Howard Marks, founder of Oaktree, wrote a much-quoted line in "The Cycle": "We may not know exactly where the future is headed, but we must know where we stand today." This line exposes the most common mistake: using up-cycle strategy to ram against down-cycle reality.
Twenty years in finance, my deepening realization is: a sense of position is worth more than prediction.
🔑 1. Why "sense of position" beats "prediction"
No one can precisely predict next year's rates, house prices, or exchange rates. But we can judge: roughly the first or second half of the cycle, expansion or clearing.
A life analogy:
- If the whole street is queuing to buy homes and sales offices need connections, that's likely the overheated-price stage. What to think then isn't "buy or miss out," but "is the risk premium still enough."
- If those around talk "cash is king" and assets are unwanted, that's often near the cycle bottom. What to think then isn't "will it get worse," but "which assets are mispriced."
Sense of position decides action.
🌏 2. Three dimensions of the current macro cycle
Break the cycle into three interlinked things:
- Debt cycle: past — leveraged expansion, asset prices soaring; present — debt deleveraging, bankruptcy clearing.
- Rate cycle: past — high local-currency rates, high real-economy capital returns; present — local currency entering a long-rate-cut channel, low rates normalizing.
- Globalization cycle: past — supply-chain globalization, low trade friction; present — geopolitical restructuring, tariffs and capital transparency intensifying.
These three happening together means we're at a node of structural switch, not an ordinary fluctuation.
Debt cycle: from levering-up to deleveraging. In the high-growth era, businesses and families got used to amplifying returns with borrowed money. But when overall leverage tops out, repayment pressure forces "balance-sheet shrinking" — selling assets, cutting debt, contracting investment. The most typical feature of this stage: asset prices are no longer priced by "future imagination" but by "who will catch the falling knife."
Rate cycle: from high to long-term decline. Once local currency enters a rate-cut channel, deposit and fixed-income returns fall, forcing capital to seek other homes; but low rates often come with weakened economic expectations. Together, market swings get more frequent.
Globalization cycle: from open to restructuring. Tariffs, supply-chain reshoring, cross-border capital information exchange (like CRS) — all raise the cost of "cross-border arbitrage." The loose environment where "you could put money in any corner" is tightening.
⚖️ 3. An action guide for our current position
We're at the key node transitioning from "asset expansion" to "asset defense and stock reconstruction."
At this position, the core operating logic is:
- Lower leverage: don't use borrowed money to bet on uncertainty.
- Shrink risk exposure: reduce the share of high-volatility, low-liquidity assets.
- Recall high-risk investments: don't invest in what you don't know; don't invest in what you don't understand.
- Settle into constant assets: move a good portion of funds into offshore "constant assets" with the hardest rule-of-law protection and most stable cash flow. They may not rise the fastest, but they keep a family from being eliminated in a headwind.
🏛️ 4. Four actionable conclusions
- Don't apply high-growth-era experience to today: the past twenty years' effective "buy property to get rich" doesn't mean the next twenty will work the same.
- First think clearly which side of the cycle we stand on: use leverage in expansion, keep cash in clearing.
- Treat survival as the first goal: in a down cycle, staying alive matters ten times more than fast money.
- Use structure against the unknown: we can't control the cycle, but we can control whether our assets have a "breakwater."
The cycle shows no mercy, but structure can block some wind for us.
Next, let's talk about what every family must eventually face: the traps of wealth succession. Why is a Hong Kong trust a widely validated solution?