In one of his famous “memos” released on July 17, renowned investor Howard Marks (Trades, Portfolio) discussed the subject of doubt.
The paper, titled “The Folly of Certainty,” began with Marks commenting on how Jen O'Malley Dillon, the chair of Biden's re-election campaign, “doesn't have any doubt,” he will be successful in snagging a second term come November. However, the focus of the memo is not on whether or not he will drop out. Rather, it is on “how anyone can be without doubt.”
He continued by recapping how there was much certainty that Hillary Clinton would likely win the presidency in 2016 and that if Donald Trump won, the stock market would collapse. As we know, neither of those events came to pass. Marks noted that is the point since we have no way of knowing what will happen and randomness exists. He wrote:
“Sometimes things go as people expected, and they conclude that they knew what was going to happen. And sometimes events diverge from people's expectations, and they say they would have been right if only some unexpected event hadn't transpired. But, in either case, the chance for the unexpected – and thus for forecasting error – was present. In the latter instance, the unexpected materialized, and in the former, it didn't. But that doesn't say anything about the likelihood of the unexpected taking place.”
The guru went on to discuss uncertainty and doubt of outcomes in the framework of both macroeconomics and the markets.
In his conclusion, noted that no amount of intelligence, education, access to information and analysis can produce correct forecasts every time. As such, Marks strongly recommended “eschewing certainty” to avoid any potential trouble.
Read Marks' full memo here.
