Linear vs Cyclical markets.

[Taylor Green]

Hi,

I was just wondering what the difference is between a linear and a cyclical market?

What are the advantages/disadvantages of both?

Thanks!

[Douglas Dowell]

Hello Taylor,

A Linear market in my opinion is one characterized by stable but likely much lower growth. A Cyclical market is subject to much wider swings in pricing.

Example: I would bet dollars to donuts the rural markets and places like Topeka Kansas saw some effect from the national run up in home prices before the sub-prime but never the same wide swings that Florida and California saw.

The big advantage of a linear market is much less downside price risk.

The cyclical market on the other hand IF...IF you can time it right will yield nice capital appreciation but of course has higher down side risk.