SummaryThe business cycle is the driving force behind asset prices.Commodities decline when the business cycle declines.Bitcoin declines when liquidity drives the business cycle down. THE PETER DAG PORTFOLIO STRATEGY AND MANAGEMENTThe critical phase of the business cycle is Phase 4. Its length depends on how long it takes to bring inventories in line with sales, to lower inflation and interest rates to levels needed by consumers to become more positive about the future, and to bring down costs to improve companies’ profitability. The longer it lasts, the more severe economic weakness will be.The beginning of Phase 1 signals a period of economic expansion driven by increased production to build up inventories to match sales. This decision involves hiring new people, buying raw materials, and borrowing more to improve and expand capacity.This is the time when interest rates and commodities bottom. They will start rising again when the business cycle moves into Phase 2 as the economy gains momentum.Toward the end of Phase 2 commodities and inflation are rising as business keeps ramping up production to replenish inventories. The inventory to sales ratio is now declining rapidly as sales rise faster than inventories.There is a point toward the end of Phase 2, however, when consumers are beginning to feel the impact of rising interest rates and inflation. The first signal is weakness in the housing sector. The demand for big-ticke...
