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Howard Marks discusses his evolving thinking on risk with Ted Seides. His key insight: risk is not volatility (as academics define it) but the probability of permanent capital loss. And the riskiest moment is when everyone thinks there's no risk.
Canon
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Marks argues that contrarian investing requires courage — buying when headlines scream disaster and selling when everyone is euphoric. This courage isn't innate; it's built through studying market history and seeing the pattern repeat enough times to trust it.
Highlights
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Risk is not volatility — risk is the probability of permanent capital loss, and it's highest when prices are high and sentiment is euphoric
Marks challenges the academic definition of risk (volatility/standard deviation) and argues that real risk is the chance of losing money permanently. A stock that drops 50% and recovers is volatile, not risky. A stock that drops 50% and never recovers is risky.