It’s not what you buy; it's what you pay for it. A great company at an exorbitant price is a poor investment, but a mediocre company bought for a bargain price can be a great investment.
– Howard Marks
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Newsletter examining the methods used by historical figures to accumulate wealth.
The following is Methods of Prosperity newsletter 122. It was originally deployed October 16, 2025. As of June 25, 2026, original subscribers have received up to Methods of Prosperity newsletter no.158: Nick Sleep.
Methods of Prosperity newsletter is intended to share ideas and build relationships. To become a billionaire, one must first be conditioned to think like a billionaire. To that agenda, this newsletter studies remarkable people in history who demonstrated what to do (and what not to do). Let me know how I can help you out. For more information about the author, please visit seanallenfenn.com/FAQ.
122
It was during the 2008 crisis.
Everyone was panicking.
Everyone was selling.
Howard Marks raised an $11 billion distressed debt fund.
Why should that make you reconsider your life choices?
That’s what made him smarter than most.
He waited a year before deploying it.
He sacrificed $160 million in management fees to ensure he was buying at the absolute bottom.
Investment risk comes primarily from too-high prices, and too-high prices often come from excessive optimism and inadequate skepticism and risk aversion.
– Howard Marks
The lesson? Have discipline to wait.
Even when holding massive capital.
This demonstrates exceptional patience and risk control.
Howard Marks (born 1946) is the co-founder and co-chairman of Oaktree Capital Management. Oaktree is one of the world’s largest distressed securities investors.
Investment success doesn’t come from ‘buying good things,’ but rather from ‘buying things well.’
– Howard Marks
Howard Marks is an American investor, writer, and co-founder of Oaktree Capital Management. Oaktree is a leading global investment firm. They specialize in distressed securities and alternative assets.
Marks began his career at Citicorp. He worked as an equity research analyst. He later became Director of Research, overseeing convertible and high-yield debt portfolios. He then joined TCW Group in 1985, where he organized one of the first major distressed debt funds.
The safest and most potentially profitable thing is to buy something when no one likes it.
– Howard Marks
Most investors chase popular, high-quality companies during good times.
They chase popularity or market fads.
Not Howard Marks. He pioneered investing in distressed debt.
That is, when companies get into financial trouble, they issue bonds and securities. No one else will touch them.
In 1988, he organized one of the first major distressed debt funds at TCW Group.
With that move, he entered a space which most investors considered too risky.
The most important thing is risk control.
– Howard Marks
In 1995, Marks and a small group of partners left TCW to found Oaktree Capital Management in Los Angeles. Oaktree Capital Management became a leader in high-yield debt and private equity investing.
Large amounts of money aren’t made by buying what everybody likes. They’re made by buying what everybody underestimates.
– Howard Marks
We can recognize his insightful memos on investing and market cycles. Many regard them as essential reading, including Warren Buffett.
If Warren Buffett pays attention to Howard Marks, what are you doing?
In 1999, Howard Marks recognized something big. He published Bubble dot com (the memo) in January 2000.
He warned us about what turned into the internet bubble, going against the market.
The idea came in the fall of ’99, when I was reading a book called Devil Take the Hindmost: A History of Financial Speculation. And it talked about past bubbles... in particular, the South Sea bubble, in which the British government granted an exclusive license to... The South Sea Company, for trade with... South America. And, sounding familiar to today, the government had a deficit, and they had trouble meeting the deficit and funding it, and so they figured they’d make a lot of money if they created The South Sea Company. People thought it was a get rich quick scheme, so they jumped on board and traded it. But as I read the book, I saw things going on, and I said, ‘this is what’s happening today’.
– Howard Marks
Most investors chase maximum returns. They seek above-average returns in boom times.
Not Howard Marks.
He built his entire philosophy around minimizing losses first.
Marks aimed for average performance in bull markets while minimizing losses in downturns.
He knows large losses have an outsized negative impact on long-term compounding.
That’s why he avoids herd behavior.
He holds cash during overheated periods.
He waits for downturns to deploy capital into undervalued opportunities.
The road to long-term investment success runs through risk control more than through aggressiveness.
– Howard Marks
Howard Marks achieves 19% annual returns. How? By avoiding disasters rather than hitting home runs.
This approach is contrary to the “go big or go home” mentality prevalent on Wall Street.
Marks advocates for what he calls “second-level thinking”.
That is, focusing on inefficiencies overlooked by others.
He buys when others panic.
He mitigates risk instead of chasing the hottest assets.
This is contrary to the traditional pursuit of most investors.
They seek constant outperformance regardless of market conditions.
Not Howard Marks.
He exercises disciplined risk management and cycle awareness.
When other people are carefree, we should be worried. When other people are terrified, we can turn aggressive.
– Howard Marks
Most investors only think surface-level.
They say “This time it’s different.”
Marks goes beyond the obvious conclusions that everyone reaches.
You can’t do the same things others do and expect to outperform.
– Howard Marks
First-level thinkers ask “Is this a good company?”.
Marks asks “Is this a good company at this price, and what does everyone else think?”
This is the key lesson:
Howard Marks achieved financial freedom by being a patient, disciplined contrarian.
He bought what others feared (distressed debt) when they feared it most (during crises).
All while obsessively controlling risk.
His 19% annual returns? Acceptable “average” bull returns.
Don’t try to beat the market in all cycles.
You don’t need spectacular wins.
You need consistent performance. Avoid the catastrophic losses that destroy most portfolios.
Instead of trying to focus on buying good assets, focus on the price you pay.
Instead of considering risk as secondary to reward, prioritize risk mitigation.
Instead of neglecting market cycle impact, have market cycle awareness.
Instead of being overconfident, admit the limits of your knowledge.
Instead of following prevailing market trends, buy in downturns.
I like you,
– Sean Allen Fenn