Not knowing the future means being prepared for things that may not go as planned from a portfolio perspective. This insightful, practical guide to understanding and responding to cycles – by a world-leading investor – is your key to unlocking a better and more privileged appreciation of how to make the markets work for you and make your money multiply. 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. In other words, while superior investors — like everyone else — don’t know exactly what the future holds, they do have an above-average understanding of future tendencies. Company profits follow a cycle similar to the economy but not all companies follow the same pattern.

The events in the life of a cycle shouldn’t be viewed merely as each being followed by the next, but — much more importantly — as each causing the next.For starters, it’s pretty much impossible to predict the distant future with greater accuracy than other investors. But whenever the pendulum is near either extreme, it is inevitable that it will move back toward the midpoint sooner or later. The author’s polished, precise English and long experience combine to leave you in no doubt about the message; cycles matter and woe unto you if you don’t take them seriously. Asset Selection: identify asset classes/securities that will be better or worse and weighting — over and under — them based on the required risk level of the portfolio.

Well, we can say of financial cyclicality what Mark Twain is reputed to have said of history: it doesn’t repeat itself, but it does rhyme. This cycle in investors’ willingness to value the future is one of the most powerful cycles that exist.As any system grows toward its maximum or peak efficiency, it will develop the very internal contradictions and weaknesses that bring about its eventual decay and demise. There is no such thing as a market that is separate from—and unaffected by—the people who make it up.

To calculate the overall star rating and percentage breakdown by star, we don’t use a simple average. This pattern is perhaps best demonstrated by taking an extreme example: the dot-com bubble, and subsequent crash, of 1995 to 2002 – a boom-bust cycle that was driven, to a large extent, by the incaution of venture capitalists. In investing, everything that’s important is counter-intuitive, and everything that’s obvious to everyone is wrong. Generally, the swings in the economy influence the rise and fall of corporate sales, which impacts profits.

Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.