Howard Marks just released his new memo. Yes, the ones that even...
Kintsugi Investing@kintsugiinvest
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Feb 07, 2025
~3 min read
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Howard Marks just released his new memo.
Yes, the ones that even Buffett reads.
Here's a 2 min summary of the 5000-word masterpiece:🧵
Yes, the ones that even Buffett reads.
Here's a 2 min summary of the 5000-word masterpiece:🧵
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1) "What is a bubble?"
For Marks, a bubble is not just about high prices; it’s a state of mind.
Key signs:
• "No price too high" thinking
• FOMO driving investments
• Blind faith in "this time is different"
Psychology > numbers.
For Marks, a bubble is not just about high prices; it’s a state of mind.
Key signs:
• "No price too high" thinking
• FOMO driving investments
• Blind faith in "this time is different"
Psychology > numbers.
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2) The 3 stages of a bull market
1️⃣ Few believe recovery is possible.
2️⃣ Improvement gains broader acceptance.
3️⃣ Everyone is convinced "things can only get better forever."
Marks warns: optimism can morph into dangerous euphoria.
1️⃣ Few believe recovery is possible.
2️⃣ Improvement gains broader acceptance.
3️⃣ Everyone is convinced "things can only get better forever."
Marks warns: optimism can morph into dangerous euphoria.
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3) Lessons from history
From the Tulip Mania to the dot-com bubble, investors have been seduced by "newness."
AI today mirrors past fads—tech in the ‘90s, Nifty Fifty in the ‘70s. Often, “new” blinds us to risks.
From the Tulip Mania to the dot-com bubble, investors have been seduced by "newness."
AI today mirrors past fads—tech in the ‘90s, Nifty Fifty in the ‘70s. Often, “new” blinds us to risks.
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4) Magnificent Seven ≠ invincible
Apple, Microsoft, Nvidia, Tesla, etc., dominate the S&P 500 (33% weight).
But history shows giants can stumble—only 6 of the top 20 companies from 2000 remain in the top 20 today.
Apple, Microsoft, Nvidia, Tesla, etc., dominate the S&P 500 (33% weight).
But history shows giants can stumble—only 6 of the top 20 companies from 2000 remain in the top 20 today.
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5) High P/E = low returns
Marks shares a chart (📈) showing S&P 500 forward P/E ratios vs. 10-year returns.
At today's high P/E (22x), 10-year returns have historically been 0 to 2%. Elevated valuations ≠ guaranteed gains.
Marks shares a chart (📈) showing S&P 500 forward P/E ratios vs. 10-year returns.
At today's high P/E (22x), 10-year returns have historically been 0 to 2%. Elevated valuations ≠ guaranteed gains.
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6) FOMO amplifies bubbles
Marks compares market mania to The Emperor's New Clothes.
Everyone feels the need to jump in—until reality (a crash) exposes the delusion.
The lesson: Beware herd behavior.
Marks compares market mania to The Emperor's New Clothes.
Everyone feels the need to jump in—until reality (a crash) exposes the delusion.
The lesson: Beware herd behavior.
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7) The role of "new"
"AI will change the world" is today’s rallying cry, much like the internet was in the '90s.
Marks agrees that innovation can be transformative but cautions: overestimating potential leads to overpricing.
"AI will change the world" is today’s rallying cry, much like the internet was in the '90s.
Marks agrees that innovation can be transformative but cautions: overestimating potential leads to overpricing.
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8) Persistence is hard
Even great companies can falter. Marks points out how Kodak, Polaroid, and Xerox—icons of their eras—lost relevance.
Betting on today’s leaders (e.g., Nvidia) assumes decades of dominance.
That’s risky.
Even great companies can falter. Marks points out how Kodak, Polaroid, and Xerox—icons of their eras—lost relevance.
Betting on today’s leaders (e.g., Nvidia) assumes decades of dominance.
That’s risky.
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9) Signs of froth
U.S. stocks = 70% of the MSCI World Index (highest since 1970).
• Magnificent Seven’s dominance.
• Bitcoin’s 465% rally in 2 years.
• Are these warning signs? Marks thinks so.
U.S. stocks = 70% of the MSCI World Index (highest since 1970).
• Magnificent Seven’s dominance.
• Bitcoin’s 465% rally in 2 years.
• Are these warning signs? Marks thinks so.
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10) Why it matters
“It’s not what you buy; it’s what you pay.”
Marks reminds us that great companies can still be bad investments if overvalued.
High prices today mean lower returns tomorrow.
“It’s not what you buy; it’s what you pay.”
Marks reminds us that great companies can still be bad investments if overvalued.
High prices today mean lower returns tomorrow.
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11) What should investors do?
Marks emphasizes:
• "It’s not what you buy, it’s what you pay."
• Even great companies can be bad investments if overpriced.
• Stay wary of herd behavior, especially when FOMO drives buying.
Marks emphasizes:
• "It’s not what you buy, it’s what you pay."
• Even great companies can be bad investments if overpriced.
• Stay wary of herd behavior, especially when FOMO drives buying.
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12) The verdict
Marks doesn’t label today’s market a bubble, but he urges caution.
"The markets... don’t seem nutty to me. But high-priced and frothy? Yes."
Wise investors temper optimism with vigilance.
What's YOUR take?
Bubble brewing or justifiable exuberance?
Marks doesn’t label today’s market a bubble, but he urges caution.
"The markets... don’t seem nutty to me. But high-priced and frothy? Yes."
Wise investors temper optimism with vigilance.
What's YOUR take?
Bubble brewing or justifiable exuberance?
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Quick summary of Howard Mark's memo:
1) "What is a bubble?"
2) The 3 stages of a bull market
3) Lessons from history
4) Magnificent Seven ≠ invincible
5) High P/E = low returns
6) FOMO amplifies bubbles
7) The role of "new"
8) Persistence is hard
9) Signs of froth
10) Why it matters
11) What should investors do?
1) "What is a bubble?"
2) The 3 stages of a bull market
3) Lessons from history
4) Magnificent Seven ≠ invincible
5) High P/E = low returns
6) FOMO amplifies bubbles
7) The role of "new"
8) Persistence is hard
9) Signs of froth
10) Why it matters
11) What should investors do?
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We're Zee & @thehowietan:
• Financially-free investors
• Co-founders of Kintsugi Investing
• Passionate about helping others build & repair portfolios
Follow @kintsugiinvest for our learnings in investing
Repost to help others grow⚡️
• Financially-free investors
• Co-founders of Kintsugi Investing
• Passionate about helping others build & repair portfolios
Follow @kintsugiinvest for our learnings in investing
Repost to help others grow⚡️
Kintsugi Investing@kintsugiinvest
Howard Marks just released his new memo.
Yes, the ones that even Buffett reads.
Here's a 2 min summary of the 5000-word masterpiece:🧵
Yes, the ones that even Buffett reads.
Here's a 2 min summary of the 5000-word masterpiece:🧵
16
Zee and I are thinking of hosting a Space to talk about "How to invest in 2025", would you be interested?
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Pls leave a comment if you think another topic will be good for discussion!