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Mastering the Market Cycle: Getting the Odds on Your Side

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Marks references the 2008 crisis and investors’ “learning” that the market always quickly recovers because that was the outcome following the crisis. There are two kinds of people who lose a lot of money: those who know nothing and those who know everything. You now have a general sense of short-term market cycles and the potential benefits of paying attention to your position within them. Spring turns to summer, summer to autumn, autumn to winter, and winter, finally, leads back to spring. 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.

Good times cause people to become more optimistic, jettison their caution, and settle for skimpy risk premiums on risky investments. Just as investors swing between greed and fear, what is the cycle for central bankers and what do we need to look for to identify potential turning points. Factors include: population growth which impacts hours worked and GDP growth which is affected by demographic shifts, education, technology/innovation, automation, and globalization. Investment success is ultimately determined by positioning, asset selection, aggressiveness/defensiveness, skill, and luck. Stages of a Bull Market: 1) when few people believe things will get better, 2) when most people see things improving, 3) when everyone believes things will stay better forever.Most raging bull markets are abetted by an upsurge in the willingness to provide capital, usually imprudently. People who are successful run the risk of overlooking the fact that they were lucky, or that they had help from others.

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. The debate around market timing and cycles is an important and timely one and his choice to dive deep into this subject in his second book is more than welcomed. But rather the investor who bought the property from the bank amid distress and then rode the up-cycle. There’s a range of outcomes, and we don’t know where [the actual outcome is] going to fall within the range.Performing that trick requires a strong stomach for being wrong because we are all going to be wrong more often then we expect. His encouragement to set aside emotions, diligently ‘take the temperature’ of the market, and act upon it, is what can set you apart as a successful investor. Mastering the Market Cycle (2018) tackles a subject that’s often misunderstood, ignored or both: financial cycles. In investing, the future is a range of possibilities — some known, some unknown — making risk and uncertainty unavoidable. A simple metaphor relating to real estate helped me to understand this phenomenon: What’s an empty building worth?

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