Marks discusses the various cycles that occur in the business world from economics and profit to credit and real estate. Marks' thesis is how the understanding of these cycles and their relationships effect investment returns. It is essential to know where the cycles stand at any point in time for long-term success in portfolio management.
The knowledge of cycles enables the investor to judge their portfolio's current position relative to the potential upside returns and downside risks. With this information in mind, the investor is well informed on how to position their holdings to deal with the probable future. Unlike cyclical movements in physics and other sciences, investment cycles are never exactly the same. History doesn't repeat, but it rhymes.
As much as market pundits claim to know the future, their prognostications are usually wrong. Marks doesn't claim to know the future, a trait he shares with the well-known Warren Buffett. It is more important to clearly understand the knowable or “where they currently are”. The knowledge of where someone is at is essential for planning their route to a destination. Using the current environment to establish a launching point provides essential information about the probable future and insights toward the "best bets" to make.
While Marks is a graduate of the Chicago School of Business, he does not a believer in the "Efficient Market Hypothesis". Investors will never be completely rational like the academic world would have their students believe. Investible assets are very seldom priced efficiently. They are either over-priced or underpriced.
The degree in which assets are inefficiently priced is a function of the convergence of many of the cycles Marks discusses. The inefficiencies will always be there because the process of buying and selling securities is not solely governed by mathematical equations, but by the actions of humans. Human actions are and will continue to be governed by emotions and those emotions will create periods where assets are significantly over-priced and underpriced relative to their intrinsic values.
Mastering the Market Cycle is a must read for any serious investor.