Mastering the Market Cycle: Getting the Odds on Your Side

£9.9
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Mastering the Market Cycle: Getting the Odds on Your Side

Mastering the Market Cycle: Getting the Odds on Your Side

RRP: £99
Price: £9.9
£9.9 FREE Shipping

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Description

Spring turns to summer, summer to autumn, autumn to winter, and winter, finally, leads back to spring. Periods dominated by good news, optimism, greed, and euphoria push investors to be more risk-tolerant than normal. Distressed debt is bought on the basis that the company can no longer pay the interest and principal. Along with his previous book and memos, this book lays the timeless fundamentals for investment success.

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. In investing, there is nothing that always works, since the environment is always changing, and investors’ efforts to respond to the environment cause it to change further. When risk tolerance takes over and lenders compete avidly for opportunities, the bidding is likely to become overheated. Every day, countless investors are closely monitoring the media and paying attention to the ups and downs of this or that market. Changing attitudes towards risk leads investors to be too risk-averse or too risk-tolerant at times.The greatest lessons regarding cycles are learned through experience…as in the adage ‘experience is what you got when you didn’t get what you wanted. For me, the bottom line of all of this is that the greatest source of investment risk is the belief that there is no risk. Because cycles are influenced in the short term by people and other variables, it has no constant rate. Instead of scrolling through your social media news feed, this is a much better way to spend your spare time in my opinion. Likewise, most collapses are preceded by a wholesale refusal to finance certain companies, industries, or the entire gamut of would-be borrowers.

Widespread risk tolerance—or a high degree of investor comfort with risk—is the greatest harbinger of subsequent market declines.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.

Most economic forecasts extrapolate the current trend because it’s safe (career risk) and sticks to the status quo.Performing that trick requires a strong stomach for being wrong because we are all going to be wrong more often then we expect. Economies, companies and markets operate in accordance with patterns which are influenced by naturally occurring events combined with human psychology and behaviour. But the force behind regression continues to exert itself, the momentum pushes the cycle past the midpoint to the next high or low. Prosperity brings expanded lending, which leads to unwise lending, which produces large losses, which makes lenders stop lending, which ends prosperity, and on and on. Lenders move from a cautious, risk-averse position unwilling to lend without higher rates and protection from losses to a risk-tolerant, willingness to lend at lower rates and no protection in place out of fear of missing out.



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