Examples of Successful Investors Benefiting from Cycles
[1]. As shown in my last post on “Cycles and Trends”, the S&P 500 enjoyed a long boom cycle and peaked in 1968, and then started a declining cycle after that.
Buffett had been investing for his partnership since 1956, and had made a lot of money for his partners and for himself.
Then in 1970, he delivered a shocking notice to his partners: He had decided to shut down the partnership. He realized that the boom cycle had ended and a declining cycle had started. He got out near the top and retired.
Of course, then the market crashed and cheap deals were everywhere. Buffett couldn’t resist the cheap stocks, so he got out of his retirement and loaded up his truck again.
[2]. In 1978, Stanley Druckenmiller’s boss, after suffering a painful long decade of busts, knew that a new boom cycle was coming soon. He promoted the 24-year old Stanley Druckenmiller to lead the investment team of old guys, because “you are too dumb, too young, and too inexperienced”, did not suffer the pain and wounds in the previous bust decade, and therefore had the courage to take risks to invest into the new boom cycle.
[3]. In 1999, when everybody was excited about investing in stocks, Buffett was reminding people of the 1970s bust and lost decade. People did not like it and they laughed at Buffett. Some even insulted Buffett in his face: “Do you still have any wisdom left?” Well, Buffett knew that after the long boom cycle of 1982-1999, another crash and lost decade was coming. Those new .com proud millionaires who did not listen to him were later wiped out.
[4]. Gold and silver had a boom cycle 1970-1980. That was followed by a long and painful bust cycle of 1980-2000. Buffett, sensing that the long bust cycle was about to end and a new boom cycle was coming, bought 3,500 Tons of silver in 1997. Bill Gates, also aware of the cycles, invested in silver miner in 1999. Silver would enjoy the next boom cycle to increase by about ten-fold from 2000-2012.
[5]. Sam Zell is a billionaire and one of the best real estate investors. He and his partner were both physically short, at about 5 feet each. The two added up to 10 feet and were called “The 10-foot team”. Sam Zell has a nickname: grave dancer. He danced in the graveyard of other failed investors and bought their distressed properties for pennies on the dollar. He knew that the real estate market had had a very good up cycle from mid 1990s to 2006. There were many greedy people with bidding wars and euphoria in 2005 and 2006. Cycles alternate; it’s the law. He knew that a down cycle was about to start. In 2006, at the very peak of the market, he sold his huge real estate collection for $36 billion.
[6]. I know a local investor LK. We had dinner together several times. LK is a nice gentleman and is in his 70s now. He renovated a big building, converted it into condo and sold the units before 2006. He told me several stories of local investors who did not know the cycles, who got caught up in the heat of the moment in bidding wars, and expanded rapidly in 2005 and 2006. They made LK look bad because they were buying lots of real estate and expanding quickly in 2005. Unfortunately, they were later wiped out and were bankrupt.
Being aware of the cycles will serve us well.
By David Meng, author of book “The Intelligent Small Investor”
Good question. This is a million dollar question. Please see my
[1]. Based on the S&P 500 history (please see my last post), the previous S&P 500 boom was from 1982-2000, it lasted 18 years. The boom cycle prior to that was 1942-1968, and it lasted 26 years. These boom cycles lasted 18 years to 26 years. The current boom started in 2009, so it's been 11 years. If history is any guide, we should have several more years left.
[2]. In the previous boom cycles, the S&P 500 increased by about 6-8 fold. In the current boom since 2009, the S&P 500 has increased by about 4-fold so far. If history is any guide, there is more room left for increase.
[3]. It never goes up in a straight line. In each S&P 500 boom cycle, there are 10%, 20%, 30% drops. These are good buying opportunities.
These are my humble observations. Investing has risks, so we can only talk about probabilities, and it is usually not a 100% sure thing. Hope this helps.
For housing prices, it is local, so I will only state my location here:
The last peak was 2006. The peak prior to that was 1989. There is about 17-18 years from peak to peak. If this holds true again, then the next peak should be around 2023-2024. Bear in mind that the cycle length can differ by a couple of years from the average length, and local cycles can be different too. So, please make sure that you study and research your own local real estate history data. My point is: It is important to study the cycles and to gain knowledge of historic cycles and trends, so that we small investors do not shoot in the dark. Good luck to you.
[1]. For S&P 500 stock market, the previous boom was from 1982-2000: 18 years.
The boom cycle prior to that was 1942-1968: 26 years.
Each boom cycle increase: 6-8 fold.
The current boom started in 2009, so it's been 11 years. If history is any guide, there should be several more years left and there are rooms for more increase. It never goes up in a straight line. In each S&P 500 boom cycle, there are 10%, 20%, 30% drops. These would be good buying opportunities.
[2]. For housing prices, it is local. In my area, the last peak was 2006. The peak prior to that was 1989. About 17-18 years from peak to peak. If this holds true again, then the next peak should be around 2023-2024. Bear in mind that the cycle length can differ by a couple of years from the average length, and local cycles can be different too. So, please study your own local real estate historical data. Best regards.
Examples of Successful Investors Benefiting from Cycles
[1]. As shown in my last post on “Cycles and Trends”, the S&P 500 enjoyed a long boom cycle and peaked in 1968, and then started a declining cycle after that.
Buffett had been investing for his partnership since 1956, and had made a lot of money for his partners and for himself.
