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In Episode 124, we welcome legendary investor, Howard Marks. Meb begins with a quote from Howard\u2019s new book, Mastering the Market Cycle, and asks him to expound. Howard gives us his top-line take on market cycles, ending with the idea that if you understand them, you can profit from them.\nMeb follows up by asking about Howard\u2019s framework for evaluating where we are in the cycle. Rather than look at every input as individual, Howard looks at overall patterns. What is the collective mood? Or is it depressed, sad, and people don\u2019t want to buy? Or is it buoyant? Second, are investors optimistic and thrilled with their portfolios and eager to add more, therein increasing risk? Or are investors regretful and hesitant, burned by recent experience? Then there are quantitative aspects \u2013 valuations, yield spreads, cap rates, multiples, and so on. All of these variables help give Howard a feel for whether assets are high- or low-priced.\nNext, Meb asks Howard to use Oaktree\u2019s actions during the Financial Crisis as a real-world example of how an investor could act upon cycles. Howard tells us there are two parts to what happened during the Crisis \u2013 what Oaktree did during the run-up to the meltdown, and then what it did during the event itself. In short, Oaktree was cautious during the lead-up. They raised their standards for investments. Why? Howard notes that they didn\u2019t know ahead of time how bad things would be. Rather, they were hesitant because they looked at the securities being issued, and it seemed that every day, something was coming out that didn\u2019t deserve to be issued. This was a tip-off.\nThen the event happened, culminating in Lehman bankruptcy, and that\u2019s when Oaktree became very aggressive, buying half a billion dollars each week for 15 weeks. Howard tells us that, yes, our job as investors is to be skeptical, but sometimes that skepticism needs to be applied to our own fears. In other words, skepticism also might appear like \u201cno, that scenario is too bad to actually be true.\u201d\nMeb notes that the challenge is investors want precision, picking the exact top and bottom. But this isn\u2019t really how it works. Meb asks if there a time when Howard felt he misinterpreted a point in the market cycle.\nBefore answering Meb\u2019s questions, Howard agrees that trying to find the bottom or top is a huge mistake. He notes that trying to find the perfect day upon which to buy or sell is impossible. In terms of potentially misreading the cycle, Howard tells us that Oaktree has been perhaps too conservative over the last few years, so they haven\u2019t realized all the gains of the market. That said, he stands by his decision telling us, \u201canybody who buys or holds because of the belief that something that\u2019s fully valued will become overvalued\u2026is embarking on a dangerous course.\u201d\nMeb asks how Howard sees the world today.\nHoward tells us we\u2019re in the 8th inning of this bull market. Assets are highly priced relative to history. People are bullish. Risk aversion is low. He notes it\u2019s a time for caution \u2013 but \u2013 we have no idea how many innings there will be in this game.\nWhat follows is a great conversation about bull markets, what ends bull markets, and how to implement market cycles into an investment approach. The guys touch on investor exuberance\u2026 whether markets need to be exuberant for a bull market to end\u2026 bullish action despite bullish temperament\u2026 the need to \u201ccalibrate\u201d your portfolio\u2026 and the average investor\u2019s ability to live with pain.\nThere\u2019s so much more in this episode: How Howard\u2019s market approach has evolved over the years\u2026 how \u201cit\u2019s not what you buy, it\u2019s what you pay for it that determines whether something is a good investment or bad investment\u201d\u2026 Howard\u2019s thoughts on contrarian investing\u2026 and, of course, his most memorable trade. This one yielded him 23x.\nWhat are the details? Find out in Episode 124.\nLearn more about your ad choices. Visit megaphone.fm/adchoices