“Luck is very important according to Marks (Howard Marks, co-Chairman of Oaktree Capital Management)…..Forecasters have been very poor and consistently so, Marks said. In the Summer of 2013, forecasters unanimously predicted that rates would go up after Federal Reserve Chairman Bernanke started talking about tapering…

…This was the most important (investment) decision in 2013 and most forecasters got it wrong as rates went down…The most important (investment) decision of 2014 was the price of oil; very few forecasters got that right either. Marks advised giving up on the forecasting game and taking a more humble approach to fore knowledge. When he is asked what is going to happen to the price of oil, he said the only correct answer is, “I don’t know.”……It is very valuable to forecast radical changes, as in the case of oil prices, but most people don’t get this right and this makes forecasting so unavailing. When something radical happens, someone gets it right, but Marks asks himself did this person get anything else right before or after, or do they just take extreme positions?…The person who successfully predicts the decline in the price of oil or gets the highest return in a given year is lionized by The Wall Street Journal. In the short term, it is impossible to know whether this success was due to luck or skill, but it will come out in the long term because it is hard to be lucky for 20 years.”, Justin Kermond, “Howard Marks on Luck and Skill in Investing”, March 3, 2015

Howard Marks on Luck and Skill in Investing

Posted on March 4, 2015, in Postings. Bookmark the permalink. Leave a comment.

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