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One of the most successful investors in the world is Howard Marks of Oaktree Capital Management. One of the things I look forward to every quarter is the letter he writes to his clients – it goes right to the top of my reading list. Not only is it always full of generally brilliant investment counsel, Howard is also a really great writer. He has an easy style that pulls you through his letter effortlessly.
I have never sent his letter to you as an Outside the Box, as the copies I get are clearly watermarked and copyrighted. So I was surprised and delighted to learn that the letter is free when I listened to a speech by Howard in which he encouraged everyone to get it. Unlike another hundred-billion-dollar hedge fund company that shall go unnamed, Oaktree evidently thinks that brilliance should be shared.
I am especially pleased to be able to pass on this latest issue, in which Howard returns to a theme he has used in the past, which is the parallels between investing and sports. He recounts the career of Yogi Berra, who sadly passed away in September. Yogi was always a fan favorite, and he was certainly one of mine; but it was his consistency, both on offense and defense, that made him great.
Marks goes on to defend the seemingly indefensible: in last year’s Super Bowl, Pete Carroll, coach of the Seattle Seahawks, called for a passing play on the one-yard line as time was running out, which as anyone who watched that game would remember, was one of the most spectacularly unsuccessful decisions of all time. But Howard asks us, “His decision was unsuccessful, but was it wrong?”
Can we judge a career on one play? I am grateful that my investment and writing careers are not judged solely by my many mistakes.
This past weekend at the T3 Conference in Miami was enlightening. Todd Harrison put together a great lineup of speakers who represented a wide range of investment styles and strategies. Perhaps because I have been looking at alternative income strategies in a world of low interest rates, I was particularly intrigued by how investors are finding reasonable yield income. I wrote seven years ago that I thought private credit would become a very large part of the investment spectrum in the future, and it is certainly turning out that way. The whole burgeoning world of “shadow banks” has been an unintended consequence of Dodd-Frank. That overreaching regulation, coupled with enhanced liquidity requirements, has severely limited the ability of small banks to lend. Private-credit funds are being set up to go where banks can’t or won’t, and frankly they have a natural advantage. Their cost of money is lower than banks’, and their overhead is even less. They typically don’t leverage as much as banks do, but they can still produce returns that any bank would be happy with. There is more and more interest in making these investment vehicles more accessible to the public, and I applaud anyone who tries.
Plus, it was just good to see so many friends, then sit by the pool for an afternoon after the conference was over. It was supposed to rain, but we got lucky and caught some sunshine in Florida.
Now I’m back in Dallas and working away on the new book. I am told we have all the volunteer research assistants we need, so if you haven’t contacted us yet, my staff has asked me to suggest that we are full up.
Have a great week, and go to your favorite spot to read and think as you enjoy Howard Marks’ latest memo.
Continue reading “Inspiration from the World of Sports”
