Book: Mastering the Market Cycle
Author: Howard Marks
Key takeaways: If you have followed Howard Marks over the years, I would recommend you skip the book because there’s nothing new here that he hasn’t talk about before. I found his Most Important Thing to be a much more useful book. Below are some useful tidbits.
- Warren Buffett’s criteria for a desirable piece of information: is it important, and is it knowable.
- Skepticism and pessimism aren’t synonymous. Skepticism calls for pessimism when optimism is excessive, but it also calls for optimism when pessimism is excessive.
- One way to judge the available opportunity set is to ask what you’d say 5 years from now, looking back: “Back in ’18, I wish I were more aggressive.”, or would it be “Back in ’18, I wish I were more defensive.”
This is a thought that came to me as I was thinking of various cycles:
- Economic cycle: GDP, driven by population growth and labor productivity
- Business cycle: function of business sentiment and financial leverage available
- Earnings cycle: function of corporate taxes
- EPS cycle: function of capital allocation, driving share repurchases
- Multiple cycle: function of sentiment, personal wealth around the world, freedom of cross-border movement of capital, prevalence of return-agnostic players
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