Our best-selling title The Most Important Thing: Uncommon Sense for the Thoughtful Investor, by Howard Marks was recently reviewed by Martin Fridson in Barron’s (scroll down to the fourth review).
Fridson praises Marks for offering analysis that is at once commonsensical and unconventional:
Much of the advice dispensed in The Most Important Thing sounds like simple common sense. But common sense is not always common among investors. In the span from 2005 through 2007, as Marks recounts, many market participants bought the “fairy tale” that risk had been vastly reduced through astute central-bank management. What little risk remained, claimed the bulls, had been healthily redistributed through securitization and brought under control by improved computer modeling.
The ensuing financial crisis proved this all to be an illusion, as Marks and a few other clear thinkers recognized beforehand.
The book itself almost did not come into being as Firdson explains:
Oak Tree Capital Chairman Howard Marks originally planned to wait until he retired to write this book. Warren Buffett, a fan of Marks’ famous client memos, offered to contribute a dust-jacket blurb if he would accelerate the publishing timetable. With that inducement, Marks produced what Buffett describes as “a rarity, a useful book.” That assessment is vindicated by many valuable insights into the psychological roots of investors’ habitual errors.
This isn’t a book of formulas for picking stocks. Instead, it offers tips on thinking through your decisions. With a little more thought, Marks suggests, investors can overcome the emotional barriers to success. For instance, many bad purchases result from fear of missing out while others are striking it rich. Investors who compare themselves in this manner tend to jump in long after the money has been made, buying at the top of the market.