A great company, everyone knows it, and the stock has risen all year
Quality and price are different things. This example is paraphrased from how Marks explains it in his book
Famous Traders · Value / Credit
Howard Marks
Howard Marks / The Memo Writer Buffett Reads First, Who Buys Debt When the World Panics
He’s not famous for predicting markets but for asking where we stand right now. His client memos, written since 1990, warned of the 2000 bubble before the peak, and when the world was most afraid in 2008, his firm bought billions of dollars of beaten-down debt. On this page you can take the market’s temperature, see how consistency wins, and work out how bad cheap debt has to get before you lose money.
MEMOREAD FIRST
- TO
- Clients
- RE
- Where we stand
- DATE
- 1990 → today
The market rarely stops at the midpointWe can’t predict But we can prepareThe price you pay matters more than what you buy
Illustration: a mock memo summarising his ideas, not a real document. No openly licensed photo was found
Born1946
First memo1990
Co-founded Oaktree1995
The 2008 fund$10.9B
OCM Opportunities Fund VII · 2008$10.9BThe largest distressed debt fund of its kind at the time
After Lehman’s collapse · about 3 months≈$6BInvested in beaten-down debt, averaging about $500 million a week
Brookfield · 201962%Bought a stake in Oaktree for about $4.7 billion, and bought the rest in 2026
01
ProfileQuick facts
NameHoward S. Marks
Born1946 in New York City, USA
EducationBachelor’s degree in finance from Wharton, University of Pennsylvania (with honours), with a minor in Japanese studies, and an MBA from the University of Chicago in 1969. A CFA charterholder
PositionCo-Chairman of Oaktree Capital Management and a director of Brookfield Corporation
The journeyCiticorp 1969–1985 · TCW 1985–1995 · Co-founded Oaktree in April 1995 with 4 partners
ExpertiseHigh-yield bonds, convertible bonds and distressed debt
BooksThe Most Important Thing (2011) and Mastering the Market Cycle (2018)
Known forClient memos written continuously since 1990. Warren Buffett says they’re the first thing he opens
02
From Citibank to OaktreeFrom a stock analyst burned by the Nifty Fifty to the founder of Oaktree
Marks started at Citibank in 1969, when the bank was buying the country’s best companies regardless of price, and saw those stocks cost their holders almost everything. This lesson made him focus on whether a price is cheap or expensive, rather than whether a company is good
From a high-yield bond portfolio in 1978 to TCW and Oaktree, he made his name in markets others didn’t want to touch. Tap each stage to follow his journey
FILE · 1946–2026Marks’ career file
1946 · Born in New York City in 1946. He calls himself lucky to have been born during America’s long post-war economic expansion
1 / 14
MEMO SHELF · 7 selectedThe most talked-about memos
- 12 Oct 1990The Route to PerformanceThe first memo: winning in the long run by not losing big
- 2 Jan 2000bubble.comA warning about the internet stock bubble, and the first memo anyone responded to
- 20 Nov 2001You Can’t Predict. You Can Prepare.You can’t predict, but you can prepare
- 14 Feb 2007The Race to the BottomLenders racing each other to lower standards
- 15 Oct 2008The Limits to NegativismFear can be as excessive as greed
- Dec 2022Sea ChangeThe low interest rate era may be over
- 7 Jan 2025On Bubble WatchA fresh look at bubble signals
Titles and dates as published on the Oaktree website and in media citing them. The descriptions are our summaries. All the memos can be read free on the Oaktree website
A principle he often repeatsRisk means more things can happen than will happen
Paraphrased, not a direct quote
03
Where do we stand?Lab: take the market’s temperature with the pendulum
Marks says we don’t need to know where the market will go, but we should know where it stands now. He uses a short checklist: if most of the marks are on the hot side, hold on to your wallet; if they’re on the cold side, it may be time to be aggressive. Pick a sample scenario or answer each item yourself
Market temperature—
Appropriate stance—
Hot side / cold side—
Economy
Outlook
Lenders
Loan terms
Credit spreads
Investors
Asset holders
New funds
Asset prices
Expected returns
A checklist adapted and paraphrased from the ideas in the chapter Having a Sense for Where We Stand in The Most Important Thing. 10 items selected. The answers for the sample scenarios are our interpretation, not his. The score is a simple average, not his formula
THE LIMITS TO NEGATIVISM · 15 Oct 2008The 3 stages of a bear market Marks uses to explain
- Stage 1A few people see that things won’t be rosy forever, while the market is still positive
- Stage 2Most people begin to see that things really are getting worse
- Stage 3Everyone believes things can only get worse. The stage Marks sees as the best opportunity
A bull market has 3 stages in reverse, from a few people starting to believe things will improve to everyone believing they’ll improve forever. Paraphrased from his memos and books
What this means for traders
Before increasing your order size, run this checklist on the market you trade, such as gold or the dollar. If everyone is confident, spreads are tight and money keeps pouring in, the pendulum may be on the hot side. The risk of a reversal rises even if the price can still go higher
COST · DOWNSIDE
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04
The route to performanceLab: never top of the table, but finishing near the top
Marks’ first memo in 1990 told of a pension fund that over 14 years never ranked below the 47th percentile and never above the 27th, yet over the full 14 years ranked 4th. Simulate which pattern of annual rankings gives the best overall result
14-year overall rank—
Years in the top 25%—
Worst year—
100 grows to—
Model: 200 fund managers over 14 years. Each year’s return = the market’s return + each manager’s difference, drawn with a fixed seed, so you get the same result until you press for a new random market. Your fund gets the return for the rank set for that year. The real result in the 1990 memo was 4th; the model’s figure varies with the draw
What this means for traders
An account that rises hard and then falls hard usually ends up worse than one that grows slowly but never falls badly, because a 50% loss needs a 100% gain to get back to even. Keeping your risk per trade constant is a trader’s way of staying in the 27th–47th percentile every year
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05
Buying when others panicLab: how bad does cheap debt have to get before you lose?
