Mastering the Market Cycle: Getting the Odds on Your Side

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Mastering the Market Cycle is his second book, the much-anticipated follow up to The Most Important Thing. There’s a range of outcomes, and we don’t know where [the actual outcome is] going to fall within the range. 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. When investors are in a pessimistic mood and can’t see more than a few years out, they can only think about the negative cash flows and are unable to imagine a time when the building will be rented and profitable.

A host of independent developments — management decisions, technology changes, regulations, taxation, geopolitical events, natural disasters, etc.But the force behind regression continues to exert itself, the momentum pushes the cycle past the midpoint to the next high or low. It’s important to note that exiting the market after a decline—and thus failing to participate in a cyclical rebound—is truly the cardinal sin in investing. The igniter is usually a recession or credit crunch making it difficult for companies to service their bonds and/or refinance.

This cycle in investors’ willingness to value the future is one of the most powerful cycles that exist. Along the way, it discusses multiple recent financial cycles, teasing out the lessons that can be learned from each.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.

The pendulum careens from one extreme to the other, spending almost no time at “the happy medium” and rather little in the range of reasonableness. And not the banker who loaned the money for its construction and then repossessed the project from the developer in the down-cycle.As far as I was concerned, there wasn't enough discussion about central banks and the way they have refused to let cycles take their natural course in recent years. It’s converting that downward fluctuation into a permanent loss by selling out at the bottom that’s really terrible. Thus it shouldn’t come as a surprise that more unwise investments are made in good times than in bad.

Imagine you’re a financial investor – a successful one, with your own capital-management firm and over 40 years experience in the market.Written in plain English, Howard Marks's hard-earned wisdom will help readers tilt the odds in their favor. You now have a general sense of short-term market cycles and the potential benefits of paying attention to your position within them. THE NEW YORK TIMES BESTSELLER Named “Wall Street’s Favorite Guru” by Barron’s (March 2013), Howard Marks provides practical insight and keen analysis on how to understand, track, and react to the ups and downs of market cycles. There can be few fields of human endeavor in which history counts for so little as in the world of finance.