Why the Capitalised Rent Will Stay High and Go Even Higher

Today I want to bring your attention to some positive news you may have missed recently. I noted at the World War D conference a few weeks ago the very bearish tone from some of the keynote presenters.

Last week, Bloomberg data showed that from the S&P 500 this reporting season, of the 134 companies that had released earnings until then, 75% had exceeded analyst forecasts.

Notably, Apple posted second-quarter earnings per share of US$11.32 per share, vs estimates that were at US$10.18, and then went on to announce a share split.

Markets do not collapse when this is going on.

Also take note of this chart below…

click to enlarge


This shows the long term rise in the stock price of ANZ bank. It recently hit new highs, as did Westpac, for April 24.

The same thing happened weeks earlier, April 10. For both banks, these are also all time new highs.

This tells you the banks so named will be releasing improved earnings reports over coming months, at which time — in the future months — they will see price top out with the announcement. (But within the existing trend.)

Do not go forecasting such banks — or the economy in general — to collapse. The odds will be against you. The only time you really have to worry about bank shares going into all-time new highs is at the end of a real estate cycle and when the yield curve is inverted. Neither is the case for 2014.

I also noted with interest a recent Forbes article on a new factory approach to urban construction to save on costs and provide greater quality control. You can read the article yourself in the link. It will have a transformative effect, allowing affordable building incredibly fast.

I hope you ‘get’ the result of this, however.

Land price WILL rise as building costs come down. And since the build cost is easily established here, we will be able to clearly and quite precisely measure the land value, should it interest anyone to do so.

The current real estate cycle, just begun, could really be huge. There are astronomical productivity gains building here.

And then there is this, in tech…

Facebook recently paid US$19 billion for mobile messaging platform WhatsApp.

WhatsApp is a $1-per-year service with 465M users. As it has been explained to me, it is possible ‘the Facebook acquisition provides the infrastructure needed for WhatsApp to begin offering voice calls. So instead of people paying on average $80 per month to do that, users in the future may only have to pay $1 per year for the same services. This shift could disrupt more than $100B in annual wireless revenues.’

Such gains WILL capitalise into the economic rent and land price WILL rise. If banks really start creating credit again, the second half of the cycle can again be really speculative.


Phil Anderson
for The Anderson Project

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Phillip J Anderson is an Australian academic, author and student of stock, commodity and real estate cycles. Drawing on the work of British economist Fred Harrison and American technical analyst WD Gann, Phil developed his own theory about 18-year real estate cycles in the early 1990s. Since then, Phil has been using cycle theory to guide his own investment decisions — crediting the phenomenon with his decision to move to a 100% cash position in July of 2007, just before the GFC wreaked havoc on the Australian stock market. He has also built up a lucrative property portfolio here and in the UK. Phil is currently predicting a 14-year boom in Australian house prices.

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