The Market Is Lying to You
Howard Marks just exposed the illusion every investor is falling for.
The market is lying to you.
It does it with a straight face.
Flashing green tickers.
Record-high indexes.
AI hype.
"Everything's fine," it says.
But under the surface?
Most investors are about to get smacked in the face with a truth they’ve ignored for too long:
Price is not value.
Howard Marks just broke it down in his latest memo, The Calculus of Value. And if you care about making smart decisions with your money—this one’s a must-read.
Here’s my breakdown of his memo, paraphrased into plain English. No fluff. No finance-bro flexes. Just real talk.
The Great Illusion: Price Feels Real. But Value Drives Returns.
Price is easy.
You see it.
It’s on your screen.
You know it to the penny.
Value? That’s messy.
It’s based on future earnings. Intangibles. Moats. Synergy (ugh).
Even AI can’t give you a perfect number.
So what do we do? We confuse the two.
We chase stocks like Tesla at 200x earnings, pretending that makes sense—because it’s "the future."
Price is what you pay. Value is what you (hopefully) get.
The gap between those two? That’s where the danger lives.
The Tug-of-War That Decides Your Fate
Every day, two camps fight over what something is worth:
The Optimists: AI! Moats! Fed pivot!
The Pessimists: Debt! Inflation! Geopolitical mess!
Price is just the result of that daily brawl.
And guess what?
Most of the time, price changes aren’t about earnings.
They’re about moods.
When investors feel good, price overshoots value.
When they panic, it undershoots.
This is why smart investors don’t obsess over price.
They obsess over the spread between price and value—and how long it’ll take to close.
But here's the catch…
Price Can Stay Stupid Longer Than You Can Stay Solvent
You might be right.
The stock might be overvalued.
The value might be lower than the hype.
But if you go all in, assuming the market will “wake up” tomorrow?
You’re toast.
Overvaluation is not the same as imminent crash.
That’s the lesson.
Marks isn’t saying sell everything.
He’s saying stop pretending the crowd is rational.
Because it’s not.
FOMO, TikTok traders, meme stocks, blind AI bets—none of this has anything to do with fundamentals.
Yet they drive price.
So don’t fight the market.
Outwait it.
So What Actually Drives Big Returns?
According to Marks, it boils down to two things:
Value increases (earnings beat expectations)
Price/value gap closes (the market finally gets it)
That’s it.
No astrology.
No guru predictions.
No CNBC hot takes.
The best investors? They spot value the market missed—and wait.
They don’t chase. They accumulate. Quietly. Patiently. While others are busy riding hype trains.
AI Is Real. But So Is Overexcitement.
Marks gets it.
Some companies today are different:
High margins
Capital-light
Dominant moats
Real growth
They deserve premium valuations.
But…
That doesn’t mean every AI-adjacent stock is the next Nvidia. Most are just tourists.
And when the music stops, the tourists are the first to get dumped.
In most ‘new, new things,’ investors tend to treat the wrong companies as likely to succeed.
Remember that line. Tattoo it on your investing brain.
So Why Are Prices Still So High?
Marks gives it to us straight:
Investor psychology is still euphoric
AI is the new opium
There’s still a “no alternative” mindset to U.S. stocks
Nobody under 35 remembers a real bear market
Combine all that and what do you get?
A market that keeps floating… even as fundamentals deteriorate.
This is how bubbles form—not with fireworks, but with slow, delusional creep.
His Game Plan? INVESTCON 5
Marks doesn’t scream “sell everything.”
He simply dials back risk.
He calls it INVESTCON levels—like DEFCON, but for investors.
Right now, he’s at:
INVESTCON 5 – Reduce aggressive positions, increase defensive ones
No drama.
No heroics.
Just controlled exposure.
Sleep-at-night positioning.
Real Talk: What Should You Do?
Here’s the takeaway:
Don’t assume price = value
Be brutally honest about earnings power
Understand the crowd’s mood (and when it turns)
Don’t bet big unless the value is screaming at you
And above all… know that good investing is boring
Because if you chase heat?
You’ll get burned.
Final thought:
Markets are full of noise.
Price is loud.
But value whispers.
Listen closely.
It might just save you from a very expensive lesson.
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