Then in 1970, he delivered a shocking notice to his partners: He had decided to shut down the partnership. He realized that the boom cycle had ended and a declining cycle had started. He got out near the top and retired.
Of course, then the market crashed and cheap deals were everywhere. Buffett couldn’t resist the cheap stocks, so he got out of his retirement and loaded up his truck again.
[2]. In 1978, Stanley Druckenmiller’s boss, after suffering a painful long decade of busts, knew that a new boom cycle was coming soon. He promoted the 24-year old Stanley Druckenmiller to lead the investment team of old guys, because “you are too dumb, too young, and too inexperienced”, did not suffer the pain and wounds in the previous bust decade, and therefore had the courage to take risks to invest into the new boom cycle.
[3]. In 1999, when everybody was excited about investing in stocks, Buffett was reminding people of the 1970s bust and lost decade. People did not like it and they laughed at Buffett. Some even insulted Buffett in his face: “Do you still have any wisdom left?” Well, Buffett knew that after the long boom cycle of 1982-1999, another crash and lost decade was coming. Those new .com proud millionaires who did not listen to him were later wiped out.
[4]. Gold and silver had a boom cycle 1970-1980. That was followed by a long and painful bust cycle of 1980-2000. Buffett, sensing that the long bust cycle was about to end and a new boom cycle was coming, bought 3,500 Tons of silver in 1997. Bill Gates, also aware of the cycles, invested in silver miner in 1999. Silver would enjoy the next boom cycle to increase by about ten-fold from 2000-2012.
[5]. Sam Zell is a billionaire and one of the best real estate investors. He and his partner were both physically short, at about 5 feet each. The two added up to 10 feet and were called “The 10-foot team”. Sam Zell has a nickname: grave dancer. He danced in the graveyard of other failed investors and bought their distressed properties for pennies on the dollar. He knew that the real estate market had had a very good up cycle from mid 1990s to 2006. There were many greedy people with bidding wars and euphoria in 2005 and 2006. Cycles alternate; it’s the law. He knew that a down cycle was about to start. In 2006, at the very peak of the market, he sold his huge real estate collection for $36 billion.
[6]. I know a local investor LK. We had dinner together several times. LK is a nice gentleman and is in his 70s now. He renovated a big building, converted it into condo and sold the units before 2006. He told me several stories of local investors who did not know the cycles, who got caught up in the heat of the moment in bidding wars, and expanded rapidly in 2005 and 2006. They made LK look bad because they were buying lots of real estate and expanding quickly in 2005. Unfortunately, they were later wiped out and were bankrupt.
Being aware of the cycles will serve us well.
By David Meng, author of book “The Intelligent Small Investor”
[1]. Based on the S&P 500 history (please see my last post), the previous S&P 500 boom was from 1982-2000, it lasted 18 years. The boom cycle prior to that was 1942-1968, and it lasted 26 years. These boom cycles lasted 18 years to 26 years. The current boom started in 2009, so it's been 11 years. If history is any guide, we should have several more years left.
[2]. In the previous boom cycles, the S&P 500 increased by about 6-8 fold. In the current boom since 2009, the S&P 500 has increased by about 4-fold so far. If history is any guide, there is more room left for increase.
[3]. It never goes up in a straight line. In each S&P 500 boom cycle, there are 10%, 20%, 30% drops. These are good buying opportunities.
These are my humble observations. Investing has risks, so we can only talk about probabilities, and it is usually not a 100% sure thing. Hope this helps.
For housing prices, it is local, so I will only state my location here:
The last peak was 2006. The peak prior to that was 1989. There is about 17-18 years from peak to peak. If this holds true again, then the next peak should be around 2023-2024. Bear in mind that the cycle length can differ by a couple of years from the average length, and local cycles can be different too. So, please make sure that you study and research your own local real estate history data. My point is: It is important to study the cycles and to gain knowledge of historic cycles and trends, so that we small investors do not shoot in the dark. Good luck to you.
大卫，您好：您似乎想分享自己的最佳想法，并使他人受益。 这里大多数人的英语水平都很高，这可能会让您惊讶。 但是，由于此处的大多数帖子都是中文，因此您可能希望使用google translation将英语翻译成中文。 从营销的角度来看，您的帖子可以得到更好的接收。本段曾用谷歌翻译。
太慢，所以就用英文写了，快得多。我会试试看用一用您所说的 Google translation. Thanks. Best regards
谢谢，我们是一样的。 由于文化大革命，我从没学过拼音。 谷歌翻译是有效的，并且易于使用。 祝好运.
房子长期来说一个字就是涨
[1]. For S&P 500 stock market, the previous boom was from 1982-2000: 18 years.
The boom cycle prior to that was 1942-1968: 26 years.
Each boom cycle increase: 6-8 fold.
The current boom started in 2009, so it's been 11 years. If history is any guide, there should be several more years left and there are rooms for more increase. It never goes up in a straight line. In each S&P 500 boom cycle, there are 10%, 20%, 30% drops. These would be good buying opportunities.
[2]. For housing prices, it is local. In my area, the last peak was 2006. The peak prior to that was 1989. About 17-18 years from peak to peak. If this holds true again, then the next peak should be around 2023-2024. Bear in mind that the cycle length can differ by a couple of years from the average length, and local cycles can be different too. So, please study your own local real estate historical data. Best regards.