When markets panic, bonds of companies that haven’t failed can be sold until their prices are far below face value. Oaktree’s question is: if we buy at this price, how many defaults would it take for us to lose money? Adjust the price, the default rate and the recovery on default
Break-even point—The maximum annual default rate before you lose money
Expected annual return—
If nobody defaults—
Cumulative defaults over 3 years—
If it defaults immediately—
A simple model: a 3-year bond paying interest once a year, with the same default probability every year. On default you receive the set recovery in that year and no interest for that year. The annual return is based on the total expected cash received, without reinvesting interest, taxes or trading costs. The sample scenarios are hypothetical figures, not real prices of any bond
Raised in advance · 2007–08$10.9BFund VII
Invested after Lehman≈$6BIn about 3 months
Average per week≈$500MCalculated from the total
Net IRR to end of 200931.5%Fund VII, as reported
What this means for traders
When prices fall hard, ask how bad a world the current price is assuming. If that assumption is much worse than what’s likely to happen, the odds tilt in your favour, but you need enough money to wait. Oaktree raised its money before the crisis. Traders using full margin don’t get that chance
06
Second-level thinkingGame: tell first-level thinking from second-level thinking
Marks says first-level thinking is simple and superficial, and anyone can do it. Second-level thinking goes on to ask what others think, how much is already in the price, and what happens if you’re wrong. In each situation, pick the answer that is second-level thinking
Score 0 / 6
The economy is in recession, stocks are down 40%, and there’s bad news every day
Markets move on news that differs from expectations, not news everyone already knows
The market expects an almost 100% chance the central bank will cut rates tomorrow
Currency traders call this priced in. What matters is the part that differs from expectations
Gold has risen 10 days in a row, and everyone’s talking about it on social media
Peak popularity often comes with lower expected returns and higher risk
A troubled company’s debt is down to 40 cents on the dollar
This is the heart of Oaktree-style distressed debt investing: check whether the price reflects an exaggerated worst case
Jobs data comes out better than the market expected
What matters is the difference from expectations and its effect on rate expectations
Tap an answer on each card
Situation 1 is paraphrased from an example Marks uses in The Most Important Thing. The other situations we wrote for traders. Second-level thinking doesn’t always mean going against the market; it means thinking beyond what everyone already sees
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Fact checkFact check: truth and stories passed along
Marks’ story has been shortened so much that some versions sound as if he could predict the future, which he himself denies. We sort each one by the weight of the evidence
Marks has written client memos since 1990
His first memo, The Route to Performance, dated 12 October 1990, is still published on the Oaktree website, and Oaktree says bubble.com in 2000 was the first memo anyone responded to
bubble.com predicted exactly when the bubble would burst
The memo came out on 2 January 2000, and the Nasdaq peaked on 10 March 2000, so it warned about 2 months ahead. But the memo didn’t give a date or level for the burst, and he always stresses that market timing isn’t possible
Marks predicted the 2008 crisis
His February 2007 memo The Race to the Bottom warned that lending standards were slipping, and Oaktree prepared a large fund. But he didn’t predict that Lehman would fail or how deep the crisis would be. He calls this preparing, not predicting
Oaktree’s 2008 fund was the largest of its kind at the time
Institutional Investor reported that OCM Opportunities Fund VII raised $10.9 billion, the largest distressed debt fund at the time. Wikipedia uses a figure of about $11 billion
Oaktree invested $500 million a week after Lehman collapsed
The reported figure is about $6 billion in about 3 months. The Penn Gazette uses $6.5 billion in the fourth quarter of 2008. The $500 million a week is an average calculated from the total, not a fixed weekly amount
Buffett says Marks’ memos are the first thing he opens
It’s Buffett’s endorsement for the 2011 book The Most Important Thing, and has been cited by many financial media outlets, such as the Motley Fool
Marks is a Buffett-style value stock investor
His main work is high-yield bonds, convertible bonds and distressed debt, not picking stocks to hold long term, though his thinking on price versus value is very similar
Oaktree was founded by Marks alone
Oaktree was founded in April 1995 by 5 people: Howard Marks, Bruce Karsh, Larry Keele, Richard Masson and Sheldon Stone, most of whom had worked together at TCW
Brookfield now owns all of Oaktree
