Mastering the Market Cycle: Getting the Odds on Your Side

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Economies and markets have never moved in a straight line in the past, and neither will they do so in the future. In investing, everything that’s important is counter-intuitive, and everything that’s obvious to everyone is wrong. Inflation is a result of increasing demand for goods relative to supply, an increase in raw materials and labor costs, and/or when a currency tied to imports declines relative to a currency tied to exports. Coming in late 2018, Mastering the Market Cycle addresses some of the most topical questions for investors, providing not just insightful thoughts that relate to our current times, but a conclusive framework that could have been valid at any point in history, empowering readers with the tools they need to find the right balance between risk and opportunity and between prudence and aggressiveness. If you’re uncertain as to whether there will be a correction in the market – or if you think there’s no reason to worry because ‘it’s different this time’ – you have to read this book before you make a move.

Most raging bull markets are abetted by an upsurge in the willingness to provide capital, usually imprudently. One of the most important things needed to achieve investment success is to clearly define your investment philosophy and diligently act upon that philosophy. While most investment professionals take the standard out – that ‘you can’t time the market’ – in Mastering the Market Cycle Howard Marks, a living investment legend, takes the contrarian point of view that not only can you time markets, but it’s imperative that you do so. The risk is completing a project while the economy is headed for recession with a rising supply/shrinking demand in the market. We all love to imagine ourselves to be independent-minded and maybe a little bit contrarian but truth is, with a few rare exceptions, almost everyone is guilty of joining in with all the other bulls and bears.

Despite being one of the most accomplished investors of our age, Marks has risen above the ranks by following seemingly simple rules, detailed in this book with his usual proficiency, unique insight and, eminently, in plain English. In other words, while superior investors — like everyone else — don’t know exactly what the future holds, they do have an above-average understanding of future tendencies. These questions should help determine the tilt of a portfolio: more aggressive when the odds are in our favor and more defensive when the odds are against us.

It's given me a few things to think about, but it hasn't made me feel more confident in my ability to read the market. Likewise, most collapses are preceded by a wholesale refusal to finance certain companies, industries, or the entire gamut of would-be borrowers. Company profits follow a cycle similar to the economy but not all companies follow the same pattern. Stages of a Bear Market: 1) when a few people believe things won’t stay better forever, 2) when most people see things are getting worse, 3) when everyone believes things can only get worse.Since risk (that is, uncertainty with regard to future developments, and the possibility of bad outcomes) is the primary source of the challenge in investing, the ability to understand, assess and deal with risk is the mark of the superior investor and an essential—I’m tempted to say the essential—requirement for investment success.

Periods dominated by bad news, pessimism, and fear lead investors to be more risk-averse than normal. The general pattern of a cycle matters, because the specific details at any point in a cycle will look different from similar points in the past. Both Apple and Google state that they ensure that only users who have actually downloaded the app can submit a review. Of course, repeating key points can help you remember them but there is a limit and, in my opinion, Mr Marks crosses it.Howard Marks, among the world's most successful investment managers as well as an intellectual leader of the profession [has written a new book]. The events in the life of a cycle shouldn’t be viewed merely as each being followed by the next, but — much more importantly — as each causing the next. Learning so much from this book as I am in 6 chapters, can relate so much to my own actions both negative and positive.