Mastering the Market Cycle: Getting the Odds on Your Side

Marks argues that cycles are the most reliable feature of markets, that their timing cannot be predicted, and that an investor's current position within a cycle can be assessed well enough to adjust exposure. The book expands material from his Oaktree memos and overlaps considerably with The Most Important Thing.

He identifies multiple interacting cycles: the economic cycle, the profit cycle, the credit cycle, the distressed debt cycle, the real estate cycle and the psychological pendulum between greed and fear. He argues that the credit cycle is the most consequential because it amplifies everything else, since the availability of credit determines whether an ordinary downturn becomes a crisis.

His central practical claim is that an investor should be aggressive or defensive according to where the cycle currently stands, and that the assessment can be made from observable indicators rather than from forecasting. He gives a checklist of market conditions, including whether investors are worried about losing money or about missing out, whether covenants are being weakened, whether new entrants are receiving funding easily, and whether risky securities are being issued readily.

He distinguishes between calibrating exposure, which he argues is possible, and market timing, which he argues is not, and states that the objective is to be aggressive when the odds are favourable rather than to identify tops and bottoms. The book repeats itself substantially and quotes at length from Marks' own memos, which are freely available. It contains no method for measuring the cycle position numerically, and the checklist requires judgment. Readers who have read his first book will find much of the content familiar.

Co-founder and Co-Chairman, Oaktree Capital Management

His client memos, written continuously since 1990, are a primary source on risk, cycles and market psychology that other investors quote directly.

Oaktree Capital Management