The equity cycle can be shown schematically - with rising share prices driven first by

The equity cycle can be shown schematically - with rising share prices driven first by falling interest rates, then falling as interest rates rise, then rising again as economic growth pushes up profits, and then falling as growth peaks and profits fall back.If this all sounds too easy, Capel applied this schematic vision of the equity cycle to the US market, picking out the stages of the various cycles since 1974.That scheme is shown here: the US market now is well into the "equity III" phase, with at some period ahead the next recession heralding the time to switch into fixed-interest or into cash. But when? The final and bravest section of the Capel paper tackles this issue. Its conclusion is that most big markets are, like the US, now firmly into the equity III phase of the cycle.The US has seen most of the rise in profits growth already and so is most mature The peak in the cycle is, however, some way off. It is likely to come six months before the peak of the profits cycle, which Capel reckons will come towards the end of next year.That suggests that the time to get out of US equities will be next spring.The paper does not go further forward than that. But you could use the same schematic thinking and project the next cycle forward too. That would suggest that a year or so later, say spring 1997, it would be right to get back into US equities.

And by the same token you could say that the time to get out of UK shares will be towards the end of 1996 - and the time to get back in, end-1997.The obvious trouble with this sort of analysis is that, in a way, it is too easy Everyone has access to the same information. It is not possible to call market movements with any accuracy because all cycles are slightly different. And they are different precisely because investors look at previous cycles and seek to profit from the knowledge of past patterns.So investors need to modify their behaviour slightly. Here the brokers instil a little practical wisdom.The US market has done so well this year that it might be time to switch out. It has already risen by the 10 per cent the brokers expected for the whole year.

So grab that 10 per cent rise, stick the money on deposit for the rest of the year and you still have a money return of nearly 15 per cent or a real return of 11 per cent.Since the average real return on equities is about 6 per cent, that 11 per cent cannot be bad.Take these two exercises together, the strategic review of BZW and the cycle analysis of Capel, and you have a long-term investment approach covering most of the factors which affect share prices.Of course someone has to do the stock-picking. But since all investment portfolios should be reasonably broadly based, the overall impact of stock- picking is going to be quite small.My suggestion to the securities fraternity, therefore, is to take a few of the people away from the study of individual companies and put them on more longer-term research of economic and financial market trends.This ought to make business sense too. It is a nice accolade to have a few star analysts in the Reuter ranking, but it gives more lasting added- value if a securities house can make a fist of getting clients into the right market at the right time.It would also help nail the lie that markets care nothing about the long term - something which would do the investment community a power of good in the eyes of the rest of the world.. THE Government's supposedly green proposal for a landfill tax could actually increase damage to the environment, according to some in the industry. They say there is already evidence that the proposed tax is encouraging a switch to disposal in cheaper sites which do not have measures in place to protect the environment. According to David Boyd, government affairs manager at the landfill operator UK Waste, some of its customers have already decided to recontract waste disposal to reduce the impact of the tax, which comes into effect in October 1996. This will drive waste away from more expensive engineered sites with liners, pollution monitoring and control systems to so-called "dilute and disperse" sites, which are literally holes in the ground.On the other hand, Mr Boyd said, the prospect of the tax was encouraging other customers to recycle more. This is the effect the Chancellor, Kenneth Clarke, was hoping to achieve when he announced the tax in the Budget last November.The landfill tax was hailed as the UK's first "green tax"; the revenue raised will be used to reduce employers' National Insurance contributions, shifting the burden of taxation from labour to resources and waste.But although the waste management industry favours the use of taxes to encourage recycling, it says the proposal to levy the tax on an ad valorem basis (that is, by value) rather than by weight discriminates against more environmentally-friendly engineered landfills.The Government estimates that 100 million tonnes of waste are landfilled each year, at an average cost of pounds 10 per tonne.

The precise level of the tax will be set in the next Budget, but in its consultation paper issued on 21 March, the Government says the tax take will be in the range of pounds 300m to pounds 500m. A 50 per cent tax rate, raising pounds 500m a year, could finance a cut of 0.2 per cent in the main rate of employer National Insurance contributions. All comments on the consultation paper must be received by 5 June.The nastier the waste, the more it costs to landfill. The Government's logic for an ad valorem tax is that relatively innocuous materials, for example inert building waste, would attract less tax than hazardous waste, reflecting its lower environmental impact. But Mike Wynne, managing director of UK Waste (a joint venture between Wessex Water and the US company Waste Management International) said it would "distort the market in favour of cheap, low-quality sites, and have little impact on the behaviour of waste producers except encouraging them to move to cheaper sites".This would reduce the tax revenue. It would also result in more long- distance transport of waste and could provoke fly tipping in areas where landfill prices are high, again increasing rather than reducing pollution. Moreover, most companies pay one bill for collection and disposal, raising the prospect that charges could be weighted towards collection to avoid the tax.Peter Jones, director of external affairs at Biffa Waste, the UK's largest waste management company, said: "To go the ad valorem route would be a disaster." He said it would accentuate the cost advantage of non-engineered landfills to such an extent that it would become uneconomic to set up engineered sites in some regions."Our preference is for taxes based on tonnages, simply because this will ensure a uniform rate throughout the country."Mr Jones believes that a weight-based tax could be banded into three categories - inert, municipal and industrial - to reflect the relative environmental impact of the waste.The Government is against a weight-based tax because as many as 500 of the 4,000 landfill sites in the country do not have weighbridges, despite a requirement to install them under waste management licensing rules introduced in 1994.

At a cost of pounds 20,000 each, installation would add pounds 10m to the start-up costs of the tax.But the larger waste management companies argue that anyone who is not prepared to invest this amount of money is not suitable to operate a landfill. "If there is a major pollution incident, what use are they?" asked Mr Jones.He said an ad valorem tax was also "spongier" in terms of enforcement. Mr Jones explained that, despite a high level of vigilance, Biffa had to sack people at its landfills "from time to time" for taking cash in hand for accepting a load of waste. There was a history of unofficial deals being done at remote sites run by smaller operators, and checking the books "may not tell you anything", he added.With a weighbridge and video surveillance, Customs and Excise, which will collect the tax, could cross-refer with written records of what went in and out of a site, Mr Jones said..