Howard Marks has released his latest memo titled – Uncertainty, in which he discusses the uncertainty associated with investing and the difficulty of trying to forecast the future. Included in the memo are eight of the best quotes from some of the greatest minds on forecasting:
We have two classes of forecasters: Those who don’t know – and those who don’t know they don’t know.
John Kenneth Galbraith
No amount of sophistication is going to allay the fact that all of your knowledge is about the past and all your decisions are about the future.
Ian E. Wilson (former Chairman of GE)
Those who have knowledge don’t predict; those who predict don’t have knowledge.
People can foresee the future only when it coincides with their own wishes, and the most grossly obvious facts can be ignored when they are unwelcome.
Forecasts create the mirage that the future is knowable.
I never think of the future – it comes soon enough.
The future you shall know when it has come; before then forget it.
Forecasts usually tell us more of the forecaster than of the future.
He also provided a great piece on ‘investing scared’ and finding the right pace for investing:
From the very beginning of my investing career, I’ve felt a sense of uncertainty. But I don’t think that’s a bad thing:
• “Investing scared” – a less glamorous term than “applying appropriate risk aversion” – will push you to do thorough due diligence, employ conservative assumptions, insist on an ample margin of safety in case things go wrong, and invest only when the potential return is at least commensurate with the risk. In fact, I think worry sharpens your focus. Investing scared will result in making fewer mistakes (although perhaps at the price of failing to take maximum advantage of bull markets).
• When I started investing in high yield bonds in 1978, and when Bruce Karsh and I first targeted distressed debt in 1988, it seemed clear that the route to long-term success in such uncertain areas lay in limiting losses rather than targeting maximum gains. That approach has permitted us to still be here, while many one-time competitors no longer are.
• I can tell you that in the Global Financial Crisis, following the bankruptcy of Lehman Brothers, we felt enormous uncertainty. If you didn’t, there was something wrong with you, since there was a meaningful possibility the financial system would collapse. When we started buying, Bruce came to me often saying, “I think we’re going too slow,” and then the next day, “I think we’re going too fast.” But that didn’t keep him from investing an average of $450 million per week over the last 15 weeks of 2008. I think Bruce’s ability to grapple with his doubts helped him arrive at the right pace of investment.
You can read the entire memo here:
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