By Mat Spasic in Albert Park
At Markets & Money, we like nothing more than speculating on the economy. On gold. On currencies. On the future of the Aussie property market. And on just about anything else you can think of.
Sometimes we pick trends correctly. Other times, we’re way off the mark. Maybe that makes us no better than tarot card readers. But it’s easier to be wrong than right. After all, any prediction, no matter how educated, is still a guess.
Like, for instance, the gamut of opinions on the Aussie housing market in the past few days alone.
The Real Estate Institute of Victoria announced the number of million-dollar suburbs in Melbourne had quadrupled in the past five years. It suggested that prices will likely continue rising in the next 18 months.
Good news, right? Not so fast…
Prominent property analyst Louis Christopher, from SQM Research, predicted a 10% price correction on the east coast. Phil Parker, CIO at Altair Asset Management, went a step further. He shut down his multi-million-dollar fund on property bubble fears.
We think you get where we’re coming from…
Trying to find consensus on the property market is like looking for a needle in a haystack.
Everyone’s trying to find a point of difference to the rest of the market. But they’re all playing to the same two camps. Those that either want something to happen. Or those that don’t.
If you want property prices to keep rising, you’ll sing from the same hymn sheet as those that spruik what you want to hear. That’s what bias does. But all you end up with is the blind leading the blind. And yet, despite this, most investors make big investment decisions based on these inherent biases.
Does that condemn us to a life of poor decisions? We suspect that it does. Which is why, time and again, we fall victim to the wisdom of crowds. Not that it makes us passive investors, though. Far from it. We’re always searching and seeking. For what, we haven’t quite figured out. Call it the Universal Equation. Or the Law That Governs All Time and Space.
What we’re looking for is a game changer. Something that upends everything we know. And everything we thought we knew.
Something ground-breaking…yet blindingly simple at the same time. A law that explains the past, describes the present, and foretells the future.
Many will tell you that such musings are the stuff of fantasy. That a single equation could never define the nature of markets. That the world is too complex for that.
But we disagree.
When we look around, we see the complexity of life all around us. How the simplest of molecules become elaborate structures. How, from the Big Bang, our known universe was crafted in all its complexity. Little by little, we uncover the secrets of the universe. And though we’ve yet to fully understand how it all works, we’re getting closer.
Why, then, should the laws governing markets be any different?
Why can’t there be a grand equation for the economy? For stock markets? For the property market?
Well, it turns out, there might be…
The Grand Cycle
Where astrophysicists have come up short, a handful of economic visionaries have made significant breakthroughs.
We’ve known about equations that govern markets for over a century. But most either fall short in one aspect or another, or they’re too technical for the ordinary investor to understand.
Most of them…with a few exceptions.
One of these outliers is called the Grand Cycle. And its equation is simple. 18 = 14 + 4.
The Grand Cycle is an open secret. It should be obvious, yet hardly anybody knows about it. And it’s powerful. So powerful, in fact, that once you understand it, you can never look at the economy in the same way again.
The Grand Cycle, as its name implies, is cyclical. Like all things in nature, it moves predictably. 18 = 14 + 4, is breathtakingly simple to understand. And yet, buried in this equation is coding that describes over a century of economic activity. Of house price swings. Of stock market fluctuations. Of recessions. All down to a tee.
Today, we’re giving you the keys to the Grand Cycle. It’s your gateway to understanding the laws that govern the Aussie economy. You’ll discover why the housing crash has to play out…but why it won’t be when you think. The Grand Cycle will show you the precise year the housing market downturn is likely to hit. And how all this ties into the stock market and the rest of the economy.
If you understand where you are in the Grand Cycle, you’ll never be disturbed by market pot-banging again. With this knowledge, you won’t ever have to think about being on the right or wrong side of a breaking trend. Because, while the herd sees the trees, you’ll see the forest.
So, what does 18 = 14 + 4 mean?
This week in Markets & Money
If you’ve read Markets & Money this week, you’ll be aware of the spotlight we’ve shed on the Grand Cycle. The team at Cycles, Trends and Forecasts helmed M&M this week as part of a build-up to their brand-new, hour-long presentation on the Grand Cycle.
On Monday, real estate guru Phil Anderson kicked things off by looking at the effect China’s massive infrastructure spending program will have on land values. The Silk Road, which will see $1.6 trillion pumped into spending across Eurasia, is going to feed into land values in areas where the money is spent.
But China’s only one part of the story. India plans to build 60 million new homes by 2024, which is expected to add two millions jobs a year. Meanwhile, Trump’s infrastructure spend-a-thon, if it ever gets off the ground, will provide another huge boost to land prices.
That should lead to more jobs, and more money flowing into land values. Buckle up for the ride. For more on this story, go here.
Are you one of the people that believes financial markets are driven by the stock market? You wouldn’t be alone if you are. Most people think this way. But, as Terence Duffy noted on Tuesday, you’d be wrong. Financial markets are based on the real estate market. The world’s financial and banking system is based on lending money backed by the security of real estate.
This is why many investors fail to see differences between corrections and major crises. And it’s why they can never seem to make up their mind about the state of the housing market. But it all starts to make more sense when you factor in land values. To learn more about how the land values drive financial markets, click here.
On Wednesday, Terence revealed that a huge boom in property prices is about to sweep the globe.
That might sound silly to you, especially given the current climate. But there are several ways property prices can go higher from here. And, as Terence pointed out, one of the likeliest ways is through financial deregulation.
One of the big restraints on property prices over the past decade is the Dodd-Frank Act in the US. As you may know, Dodd-Frank passed in the aftermath of the 2008 financial crisis. It was the US government’s answer to preventing banks from pushing rampant home loan growth in the future. Well, that future is here, and Dodd-Frank is now on its last legs.
President Trump has indicated on several occasions that its days are numbered. He’s moving ever closer to repealing the Act, which would likely put a rocket under US house prices.
That, as you can guess, would be very good news for the housing market. And not just in the US, but in Australia too. Click here to find out why.
Yet it’s not just deregulation that is likely to boost the property market. As Bernd pointed out in Thursday’s Markets & Money, demographic factors are playing their part too.
Home prices in Sydney fell by 1.3% in May. Melbourne fell slightly more, with prices down 1.8% for the month. Cause for alarm? Perhaps…or perhaps not. Sydney and Melbourne are still up over 75% and 50% respectively over the past five years. That suggests May’s drop is little more than a minor pullback.
More importantly, Australia’s population surpassed 24 million last year. The major capitals continue to see an influx of new residents, with Melbourne set to double in size by 2046. Add to that low interest rates and loose monetary policy, and you have all the ingredients for sustained price growth.
Regardless, Bernd still believes the market is in a bubble, and that it will eventually burst. But he doesn’t see it happening anytime soon.
Like Bernd, Vern also believes the market is set for a major crash. That was the theme of his piece in Friday’s Markets & Money.
At some point, it’s likely that a market meltdown will in fact take place. And it probably won’t be pretty. But all anyone wants to know is, ‘when?’
Well, that’s where the Grand Cycle comes in. If you understand the timing of markets, you could potentially position yourself on the right side of any trade. This is where the Grand Cycle could make the difference between growing your wealth…or seeing it go up in a ball of flame.
That’s all for this week.
Until next time,
For Markets & Money