Mastering the Market Cycle

Book Review: Mastering the Market Cycle by Howard Marks

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Mastering the Market Cycle: getting the odds on your side” is the latest book by legendary investor Howard Marks. He’s the co-founder of Oaktree Capital Management, a firm with $122 billion under management as of this writing. In this review, we will focus on a few key points discussed in the book to help you determine if you should invest in it.

The first thing that should be noted is that this is not a “how-to” book. If you are looking for a precise method of determining where we are in the market cycle, you will likely be disappointed. However, if you are at all interested in investing, we believe that this book is worth the time and money. Mastering the Market Cycle is an investing philosophy to help identify where we stand in one of several cycles, including:

  • The economic cycle
  • The credit cycle
  • The real estate cycle
  • The psychology cycle

The idea is to try to develop awareness of cycle “extremes”. In other words, the goal is to notice when a market reaches an unreasonable level of optimism or pessimism. The “market” in question could be the stock market, the real estate market, or another market. These markets all affect each other but they don’t necessarily move in tandem. Also, Marks stresses throughout the book that each event within a cycle causes the next event, rather than merely following it. This is why it is important to develop an awareness of the different market cycles.

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“Mastering the Market Cycle” is not about market timing

Howard Marks’ book is not a market timing book. It won’t tell you when to get in or out of the market. It does not promote making any forecasts. It is also not concerned with the day-to-day fluctuations in the market. Rather, it focuses on “cyclical extremes” which, according to Marks, used to be once-in-a-lifetime events but now occur about once a decade. The idea is to detect and exploit these extreme events by calibrating your portfolio “along a continuum that runs from aggressive to defensive” (p. 295). Marks lets the reader decide how to implement this calibration without going into specifics.

What we didn’t like

It would probably be fair to say that the book is somewhat mistitled since it uses the word “mastering” (in reference to the market cycle) even though Marks admits that determining where we are in the market cycle is extremely difficult and not an exact science.

The book is also quite repetitive. This is both a good and a bad thing. It makes for tedious reading, but by discussing the stages of market cycles multiple times, it makes it more likely that you will recognize some of these patterns when they occur.

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Overall impression

If you are a seasoned investor, you will likely not learn a lot of new information from this book. However, you will probably wish you had read it when you were first getting started. In addition, this would be a good book to keep for the day your emotions start affecting your thinking, such as after a long bear or bull market. We think Mastering the Market Cycle could help readers develop an awareness of red flags in the market and keep a long-term perspective on their investments.

Disclosure: This article is provided for informational purposes only and is not intended to form a primary basis for any investment decision that you may make. Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results. Always consult with an investment advisor, tax advisor, and/or lawyer prior to making any financial planning, investment, tax, or estate decisions.

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Mastering the Market Cycle by Howard Marks
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