Brookfield bought 62% in 2019 for about $4.7 billion, announced the purchase of the remaining roughly 26%, worth about $3 billion, in October 2025, and announced that the deal closed on 3 August 2026. Marks remains Co-Chairman of Oaktree
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08
LessonsLessons for Forex and gold traders
Your checklist
0/4
A good asset isn’t enough; you need a good price
The first lesson of Marks’ career was the Nifty Fifty: the country’s best companies can cause heavy losses if you pay too much. Traders can apply the same principle: the gold or currency everyone loves may not be a good entry
Prepare instead of predicting
He says we don’t know the future, but we can know whether the market is hot or cold now. Traders can prepare by knowing when big news comes out and sizing orders to cope with either outcome
Ask what’s already in the price
Second-level thinking means asking what others expect and how much is already in the price. Rate news everyone knows in advance usually moves prices less than surprises
Losing less on bad days matters more than winning big on good days
His first memo told of a fund that was never top of the table but never bad either, so its 14-year total was near the top. Traders can do this by controlling order size on every trade
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Quiz5-question quiz
Question 1 / 5
Which memo does Oaktree say was the first one anyone responded to?
Published on 2 January 2000, warning about the internet stock bubble
In which year was Oaktree Capital Management founded?
It was founded in Los Angeles in April 1995 by 5 partners
As Marks explains it, what is the third stage of a bear market?
And he sees this stage as the best time to buy
What is the lesson of the Nifty Fifty stocks that Marks often talks about?
The country’s best companies made people lose about 80–90% because they paid too much
What is second-level thinking?
Knowing the news is good isn’t enough; you need to know whether it’s better than the market expected
0/5
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You can’t predict. You can prepare.You can’t predict, but you can prepare
What you can apply from Marks is knowing where the market stands, asking what’s already in the price, and controlling risk so you lose less on bad days. Here are tools on 1TRADER that can help
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Further readingFurther reading
- The Most Important ThingHoward Marks · 2011His memo thinking gathered into short chapters, covering second-level thinking, risk, the market pendulum and knowing where we stand. Buffett wrote the endorsement
- Mastering the Market CycleHoward Marks · 2018A deep dive into economic, credit and investor-psychology cycles, and how to use knowing where you are in the cycle to adjust risk
Sources for this article
- Wikipedia: Howard Marks (investor)
- Wikipedia: Oaktree Capital Management
- Oaktree: Howard Marks bio
- Oaktree memo: The Route to Performance (1990)
- Oaktree memo: The Race to the Bottom (2007)
- Oaktree memo: The Limits to Negativism (2008)
- Oaktree: On Bubble Watch (2025)
- Institutional Investor: Howard Marks, the distressed debt king
- Hedge Fund Alpha: NYT on Howard Marks and the financial crisis
- The Pennsylvania Gazette: Money, nerve, and a lucky birthday
- Knowledge at Wharton: Luck, risks and the job that got away
- Motley Fool: 2 letters Buffett reads immediately
- GlobeNewswire: Brookfield completes acquisition of Oaktree (2026)
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FAQFrequently asked questions
Who is Howard Marks?
An American investor born in 1946 who co-founded Oaktree Capital Management in 1995. He specialises in high-yield bonds and distressed debt and is known for the client memos he has written since 1990
Why are Marks’ memos famous?
His bubble.com memo of January 2000 warned about the internet stock bubble about 2 months before the market peaked, and Buffett says his memos are the first thing he opens. All the memos are published free on the Oaktree website
What did Oaktree do in the 2008 crisis?
Oaktree had already raised a $10.9 billion distressed debt fund, and after Lehman collapsed it invested about $6 billion in about 3 months, buying debt whose prices had collapsed in the panic
What does the market pendulum mean?
Marks compares market mood to a pendulum swinging between greed and fear, between optimism and pessimism, and spending very little time at the midpoint. Knowing which side the pendulum is on helps you decide whether to be aggressive or defensive
How can Forex and gold traders use Marks’ ideas?
Always ask how much of the news is already in the price, gauge whether the market is hot or cold before adding risk, prepare plans for several outcomes instead of guessing one, and control order size so you lose less on bad days
Educational content, not investment advice. Figures are publicly reported. The labs use models and hypothetical scenarios. · risk disclosure · Forex glossary