Howard Marks on Value Investing, AI in Finance & More – Wharton School Investor Series

ELI5/TLDR

Howard Marks sits down with Wharton’s Chris Geczy for the 2026 Howard Marks Investment Series. The market has cracked a little after three euphoric years, and Marks walks through why: tariffs, private-credit fraud scares, AI eating software, Iran. He then runs his greatest hits — you can’t time the bottom, cheapness is the only thing you can actually measure, selling because something “went up” is illogical, and the growth-vs-value divide is a category error. He closes on his favorite frame: most investors, like most tennis players, win by hitting fewer losers, not more winners.

The Full Story

Taking the Temperature, April 2026

Geczy opens by asking where the market sits. The S&P is coming off three ridiculous years — up 26% in ‘23, 27% in ‘24, 18% in ‘25, “probably up more than 100%” cumulatively if you start from Q4 ‘22. Now, in the last two months, a little retrenchment. Marks inventories the confluence:

The April 2 tariff announcements (bigger than expected, paused, reinstated, partially lifted) — S&P down roughly 15% around them.
First Brands and Tricolor blowing up in the credit markets around August/September — “not only were they bankrupt, but it appeared that they were fraudulent.” Cue the Jamie Dimon line: “when you see one cockroach, there are probably more.”
OpenAI and Anthropic’s February coding models, which sent a shiver through the software sector. A lot of LBO’d software companies carry a lot of debt. If the code machines eat their revenues, the debt is in trouble.
The attacks on Iran, and downstream implications for energy.
A liquidity scare in private credit — investors trying to exit instruments they hadn’t asked enough about on the way in.

“In real life, things fluctuate between pretty good and not so hot. But in the minds of investors, they go from flawless to hopeless.”

His reading: still optimism-driven, with a dent. The S&P trailing P/E has moved from ~23 to ~22. Historic average is 16–17. So: not cheap, cheaper than before, and don’t trust anyone who tells you “this time is different” about the Magnificent Seven — even if, with the possible exception of Tesla, they might actually be the best companies he’s ever seen.

Why You Can’t Wait for the Bottom

Asked whether now is a time to stretch or to hunker down, Marks detours into an argument he’s made for years but sharpens here. The definition of “the bottom” is the day before it starts going up. You can only identify it one day late. Therefore waiting for the bottom is logically impossible.

“The only basis for buying is that things are cheap. You can tell when things are cheap. You can’t tell when the day has been reached that it’s never going to go down anymore.”

The worked example is September 2008. Oaktree had a $10 billion distressed fund sitting unspent when Lehman filed — an unheard-of size at the time (their next-biggest was $2.5 billion). The decision tree Marks and Bruce Karsh ran was disarmingly simple: if the world melts down, it doesn’t matter what we did today. If it doesn’t, and we didn’t invest, we didn’t do our job. So they bought. Bruce deployed $450 million a week for 15 weeks — $7 billion in a quarter. Prices kept falling because nobody else was buying, so they kept buying lower.

The kicker is the micro-structure. They were buying the senior-most debt of LBO’d companies at yields of 15–20%, priced such that even if enterprise values fell to a quarter or a fifth of the original buyout price, the senior tranche would still be made whole. Psychology plus math. Contrarian spirit plus a margin of safety.

“You had to have the money to spend, which you can’t raise during a crisis. We had pre-raised it. And you have to have the nerve to spend it. A lot of people didn’t have the nerve.”

The Growth-vs-Value Category Error

Geczy pivots to the value-is-dead debate. Marks does a quick history of the labels. Before the 1960s, people who bought stocks were just called “investors.” Then around ‘62, Wall Street invented “growth stocks” — Xerox, IBM, Kodak, Polaroid, Merck, Coca-Cola — companies that looked expensive on current numbers but had brilliant futures. Everyone else, by elimination, got called “value.”

That division hardened into an either/or. By the late ’60s the Nifty 50 embodied the growth pole. If you bought them at the peak in late 1969 and held them for five years out of sheer conviction, you lost about 95% of your money. Marks started at Citibank in September 1969 and watched it happen in real time. The lesson he drew — and still considers the most useful thing he learned in his first decade — sticks:

“It’s not what you buy, it’s what you pay that counts. Good investing doesn’t come from buying good things. It comes from buying things well. There is no asset which is so good that it can’t become overpriced and dangerous. And there are very few assets so bad that if they get cheap enough, they can’t be a good buy.”

The growth-vs-value dichotomy, he argues, is a category error. His January 2021 memo “Something of Value” (written during the pandemic when his son Andrew’s family moved in) crystallized the point: you can value-invest in a fast-growing company, as long as the price you pay is appropriate to the growth rate. Don’t let the label do the thinking for you.

Why Selling Is Harder Than Buying

Literature on when to buy: enormous. Literature on when to sell: thin. Marks wrote the 2017 memo “Selling Out” to fill the gap, and he boils it down half-facetiously: people sell for two reasons — because it went up (they’re scared the profits will evaporate) and because it went down (they’re scared it’ll fall more). Those cannot both be right.

His alternative frame: the decision to sell is a decision to un-buy. Pretend you don’t own it. Would you buy it today? If no, maybe sell. If also-no to buying but not an obvious sell — hold. Some things just live in the middle; pretending every position must be a buy or a sell is false precision.

