Howard Marks - Successful Investing Through Buying Things Well

SPEAKER_1 (0:00)

Value Investing is more than an investment strategy. It's a fundamental way of thinking about finance.

Welcome to Value Investing with Legends, a podcast hosted by Tano Santos, the David L and LCM Dodd Professor of Finance at the Heilbrunn Center for Graham and Dodd Investing at Columbia Business School. Our mission today is to promote the study and practice of Graham and Dodd's original investing principles and to improve investing with world-class education, research, and practitioner academic dialogue. In this podcast, you will hear from some of the world's greatest investors, their views on the investment management industry, how they develop their investment process, and how they see the field changing over time. To learn more and to subscribe to this podcast, please visit grahamanddodd.com.

Tano Santos (0:49)

Welcome all to a new edition of the Value Investing with Legends podcast. I'm your host, Tano Santos, the David and Elsie Dodd Professor of Finance at Columbia Business School, and the Faculty Director of the Heilbrunn Center for Graham and Dodd Investing.

Before we start our conversation today with our guest, I want to apologize to our listeners that we missed one of the episodes. An unfortunate series of personal matters surprising you both on my side, as well as on the side of my guests, interfere with the scheduling, and as a result, we've been playing catch up for a while. This period is demanding on all of us and sometimes even when we try hard, we cannot get some of these things done in a timely manner. So I apologize for that, but the new episodes are coming soon. So we're back then this week, and I cannot think of anyone better than my guest today to discuss, of course, his career and methods, but also the many complexities of markets and the economy these days. He's known for his penetrating mind and his letters are a must read for any serious student of the market. As I said before, in this podcast, the most successful investors combine first a deep and profound analytical understanding of financial markets and of the economy at large, with second, the ability to act on those ideas.

My guest today combines these two attributes in space. Howard Marks, welcome to the Value Investing with Legends podcast.

Howard Marks (2:14)

Thank you, Tano. It's great to be with you.

Tano Santos (2:16)

Thank you. Howard Marks is, of course, the co-founder and co-chairman of Oaktree, which is one of the largest credit investors in the world, and certainly the largest investor in distressed securities.

Howard started his career at Citicorp, where between 1969 and 1978, he was an equity research analyst, and after that, Citicorp's director of research.

From 1978 to 1985, he served as vice president, as well as senior portfolio manager overseeing convertible and high-yield debt, a transition that I'm really curious about to explore with Howard. Then he moved to the TCW Group, where once again, he was responsible for investments in distressed debt, high-yield bonds, and convertible securities.

In 1995, he and another group of partners from TCW founded Oaktree, where he remains today. Howard, welcome again to the Value Investing with Legends podcast. Thank you, Tano. Let's start a little bit. I'm always curious, and we always start this podcast, learning a little bit about the family background of our guests. How do you grow up? Whether you were surrounded by finance early on in your life? Where do you get that passion for financial markets? So tell us a little bit about those origins. I believe in Queens, New York, right?

Howard Marks (3:29)

Yes. I was born in Rego Park, went to the public schools of New York. My dad was an accountant, and I used to go to his office and work the adding machine on Saturdays. I think I got 50 cents an hour.

I was not one of those kids who was reading prospectuses when he was 12 I went through a lot of different iterations as to what my career would be. But in my junior year of high school, one of my friends said, there's a new course, Advanced Accounting, and I took it, and I really fell in love with the counting, the symmetry.

I immediately got the double entry system. So I applied to Wharton. I was told I wouldn't get in. But the teacher of the accounting course wrote a letter of recommendation for me, and I did get in, confounding the experts. And I intended to study accounting, but when I got to Wharton and started to take courses in finance, I found them more interesting. So I switched my major to finance. At that time, Wharton was entirely qualitative and practical.

Tano Santos (4:30)