Howard Marks has recently released his latest memo – The Seven Worst Words In The World. PS: – They are “too much money chasing too few deals”. Here are my key takeaways:

1. Howard Marks believes that investors knows that the future is unknowable.

However, he also believes that investors can also enhance their likelihood of success if they adapt their investing stance based on where the market is in the cycle. Knowing where are you are in the cycle will help investors decide their investment stance. Should you be taking more risk, more leverage? Or should you be reducing your risk exposure and fortifying your balance sheet. Taking the “temperature” of the market will help you decide these questions.

2. Howard Marks looks at several things to decide if markets are too “frothy”

• Elevated market prices
• High risk tolerance
• Unwise behaviour of market participants
• Excessive optimism

On the reverse, ......