In this presentation, Howard Marks discusses how to identify when the odds are against you. Here’s an excerpt from the presentation:
What causes the losing tickets to outnumber the winning tickets in the bowl? In my opinion they’re things like this:
A high level of investor optimism as I discussed.
Investors who are spurred on by greed, recent successes, because what makes people more optimistic and greedy than having made money recently.
Investors who are happy with their gains, or jealous of the gains of others, and jealousy is one of the strongest forces all around the world.
Unwise risk tolerance and eagerness to supply capital.
Things like this denote a market which is elevated and a market which is against you. When are these things seen? At market highs, when the cycle reaches its high the probability is that these things have occurred and that the odds are against you.
You can watch the entire presentation here:
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