Monday, February 12, 2018

Howard Marks is Going to Live In Your Brain After Reading 'The Most Important Thing'

Earlier this week I started - and finished - 'The Most Important Thing: Uncommon Sense for the Thoughtful Investor' by Howard Marks

For the second time.

I have been living in the realm of investments lately and this piece of non-fiction lands in the center ring. Based strictly on the title, it reads like it would be one of those, "do this to get rich," or "how to get rich, quick." This book is as far from that category as you can imagine. The opening even states it is not meant to be a "guide" or a "hand-book" of sorts.

It is a composition and expansion on his memo's to investors. Second only the Buffett, the memo's, all of which are archived on the Oaktree website, are pure gold.

For those of you who don't know who Howard Marks is, you should. In 1995, Marks and 5 other partners founded Oaktree Capital Management where he remains the co-chairman. The focus of Oaktree (traded on the New York Stock Exchange under OAK) is on private equity, distressed debt, and high-yield bonds, among others. The public listing IPO'd for $43 dollars raised about $380 million for the firm. Though the stock today is trading at approximately the same level, it bolsters a strong, consistent dividend. 2017 returned roughly 7.00% alone just from dividends. But I digress.

Howard Marks specializes and firmly believes in value investing. (He has appeared many times on television, often talking about the current state of the markets. Typically seen on Bloomberg). It seems his investment philosophy is built around just that. Buffett himself heralded the book saying, "This is a rarity, a useful book." The book itself is created from the same guiding principals encompassing value investing, but goes in a different direction than most. There are no formula's. There is no math. There is no instruction on finding intrinsic value. There is only thoughtfulness.


The Most Important Thing is a thought provoking book built around the philosophy of value investing created by one of the greatest minds in the industry. It is the perfect compliment and expansion of his always insightful memos to his investors.

However, I know I'm repeating myself, you need to understand this isn't a guide on how to invest. Throughout Marks' memos he often references "the most important thing." In the following memo he'll be writing on a different topic all together and say how, "...this is the most important thing..." Investing is hard, and in reality there are a LOT of extremely important factors to consider all at the same time. Some taking precedence over others depending on the situation.

The book is broken down into 20 different chapters with each delving into a specific important thing. Often you'll notice what was mentioned at the beginning will be developed later on, and vice versa. It helps to see different ideas repeated in a different setting or different area and how it the thought process changes.

A recurring theme you'll notice right away is risk and the importance of understanding, recognizing, and managing it. There are multiple chapters dedicated to it because of the gravity of the subject. Marks lays down an argument on the terms of risk versus volatility and whether or not their synonymous. I don't want to give away too much, so that's all I will say on the risk front.

One section really caught my eye relates to this basic idea; in order to earn higher returns, you need to take more risk. It's the mantra I learned in school, read online, and read in books and in articles. But truly it isn't the case! If risky investments had above average returns consistently... they would NOT be risky investments!

Chapter 20, the final of the book, is filled with some thinkers. What I am calling Marks' paragraphs of wisdom. He is able to summarize the most important points put forth in the book into one chapter. If anything, it serves as a great refresher once it's already been read. I've read the book twice, but the last chapter has had it's share of wear and tear. During emotional market times, take the first week of February, the thoughtfulness of the final blurbs were grounding and provided some stress relief.

Overall, I enjoyed this book incredibly so. It was written in a way to show some of Howard Marks' true personality. More importantly, the book provided a plethora of knowledge and philosophy for anyone interested in investing, no matter what skill level. I would consider myself a step up from beginner and loved it. Obviously the heavy hitters think the book holds water as seen by the endorsements on the back jacket. Take Warren Buffet, Seth Klarman, Joel Greenblat, and John Bogle for instance. Each one of them holds decades of experience and have vouched for Marks.

I wish I could go through and show how much of this I have underlined, the notes in the margins, and the pages I have earmarked. The review doesn't do justice the elegance and ease at which the book itself is written. I think it best to take my advice, and the advice of many others and take a look for yourself. As much as I enjoy reading nonfiction books centered around finance or investing or economics, they can get boring. So, so boring....

But this one. To be honest I found it hard to put down.

"The Most Important Thing: Uncommon Sense for the Thoughtful Investor"
Authored By: Howard Marks

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