If you invest the goal is to have more and the easiest and hardest way is to buy low, hold on to your investments for a period of time, sell some of it when it is high and buy more when it is low. That is a cycle. The way a cycle works is when you look backwards, it is easy to see. When you look forward it is very hard to know what and when the top or bottom is. One person who has tried to use cycles as an investment philosophy is Howard Marks, the founder of Oaktree Capital Management. Mr. Marks has written a number of books and every once in a while, he publishes his thoughts on Oaktree Capital Management website. Mr. Marks has made money buying low and selling high and wrote a book called Mastering the Market Cycle, published by Houghton Mifflin Harcourt Publishing Co, NY, 2018.

How can you tell where we are in the cycle?

Things to watch out for

Economy Vibrant Sluggish

Outlook Positive Negative

Lenders Eager Reticent

Capital Markets Loose Tight

Capital Plentiful Scarce

Terms Easy Restrictive

Interest rates Low High

Yield spreads Narrow Wide

Investors Optimistic Pessimistic

Sanguine Distressed

Eager to buy Uninterested in buying

Sellers Happy to hold Rushing for the exits

Markets Crowded Starved for attention

Funds Hard to gain entry Open for anyone

New ones daily Only the best can raise money

Recent performance Strong Weak

Asset prices High Low

Prospective returns Low High

Risk High Low

Popular qualities Aggressiveness Caution and discipline

Broad reach Selectivity

Available mistakes Buying too much Buying too little

Paying up Walking away

Taking too much risk Taking too little risk

For each pair, check off the one you think is most descriptive of the current market. And if you find of your checkmarks are on the left-hand column, hold onto your wallet. If on the right, buying is a good thing, because you should be able to find good values. You will need to estimate what intrinsic value is and then have the fortitude to have your estimate of value proved correct.

The checklist is easier to do if you are in the industry but you can change it to reflect what you are exposed to. For example, can a small business get a loan with the bank or it is harder to do, almost need to show you do not need the money to get the loan?

Linking to dividend paying stocks, the cycles are a tool to help you when you invest. There is nothing wrong with waiting if you think the market is turning to bearish. However, the issue is always when do you buy? Often times people wait till the market has moved upwards, but they missed the easy profits to be made. If you are going to follow understand market cycles, you have to be do your homework on what is good value for a stock and wait till the market allows you to buy. If you buy a profitable stock with a dividend it is entirely possible for the dividend payments to help make up paying a little more for the stock and waiting.

There are more questions than answers, till the next time – to raising questions.