It is not possible to understand how the stock market and economy works without understanding long-term business cycles.
The world is constantly changing over the medium to long-term but for the short-term focused financial markets, extrapolation of the recent past is usually all it takes to put together a long-term forecast. The downfall of Long Term Capital Management should serve as a warning to all of those active in the field of finance who overly depend on short-term forecasts to make long-term predictions. Using short-term figures which have been extrapolated into a long-term forecast exposes the user to a major underestimation of the huge changes that happen through secular and long-term cycles.
