Buffett once said: "When a memo from Howard Marks arrives, it's the first thing I open — I always learn something." Through 2026, Marks kept asking one question across his memos: is it a bubble?
He started out skeptical of AI, then revised his view after long conversations with engineers in their thirties and forties. But the real lesson isn't his conclusion on AI — it's his method for thinking about risk.
Avoid losers before chasing winners
One of Marks's core ideas: building lasting wealth isn't about catching the single biggest gainer — it's about consistently avoiding the things that knock you out. Losing less is itself a way of winning. In a market where a few mega-caps carry most of the gains, that matters more than ever.
How do you "read" a cycle?
Markets forever swing between excess optimism and excess pessimism. You don't need to time the exact turn, but you should sense roughly where you stand. Signs of euphoria:
- People start believing "this time is different"
- Bad news is ignored, good news is amplified endlessly
- No one talks about risk anymore, only returns
- Even people who never invest start asking for tips
"Nothing is more dangerous than believing there is no risk."
The more euphoric the mood, the lower future returns and the higher the risk — that's the iron law of cycles.
Putting it to work
- Control the downside with allocation and barriers (KO / KI), rather than betting on one direction
- Be a little more cautious in euphoria, a little braver in panic
- Put "surviving long" ahead of "earning fast"
- Review regularly: am I taking this risk because I understand it, or because everyone else is?
The takeaway
Whether it's a bubble only becomes clear in hindsight — but where you stand in the cycle, you can feel today. Read the cycle, and you won't make your most optimistic decision at the most dangerous moment. That is worth more than any forecast.