Monday, May 9, 2011


Three earthquakes in Alaska, Australia and on the coast of the Philippines have been reported.

A contagion of black swans?

Howard Marks lists 20 most important things:

1. Second-Level Thinking
2. Understanding Market Efficiency and Its Limitations
3. Value
4. The Relationship Between Price and Value
5. Understanding Risk
6. Recognizing Risk
7. Controlling Risk
8. Being Attentive to Cycles
9. Awareness of the Pendulum
10. Combating Negative Influences
11. Contrarianism
12. Finding Bargains
13. Patient Opportunism
14. Knowing What You Don't Know
15. Having a Sense of Where We Stand
16. Appreciating the Role of Luck
17. Investing Defensively
18. Avoiding Pitfalls
19. Adding Value
20. Pulling It All Together

Second-level thinkers ask the following questions:

* What is the range of likely future outcomes?
* What outcome do I think will occur?
* What is the probability I am right?
* What does the consensus think?
* How does my expectation differ from the consensus?
* How does the current price for the asset comport with the consensus view of the future and with mine?
* Is the consensus psychology that's incorporated in the price too bullish or bearish?
* What will happen to the asset's price if the consensus turns out to be right and what if I am right?

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