The key to generating wealth over a long period of time is to identify when one macro cycle ends and a new macro cycle begins. In economics, a macro cycle is defined as a cycle of big picture economic performance, structure, and behavior.
No bell is rung at the end of the cycle. Identifying the end of the cycle early as well as the leaders for the next cycle is the key to generating wealth.
The foregoing is common sense but it is one of the most difficult tasks in the realm of successful investing. Big gains with the lowest risk are made by identifying the end of the old cycle and leaders of the new cycle well before the crowd. By the time most gurus start identifying the change in cycles, the highest alpha generating opportunities are gone.
Alpha is the well accepted risk adjusted measure of investment return; it is the investment return in excess of the compensation for the risk taken.
The end of a cycle is a process that lasts over a significant period of time. Similarly the start of a new cycle is also a process lasting over months. The inherent nature of the macro cycles is that there are lots of fits and starts; it is never a clean break from one cycle to another.
ZYX Global Multi Asset Allocation on August 11, 2011, issued an alert that the previous cycle was ending.
END OF THE CYCLE
Historical data shows that the recent behavior of various markets across the globe typically coincides with end of the cycle…Read more at MarketWatch