There was a great excerpt from Howard Marks’ book, The Most Important Thing:
Here’s a simple exercise that might help you take the temperature of future markets. I have listed a number of market characteristics. For each pair, check off the one you think is most descriptive of today. And if you find that most of your checkmarks are in the left-hand column, as I do, hold on to your wallet.
I liked this exercise so much I decided to put it into a little sheet that you can use yourself here. The market characteristic pairs are listed, along with my description of where I think things are in May 2018. My plan is to revisit this myself every three months. My recommendation is to create a copy of this for yourself and do the same thing! Would be great if you share your results back with me on this page – would love to hear how other folks are thinking about the current market dynamics.
A wonderful chart and a great exercise.
– Joel Greenblatt
I feel strongly that running through this checklist twice a year would allow an investor to keep tabs on the swing of the market’s pendulum. After a decade, the investor would have a rich database of past market swings from which to draw. I wish I had started such a list ten years ago.
– Paul Johnson