Howard Marks: Investors Drive Themselves Nuts Focusing On The Short-Term

In this interview with SJP, Howard Marks discusses how investors drive themselves nuts focusing on the short-term. Here’s an excerpt from the interview:

Marks: The least important thing is the short run.

Everybody’s obsessed with what is going to be inflation over the next six months. What will the Central Bank do in terms of interest rates to fight the inflation, and will the changes in interest rates produce a recession.

This is what everybody wants to know, and consequently of course what will happen to security prices in the next six months.

And the answer is it doesn’t matter.

That’s not what matters.

If you think that those are all short-term considerations. It’s all about the next six months, three months, 12 months, whatever it might be.

Number one, we really can’t know much about the short run number.

Two, if we develop an opinion about the short run we shouldn’t have too much confidence in it. It’s hard to get that right number.

Three, nobody should change their portfolio wholesale in response to what they think is going to happen over the next six months.

And number four, the next six months isn’t what matters.

My clients and your clients should be investing for the next 10, 20, 30 years, and if you have a position today what happens in the next six months is probably not going to affect the outcome of the next 20/30 years.

And so why does everybody care about it so much, and the answer is it’s kind of like social media, it’s all around us. People are talking about it all the time. The newspapers talk about it. The talking heads on TV talk about it.

And everybody gets on TV and they said well you think there’s going to be a recession in six months. No, I don’t think so. Yes, I think, the bad, yeah not too bad, but pretty bad.

This isn’t what matters and people drive themselves nuts with these matters and they hurt their performance.

You can watch the entire discussion here: