The Founder of the US Real Estate Cycle

How does a bastard, orphan, son of a whore grow up to be a hero and, perhaps, the founder of the US real estate cycle?

I tend to spend my summer — your winter — in the UK and France.

Obviously ‘summer’ is a term that in England means ‘that lighter grey, slightly less cold season’, but you get the idea! I used to say that I follow the sun…well I’ve been back a month or so and ‘avoiding the cold’ may be more accurate!

Actually it’s not been too bad.

If you have been to London you’ll know that the West End theatres are a key part of the city. What may be less known is that two men own most of them.

There’s the well-known Sir Andrew Lloyd Webber, composer of musicals such as Cats, Jesus Christ Superstar, and Evita. And there’s the less well-known Cameron Mackintosh. Who used to work for Lloyd Webber.

Both had the idea to produce their own musicals/shows and then become the landlord, instead of the tenant.

This gave them more security (they couldn’t get thrown out of the theatre) and a much greater share of the income they generate. Both have made very long-term investments in London real estate and have benefitted massively.

They both started buying when no one wanted the theatres and they’ve just kept buying. Today both have estimated fortunes of approximately $1.3 billion each. The property buying also gave them the chance to create the theatres they needed to put on their shows.

For example, Mackintosh owns the Victoria Palace Theatre. It used to host the long running musical Billy Elliot, but closed in 2016 to allow for a full refurbishment with estimated costs of $100 million (coinciding with the still ongoing multi-billion-dollar renovation of the whole area around Victoria station).

Whilst he left the exterior walls standing, almost everything else is brand new. One of the reasons why Mackintosh did it this way then was that it meant he’d have a ‘new’ home for the smash hit musical Hamilton.

Hamilton is one of the forgotten forefathers of the US

Hamilton is easily the ‘hottest show’ in town with top tickets costing $500 each — yes, that’s for one ticket. Don’t fear. Cameron has made more tickets available — for March 2019!

I admit to being somewhat excited when I heard that Hamilton would get his own musical. He’s one of the forgotten forefathers of the US.

You can read in my book The Secret Life of Real Estate and Banking, he may have done more than any other person to create the US property based economy. So in terms of the Secret Life of Real Estate, Hamilton could be seen as the most important founding father.

You can also read up on lot more of the real estate cycle here, too.

The musical is based on the exceptional biography of Hamilton by Ron Chernow.  Much of the drama centres on Hamilton running the new Treasury at the request of George Washington. As George Washington sings in the scene Cabinet Battle #1, ‘The issue on the table: Secretary Hamilton’s plan to assume state debt and establish a national bank.

But there was massive resistance to Hamilton’s proposal to pay for the war with England by creating what was to become the Bank of the United States (BUS).

Consistent with all other bail outs, Hamilton proposed paying 100% of the debt the States had accrued fighting the English, when parts were valued at 15 cents on the dollar.

(Does that sound familiar? I think you’ll find $700 billion reminders in the 2008 US bank bail-out plan!)

Hamilton’s plan obviously benefited speculators and financiers who had been buying up the debt for cents on the dollar.

One financier, Robert Morris, did excellent business and supported Hamilton’s plan. Hamilton managed to win support from the Southern objectors by agreeing to locate the new capital on the banks of the Potomac — which was owned by the Southern states.

A nice boost in real estate values there…

Hamilton banked nothing

Whilst many people benefited from this bank-creation deal financially, there’s no evidence that Hamilton did so personally. As I said in my book, he appears to have been ‘of impeccable honesty, genuinely believing in the rule of the elite for the benefit of all’.

The problem you can see is that just about everyone around him seemed to benefit personally from the agreement. His reason for offering 100% repayment was to ensure the USA would be able to borrow in the future if it ever needed loans — and that is what happened.

To complete the story on Hamilton, Aaron Burr killed Hamilton in a duel.

In the play the reason centred on Hamilton endorsing Thomas Jefferson for President as he didn’t trust Burr. This ended Burr’s hopes of becoming president.

Hamilton’s distrust was well founded. Burr made a great deal of money speculating on land with his financier partners. He actually founded a bank that later became Chase Manhattan Bank.

Don’t go expecting our politicians to become honest any time soon. The system doesn’t permit it. Does this sound cynical? I don’t see it as cynical myself — I see it as reality.

You have to make your own plans and take care of the people you care about. The only reason why you see it as cynical is that you’ve been sold a myth that politicians act in your interests. And when they don’t you think somehow things haven’t worked out. I see it as things working out exactly as they are designed.

It’s been going on since before the US was founded. All that’s different now is that the elite have all the infrastructure they need to do it again.

This is why I work to help people like you understand what is really going on. First to make sure you don’t get caught out again making investments at the wrong time.

And secondly that you can profit from it — especially in the next 10 years.

To learn how to profit from the real estate cycle, go here.


Phil Anderson,
Editor, Cycles, Trends & Forecasts

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; an idea he expands on more in a brand new Fat Tail Investment Research film, ‘Remembering the Future’.

Money Morning Australia