods by definition. And there have been only six which were better than the last three years.”
Marks argues markets have enjoyed seventeen years without a truly tough period since March 2009, despite brief disruptions.
“the stock market bottomed March 6, I think it was, of 2009, seventeen years ago, this month, and there hasn't really been a tough time in the financial market since then.”
Understanding current cycle position matters more than forecasting for investment success.
“If you want to succeed in the markets, you don’t need to predict the future. What you need is a solid understanding of where we stand today in the cycle. That alone gives you a considerable edge.”
Markets oscillate between extremes of sentiment that drive prices away from fair value.
“The pendulum of financial markets swings constantly between euphoria and depression, between celebrating good news and obsessing over bad news, and therefore between overvaluation and undervaluation.”