Then he turns the knife on his own caution. He was raised by parents who were adults during the Depression — “don’t put all your eggs in one basket,” “save for a rainy day” — and he internalized cautionary sayings like “if you sell half, you can’t be all wrong.” Looking back, he thinks these cost him money.

“If I’d been more of an optimist, I would have made more money.”

The case study is Amazon. $90 in ‘99, $6 at the 2001 low — down 93%. Say you bought at $6. Would you have sold at $12 (double)? $60 (10x)? $600 (100x)? When he wrote the memo, Amazon was $3,300. So even if you were brilliant enough to hold to $600 — a monster return — you left 85% of the money on the table. Buffett claims 12 ideas made his fortune. Munger said four.

“If you realize how scarce compounders are and that you’re not going to find a lot of them, then the big mistake is getting off too soon.”

Winners vs. Losers: Pick the Right Tennis Court

The closing frame is Marks’s tennis analogy, lifted from Charlie Ellis’s 1974 article “Winning the Loser’s Game” and Si Ramo’s book Extraordinary Tennis for Ordinary Tennis Players. Professional tennis is a winner’s game: you beat your opponent by hitting more winners. Club tennis is a loser’s game: most points end with an unforced error, so the player who just keeps the ball in play wins by default.

Credit investing, Marks argues, is a loser’s game. Make enough loans, let none default, and you collect the yield — you mathematically cannot do much better than that. Which is why Oaktree’s stated investment philosophy is risk control first, consistency second.

“In credit, avoiding the losers is good enough. It’s a choice that everybody should make based on their skill level. A lot of life is figuring out what you’re about and then pursuing life accordingly.”

Venture capital, equities, real estate — those need winners. Credit doesn’t. Know which court you’re on.

Key Takeaways

Cognitive dissonance is the bull market’s accelerant. Good news gets priced in; bad news gets rationalized away. Markets break when enough negatives gel into a “confluence” the optimistic reflex can’t absorb.
Current temperature (April 2026): Slight turn from optimism to pessimism. S&P P/E ~22x vs 23x, still well above the 16–17 historical average. Not cheap, but cheaper.
The bottom is the day before it starts going up. By definition, you can only identify it one day late, which makes “waiting for the bottom” a logical impossibility. Buy when things are cheap; cheapness is measurable.
The 2008 decision rule: If the world melts down, today’s actions don’t matter. If it doesn’t, inaction was a dereliction. Therefore, invest.
Two prerequisites for crisis buying: (1) money pre-raised — you can’t fundraise during a panic, (2) the nerve to deploy it, and a portfolio clean enough that you’re not stuck triaging existing positions.
The senior-debt margin-of-safety math: Buying the senior-most tranche of LBO’d companies at prices implying enterprise values could fall 75–80% before you take a loss, at 15–20% yields. Psychology plus numbers.
Nifty 50 lesson: bought at the 1969 peak and held 5 years, you lost 95%. Good companies, terrible prices. “It’s not what you buy, it’s what you pay that counts.”
Growth vs. value is a false dichotomy. You can value-invest in a fast grower if the price suits the growth rate. The labels are lazy shorthand.
The sell decision = the un-buy decision. Would you buy it today? If no, consider selling. If no-to-both-buy-and-sell, hold. Not every position needs a verdict.
The Amazon compounder trap: selling at 100x when it eventually ran to 550x+ means you gave up 85% of the gain. Great ideas are scarce; exiting early is the expensive mistake.
Winner’s game vs. loser’s game: Pro tennis and equities need winners. Club tennis and credit are won by not hitting losers. Pick your game based on skill and temperament.
Oaktree’s written-down philosophy: (1) Risk control, (2) consistency. Explicitly designed around a loser’s-game strategy.
Book recommendation (from his son Andrew): Mistakes Were Made (But Not by Me) by Carol Tavris — on cognitive dissonance.

Claude’s Take

Marks at 79 doing Marks is a known quantity, and that’s fine — the greatest-hits album of a great album is still a great album. This was a 41-minute interview that ends before the Q&A even starts, so it’s a compressed run through three of his foundational memos with enough market commentary to feel current. Nothing here is new to anyone who’s read him, but the synthesis is tight and the 2008 anecdote — $450 million a week, for 15 weeks — still hits.

The honest BS filter: the tennis analogy is getting a bit worn. The growth-vs-value argument is correct but has been correct for 15 years; at this point resurrecting it feels more like a victory lap than a fresh insight. And the April 2026 market read is pretty mealy-mouthed — “slight retrenchment,” “still high,” “cheaper than before” — which is exactly what you’d expect from someone whose whole shtick is not making forecasts. That’s a feature, not a bug, but it means you don’t walk away with an actionable view.

The most interesting moment is when he turns on himself: admitting the Depression-era caution he inherited from his parents cost him money, and that “if I’d been more of an optimist, I would have made more money.” That’s a harder thing to say than most of what he says, and it frames the Amazon example not as investment wisdom but as a genuine late-career concession. The “un-buy” reframe for selling is the cleanest mental model in the talk — actually useful.

Score: 7. Solid, clear, occasionally sharp, but aimed at a student audience and pitched a few rungs below his best written work. If you haven’t read the three memos — “Fewer Losers or More Winners,” “What Really Matters,” and “Taking the Temperature” — read those instead.