In today’s Money Morning we can only admire the investors who had the guts to step in after the collapse of 2008 and buy up the best assets cheap. They’re reaping the gains now.
Over in Florida, for example, jackonsville.com reports there are firms that own hundreds and hundreds — some thousands — of homes bought in distressed sales. These are now gushing cash flow as the rental cheques roll in.
Some property companies are still shopping for homes, but the major chunk of the bargains are gone. The hedge funds are hard to beat now.
Imagine for a moment if you’d been able to buy up hundreds of homes at bargain prices from around 2010 in the States. You’d be sitting very pretty.
But hold that thought…
Acting on this made some millions
First of all you would had to have the money. The second is you’d have to ignore the hellish news around you that the world was going to collapse again.
Would you have taken the risk?
If you’d been following the work of my colleague Phillip J Anderson at the time, you would have at least known the opportunity was there for the taking.
In fact, he went on the cover of the UK’s largest financial magazine in 2008 to tell everyone US house prices would fall until 2010, before kicking into gear again and go higher. He also added that you’d know that particular forecast was on track because US stocks would lead the way.
See for yourself…
That’s exactly what happened.
Don’t take that for granted by the way. Over in the UK, the establishment there is bidding adieu to Sir Nick Macpherson.
We send him our best wishes, but hopefully someone more competent replaces him.
Who is Sir Nick? He’s the departing top civil servant for the UK Treasury. I didn’t even know his name until this week, but you’ll appreciate why I bring him up.
This man apparently spent 31 years involved in the public sector with the last 10 years as permanent treasury secretary. Did he see the financial crisis coming? Er, no.
As he retires this week, here’s his explanation this week to the Financial Times…
‘“I see myself as one of a number of people in finance ministries, central bank regulators, in the UK and the US who failed to see the crisis coming, who failed to spot the build-up of risk,” he says. “This was a monumental collective intellectual error.”’
That’s a pretty lame excuse, considering land economist Fred Harrison published a book in Britain called Boom Bust in 2005, which forecast the collapse of 2008 and the depression of 2010.
Fred’s not like your average forecaster who says the same thing every year and then crows about the one he got right. Fred had said the same thing in 1997 — the UK would collapse in 2008 as the real estate market went over the top in a total frenzy. That was based off his study of historical real estate cycles in the UK.
If Sir Nick doesn’t read book reviews or browse the bookstores, he might like checking his mail every now and again.
Fred Harrison also wrote to the UK Prime Minister Gordon Brown and UK Treasury to warn them of the collapse he saw coming.
Fred was ignored. Suffice to say, you can put Sir Nick’s defence down as the self-serving slop it is. It’s no good hiding behind the fact most of the government bureaucrats and central bank types were just as clueless as he was.
Do yourself a favour. Start listening to Phil’s forecasts and not the government’s or the press. They will never tell you what you need to know.
You’ll also be amazed how often Phil forecasts events before they’re news.
Dubai just gave him another win on the scoreboard…
The secret of the ‘talls’
One of the things we keep watching for at Cycles, Trends and Forecasts is for record tall buildings to open around key dates.
In fact, in our very issue as far back as 2014 now, Phil wrote the following about the tall building indicator and timing the economy:
‘This dating has a high probability of working and has proven accurate in the past. The world’s tallest have at all times in the past opened in recession.’
It seems obvious to point out that projects have a major time lag between approval and financing to development and completion.
Certainly while these buildings that are going up they keep people employed and the associated companies busy.
There’s an interesting study to be done on all this. In fact, studies have been done in this. That’s because history shows tall buildings (or the biggest, grandest buildings) often open in a downturn.
The danger to the economy is usually not while they’re being built, but once they’re finished. Here’s why: the credit and construction expansion that boosts the economy happens before they’re completed.
Here’s also what you need to know about this. There are a large number of projects due to open in Australia — indeed around the world — in 2019.
This is one reason why, over at Cycles, Trends and Forecasts, we’ve pegged for the next recession to begin around this date and run through to 2021.
I see it all the time. Just last week really took the cake. The Wall Street Journal reported:
‘Dubai’s flagship developer Emaar Properties on Sunday unveiled plans to construct the world’s tallest tower in the Middle Eastern emirate, set to rise slightly above the Burj Khalifa that currently holds the title.’
The Burj Khalifa — the current tallest in the world, if not for long — opened in 2009, by the way.
The world is moving.
The WSJ included this nice graphic of what the two new tall buildings might look like…
Source: Wall Street Journal
When’s the new tower due to open? 2020. Like we say, the world’s tallest buildings almost always open in recessions.
But what will happen in between now and then?
For your best shot to know the news long before it breaks, go here.
Associate Editor, Cycles, Trends and Forecasts