Predicting market cycles: How to be less wrong

Early success led to Parliament and the King approving a conversion of £30 million of national debt to SSC shares in 1720.

By October, however, the price had plummeted back down to £200 and the South Sea Bubble burst.

Later, seeing gains continue, he couldn’t resist the fear of missing out and re-invested his fortune right before the crash.

This is what causes market cycles that swing from “underpriced” to “overpriced”, seldom pausing in the middle.

But, as Mark Twain is reputed to have said, “History doesn’t repeat itself, but it often rhymes”.

Governments have printed trillions in their currencies in the last 12 months and inflation is a real risk.

Worse yet, markets can be irrational for a long time and there is no telling when the pendulum will swing.

But if there was a formula that predicted market cycles, there would be no market cycles.

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