Mastering the Market Cycle by Howard Marks - Summary


I've read this book in November 2018 and at the same time a market correction occurred in the equity markets world wide. I think the book really gives some great insights in how the markets work and how important an investor's psychology is for the market. In essence, it behaves and acts in cycles. This drives the excesses in overpriced and underpriced assets which is the basic statement of this book.

Some parts are directly taken from the book as excerpts below.


Nature of cycles



The regularity of cycles

Cycles can't be compared to mathematics. The next high is rarely equal to the previous high. They can't be compared to sin/cos curves. There are cycles on cycles with a secular trend. If one knows what causes them and why, it gives them an edge. When, how long and the extent of cycles are not predictable. There is a lot of randomness involved.

The economic cycle

economics = the dismal science

Many investors predicate their actions on forecasts that they make themselves or obtain from economists, banks or the media. And yet many such forecasts contain information that’s likely to not add value and lead to investment success.

The cycle in profits

The pendulum of investor psychology

A few years ago my friend Jon Brooks supplied this great illustration of skewed interpretation at work. Here’s how > investors react to events when they’re feeling good about life (which usually means the market has been rising):

The cycle in attitudes towards risk

The credit cycle

The distressed debt cycle

The real estate cycle

Putting it all together - The market cycle

How to cope with market cycles

Cycle positioning

Limits on coping

The cycle in success

The future of cycles

The essence of cycles

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