Why do those who understand the economic cycle have to struggle for fewer decades than ordinary investors?

Question

Understanding market规律 allows you to follow the trend. Many investors lose money not because they choose the wrong coin or misjudge the timing, but because they fail to recognize which phase of the economic cycle they are in.

Why Do Cycles Exist? The Underlying Logic of Economic Fluctuations

The emergence of economic cycles stems from two core contradictions: the mismatch between one-time investment expenditures and phased income returns, and the tension between certain costs and uncertain future gains.

More intuitively, it is the conflict between supply lagging behind and demand changing rapidly. People can decide overnight whether to increase meat consumption, but pig farming cycles take half a year; companies can quickly decide whether to expand photovoltaic investments, but factory construction takes up to two years. It is this time mismatch that leads to alternating periods of cyclical shortages and surpluses.

Three-Layer Cycle Framework: From Short to Long Cycles

Short Cycle (Kitchin Cycle: 3-5 years)

In 1923, British statistician Sir John Kitchin discovered, based on a century of data from the UK and the US, that the economy exhibits short-term fluctuations of about 40 months. The changes in China’s finished product inventories perfectly confirm this pattern.

The driver of the short cycle is inventory: when supply is insufficient, businesses proactively replenish stock → after demand is met, they passively replenish → excess supply leads to active destocking → finally, passive destocking. Along with this process, asset prices also fluctuate, allowing investors to profit by buying at lows and selling at highs.

Medium Cycle (Juglar Cycle: 8-10 years)

French economist Clément Juglar proposed in 1860 that the economy follows a cycle of prosperity → crisis → depression, with an average period of 9-10 years.

The real driver of the medium cycle is the renewal of fixed assets. Equipment depreciates, efficiency declines, and after a certain period, it must be replaced. According to accounting standards, the depreciation period for production equipment is about 10 years. When companies focus on updating equipment, it drives economic growth; after the update is complete, demand sharply contracts, and the economy enters a downward cycle.

There is also a 20-year cycle called the Kuznets Cycle, related to the real estate market. Buying a first home in your 20s, upgrading in your 40s, and after 20 years, the next generation reaches adulthood and needs housing again, forming a regular real estate investment cycle.

Long Cycle (Kondratiev Wave: 50 years)

In 1925, Russian economist Nikolai Kondratiev analyzed over a century of data on prices, interest rates, and trade, discovering an average super-long cycle of about 50 years.

A complete Kondratiev cycle includes four phases: recovery, prosperity, recession, and depression. Technological bubbles often mark the peak of prosperity, and supply-side reforms tend to signal the onset of a global depression.

The Wealth Epic Witnessed by Five Kondratiev Waves

First Wave (1780-1840): Driven by the steam engine and textile machinery, fueling the Industrial Revolution; the Rothschild family rapidly expanded their wealth during this period.

Second Wave (1840-1910): Rise of railroads, internal combustion engines, and steel industries; the Rockefeller family accumulated wealth through oil.

Third Wave (1910-1970): Electrification, heavy chemical industries, automotive era; the Ford family created legends.

Fourth Wave (1970-2030): Internet, electronics, communication technology boom; entrepreneurs like Bill Gates created unprecedented wealth.

Fifth Wave (Projected 2020-mid-21st century): Driven by frontier technologies such as artificial intelligence, new energy, and life sciences; the wealth increase in this cycle is expected to surpass the previous four, bringing a historic transformation to human society.

Zhou Jintao’s Prediction and the Depression Phase of 2016-2026

The late economist Zhou Jintao once famously stated that “wealth creation depends on Kondratiev waves,” emphasizing that wealth accumulation is not solely due to individual ability but is driven by economic cycle opportunities. He believed that a person theoretically has three Kondratiev opportunities in life, and seizing one can elevate them to the middle class.

Zhou Jintao precisely marked each Kondratiev wave:

1975-1982: The depression phase of the previous Kondratiev wave
Starting 1982: The current wave begins to rise
1991-1994: US tech bubble, marking the start of prosperity
2004-2008: Kondratiev golden period
2004-2015: Recession phase
2016-2026: Depression phase

2025-2026: The Intersection of Old and New Cycles

According to Kondratiev theory, starting in 2026, a new wave will enter its ascent phase, which coincides with the period of wealth restructuring in the global financial markets.

The significance of 2025 is that it marks both the end of the old cycle and the beginning of a new one. This window will determine the investment landscape for the next decade and beyond.

Understanding the essence of Kondratiev cycles is understanding the pulse of the market. Investors who master cycle规律 can position themselves ahead of the curve and follow the trend, ultimately becoming the main beneficiaries in the new cycle. Those who miss this node may regret it for many years.

The key is: Understand trends, respect risks, stay flexible, and in the sixth Kondratiev wave, seize your opportunity.