A Lesson in Second-Level Thinking from Howard Marks

“The question is not which woman is the most beautiful but which woman everyone else will think is the most beautiful.”

The man in front of me is a billionaire investor. He is a self-made billionaire. He has actually funded other billionaire investors’ hedge funds. Warren Buffett has publicly admitted that he is one of the few people Buffett “learns from.”

His name is Howard Marks. And suffice to say, I’m all ears.

Marks is discussing the importance of what he calls “second-level thinking.”

Second-level thinking is being able to think beyond the first level implications of a particular development. Mr. Marks provides several examples of this in his book. He explains that first-level thinking says:

  • “It’s a good company; let’s buy the stock.” Second-level thinking says, “It’s a good company, but everyone thinks it’s a great company, and it’s not. So the stock’s overrated and overprices; let’s sell.”
  • “The outlook calls for low growth and rising inflation. Let’s dump our stocks.” Second-level thinking says, “The outlook stinks, but everyone else is selling in panic. Buy!”
  • “I think the company’s earnings will fall; sell.” Second-level thinking says, “I think the company’s earnings will fall far less than people expect, and the pleasant surprise will lift the stock; buy.”

At the investment conference at the University of Virginia I attended, Mr. Marks gave a more colorful example of “second-level thinking.”

In the early 1900s in the United Kingdom, there was a newspaper competition for the most beautiful woman. Readers were asked which woman was the most beautiful out of a series of candidates.

Marks points out that if you picked the woman you thought was the most beautiful you would likely lose the contest. However, if you picked the woman that you believed most readers would think was the most beautiful you would win.

In investing terms, you could rephrase this as:

You need to overcome your own personal bias and learn to see how the market thinks about things.”

Or as I like to tell my clients: “It’s not what you think, it’s what the market thinks that matters.”

Second-Level Thinking in Action

For me, this has been one of the greatest challenges as a strategist.

Let me give you an example.

For years, my natural bias was to overweight risks and ignore opportunities in the markets. A big part of this was because I first made my name in the 2008 Crash, as one of the few analysts on the planet to predict a crash would hit months in advance.

Because of this, I usually looked for downside risks or issues in the markets. And while I’ve beaten the market almost every year in the last 10, I’ve made the process of making money a lot more difficult than it needed to be.

It was only when I began looking at how the market acted on a daily basis, minute by minute, that I began to notice new untapped opportunities for extraordinary profits.

Perhaps the biggest of my career, was my discovery of a bizarre market anomaly that has the opportunity to produce double-digit gains in the scope of a few hours per day.

It all started when my personal trades kept blowing up in my face in early 2019. At that time, my personal bias was the short the market on mornings when it opened in the red. I was doing this because this strategy had worked extremely well in the past.

However, starting in early 2019, week after week, this strategy resulted in these trades blowing up in my face.

What made these moves even more bizarre were that they were happening at roughly the same time of day (9:50AM-10:00AM EST). And as if that wasn’t odd enough, these violent rallies were occurring on almost NO volume, meaning that real investors were not driving them.

And this was happening almost every week.

Now, what I was discovering was nowhere near significance of penicillin. But I knew something BIG was going on in the markets. And I started digging deeper into this weird market phenomenon.

What followed was a labyrinthian journey into the guts of the financial system. It took several months, but after countless hours of research, I came to a startling conclusion.

I 100% believe the Fed is actively intervening in the stock market.

I don’t mean indirect interventions via rate cuts or quantitative easing (QE) programs… I mean that I believe the Fed is LITERALLY buying stocks directly to stop the stock market from falling.

And I’ve recently developed a proprietary trading research strategy to cash in on it.

It’s specifically designed to accurately predict when the Fed is pouring money into stocks using what I call “ghost money”.

This new service is called Ghost Money Trader.

Since its launch a few weeks back, this strategy has an amazing 100% success rate for subscribers…

Ghost Money Trader is the only system I know that tracks what I believe are massive Fed interventions in real time.

So you can get ahead of these major market moves before they happen.

Giving you the chance to pull thousands of dollars from the stock market every week.

I’m convinced that this is the easiest and most profitable trading strategy in the world.

Just act when my “ghost money” system triggers in the morning… and then get out with thousands in potential profits by lunchtime.

You can receive the full rundown in Ghost Money Trader… and have the chance to get in on the next opportunity for potential profits at the link below.

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A new opportunity is set to signal at any time…

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Best Regards,

Graham Summers
Editor, Money & Crisis

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Graham Summers

Editor Graham Summers has spent the last 15 years building a reputation as one of the most sought after and highly respected investment strategists on the planet. His work has been read and quoted by former Presidential advisors, award-winning institutional analysts, U.S. Senators, and more. He’s one of the few analysts on the planet to...

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