Instead of fighting or fearing market downturns, a superior strategy is to consciously "surrender" to their inevitability. This philosophical acceptance frees you from the draining, low-value work of predicting the unpredictable (recessions, crashes) and allows you to focus on owning resilient businesses for the long term.

Unlike typical investors who chase performance, sophisticated institutions often rebalance into managed futures when the strategy is in a drawdown. They take profits after strong years (like 2022) and re-allocate capital during weak periods to maintain strategic exposure.

Conventional definitions of risk, like volatility, are flawed. True risk is an event you did not anticipate that forces you to abandon your strategy at a bad time. Foreseeable events, like a 50% market crash, are not risks but rather expected parts of the market cycle that a robust strategy should be built to withstand.

During profound economic instability, the winning strategy isn't chasing the highest returns, but rather avoiding catastrophic loss. The greatest risks are not missed upside, but holding only cash as inflation erodes its value or relying solely on a paycheck.

“Crisis Alpha” is not a guaranteed hedge but the result of a managed futures strategy successfully capturing extreme macroeconomic shifts. The strategy is fundamentally about following major macro themes, with a crisis simply being one of the most intense themes it can follow.

Howard Marks argues that you cannot maintain a risk-on posture and then opportunistically switch to a defensive one just before a downturn. Effective risk management requires that defense be an integral, permanent component of every investment decision, ensuring resilience during bad times.

Thinking about leverage as simply "on" or "off" is limiting. A more advanced approach views any asset with a lower expected return as a potential liability. One can effectively "borrow" it (i.e., short it) to finance the purchase of an asset with a higher expected return, aiming to capture the spread.

Profitable companies act as a hedge against currency debasement. They issue long-term debt at low fixed rates, effectively shorting the currency. They then invest the proceeds into productive assets or their own stock, which tend to outperform inflation, benefiting shareholders.

The true value of a large cash position isn't its yield but its 'hidden return.' This liquidity provides psychological stability during market downturns, preventing you from becoming a forced seller at the worst possible time. This behavioral insurance can be worth far more than any potential market gains.