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are you concerned about this current bear market if you're finding it difficult these days you definitely want to watch this video as we'll be covering one of the best work on stock market mastering the market cycle from billionaire legendary investor and author howard marks for those of you who don't know howard marks he's an american investor with over 50 years of investing experience he's famous for his the memo with howard marx where he shares his outlook on the market with his clients today we'll be talking about our top three takeaways from this book so let's get right into it take away one the nature of market cycles cycles are all over in nature and we keep seeing them year in and year out but did you know that markets have cycles well just like the ordinary cycles we see in life the prices of assets in the market and economy tend to conform to swings throughout history economies and markets follow an up and down pattern called a cycle which can help us understand what lies ahead and that could tell you why investing has never been lucrative to every investor unlike cycles in nature market cycles can not be predicted with certainty they're controlled by human emotions of fear and greed it's surprising that the odds of losing money tend to be highest when everyone else becomes too optimistic ideally high optimism pushes asset prices high but the odds of better returns shrink on the other hand when everyone else is pessimistic the asset prices tend to be low and this is when the odds are in our favor to profit when the uptrend begins even though you can't predict with certainty the direction of the market you can have an idea when the market is favorable and unfavorable to invest in at that point therefore the few investors who take time to study market trends over time tend to profit more nothing best explains the reason behind this secret than mark twain's legendary statement history doesn't repeat itself but it often rhymes and so the few who can learn to predict the rhymes in the market gain more takeaway 2 investor psychology drives short-term cycles the short-term swings in the market reflect the emotions and psychology of investors people will tend to interpret things depending on how they feel emotionally when they are euphoric no matter the amount of bad or good news they hear they'll tend to hold high optimism and positivity for the market that means there's going to be a pressure to buy however when psychology is negative and markets have been falling for a while everything is likely to be interpreted negatively leading to a huge selling pressure which causes the prices to dip further this cyclic movement which is influenced by psychology keeps recurring over time resulting in short-term cycles however the superior investors are not influenced by psychological excesses and therefore they do not participate in the market swings and this explains why they are successful most of the time because no one can predict the market swings with certainty even isaac newton the most intelligent person of all time still could not time the market despite his brilliance he fell victim to emotions and lost much of his fortune during the south sea bubble of 1720 takeaway 3 attitudes towards risk if you're a seasoned investor you'll agree that your attitude towards risk has failed you most of the time and you're not alone take the case of john who entered the market in 2007 intending to convert his investment portfolio into a cash cow and escape his 9 to 5 job but it seems like john didn't anticipate the 2008 recession and in just a few months the market took a hit and john's assets were trading at negative 50 percent john became emotional and in fear that his investment might be wiped out he sold most of his stocks at a loss he couldn't wait to see his hard-earned money getting washed down the drain but it seems he should have stayed with his stock and even invested more money because just one to two years later the economy was in recovery mode and stocks started hitting new all-time highs as fundamentals kept favoring stocks and prices kept surging more investors started to join and john also wanted to make a profit from his euphoria so he decided to join again but john is just confused about whether to put in more money or take out his desire is just to know exactly whether we're going into a bull or a bear market sadly for him no one can tell with certainty what's going to happen in the investment world bonus takeaway long-term growth is driven by fundamentals now as much as the short-term growth is driven by psychology the long-term growth is driven by fundamental factors like birth rate and rate of productivity improvements etc therefore if the population grows faster the gdp will grow even more similarly if productivity is rising the economy is expected to grow but if it falls the economy is likewise accepted to fall however along the longer secular upward trend are short-term cycles and that is enough to prove that the market is not consistent from year to year as you and i might want to expect so that was it for today guys thanks for watching and make sure to smash that like button and subscribe for more such videos
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