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this video is sponsored by real vision everywhere you look people are obsessed with cycles you got election cycles which you know never end you got lunar cycles that people actually get married off of and of course there's the textbook economic cycle which is exactly what we're gonna talk about today on this episode or real visions the one thing what's going on investors they K here now here a real vision obviously we're obsessed with markets so let's look at some cycles that you could Bank on because the reality is while most people focus on things like technicals the real pros start with the cycle john taylor who had one point manage 14 billion in his forex fund came on real vision recently to talk about cycles i couldn't be more simple after doing this for sold okay right so let's hey that's a cycle okay you know it's got a low here and a low there and a high there or whatever and if it's too weird one of my rules is you know keep it simple in a way if it doesn't come out don't try to make the play waited for the play to come to you Taylor that went on to explain how he used cycles to confirm a great trade in the Swiss franc certain other things happened it basically made it so that were the Greeks were having an election or whatever and they were they were standing up electing somebody who was in the same spot so I looked at this and said oh my god there's a lot of problem the flows are really high what are we gonna do and you know drag he was in a bad spot he had to do something so there was there was a human element behind this despite the fact that it I realized after the fact that gee whiz it Swiss interest rates dropped like in half because of money flowing into Switzerland to take advantage of what they saw happening and and it fit on my big cycles the 2011 dropping at this and that that day all fit together so I was set for it in a in a purely statistical way and then I listened to Draghi corner the Swiss and forced them into you know you're either out of this or you're gonna get wiped out and you're going to own so many euros I can I know what to do with them Keith McCullough the CEO of hedge eye who we profiled last week actually uses cycles to determine where the economy is in his four quadrant model and actually the four quadrant model is a cyclone in itself he looks at economic growth cycles combined with Fed policy to see where the opportunity is in various macro asset classes and Raoul pal our founder he obsesses over the business cycle here's what he had to say about it in this real vision classic the short-term cycle is really the crux of what we need to use for investment one is the is the framework our secular framework next is how we implement that framework and where we are within it and that's why I use the business cycle so the chart you can next see is an idealized business cycle it kind of goes up and down that's the boom-bust cycle we're so familiar with and it would be perfectly measurable if it was like this because then we know exactly when the trough comes exactly when the boom arrives however it's not like that it's variable but it is still predictable because there's a range of outcomes that we know we know there's a certain length to each business cycle on average we know what the longest one is the shortest one is so once we know that we also know that as I mentioned before business cycles can trend and you can see that once it's peaked out it goes to a trough that's boom to bust recession we know there's a certain period of time with we know there's a certain depths of that cycle so that helps us forecast things but let's have a look at the real world a bit this chart is the business cycle versus recession indicators the recession is grayed out on the chart now as you can see it doesn't quite look like that idealized cycle but you can see it is a boom-bust cycle it is cyclical it goes up and down without there was no disputing that real vision loves digging deeper with legendary investors and when a Wall Street Titans share is what cycles are important to him you should probably listen ladies and gentlemen mr.
Howard Marx whether it was the human cycle where there was a market sign mmm credit cycles everything seemed to have a rhythm and it made investing a lot easier because you could at least have some sense of how these cycles would turn that seems to have changed significantly in the last 15 20 years hey could you hit this I don't I don't agree with that I mean I think that if you talk about 20 years if you came in this business 20 years ago you have seen two profound cycles you know you had the TMT bubble and crash and then you had the mortgage bubble and crash and I think that maybe they weren't predictable but I'm not sure they ever were you know jew-- but he said you know I wouldn't classify those as cycles I kind of look at them and think they were both attempts at cycle turns that happen quickly in kind of short order in small corners of the market and then got squashed quickly by by Fed policy well they were market cycles bubble and crash yeah they weren't economic cycles in the traditional sense Marx talks about how master investors are able to distinguish cycles whether they be economic or market related but the economic cycle has been a bit trickier to identify because of all the central bank intervention over these last few decades and that's part of why Howard Marks focuses on tried and trued market cycles which he could identify and then capitalize on in a big way so as you can see becoming an expert on cycles that dominate the market business and the economy is very important to investing a lot of people talk about stock prices in a vac with no mention of the cycle at all but if there's one thing we've seen with all these interviews is that the beginning point of any great trade starts with the question where are we in the cycle and just like the seasons cycles come and go and as mr.
mark said later in his video history never repeats itself but it rhymes so if you're interested in learning more about cycles and how to use them to profit in the market then make sure you subscribe to real vision I'll talk to you next week you
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