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“We are working closely with the regulators to deliver a new, coherent and agile regulatory regime that seizes the benefits of Brexit to deliver for individuals and businesses.”
So, there we have it.
As a student of the 18-year Real Estate Cycle, it was the signal I was looking for.
We have had the weirdest couple of years imaginable. The world has gone mad with lockdowns and their aftermath. Inflation is rampant, though nobody seems to agree why and what to do about it.
There is conflict in Europe. The global financial system, underpinned by the almighty dollar, is breaking apart.
The goon (Former UK Prime Minister Boris Johnson) that has been in charge has fallen, citing betrayal but conveniently forgetting his own contribution to that drama.
We now have two potential candidates to succeed him. Both have been arguing about how much to raise or lower taxes and how much to spend.
One thinks a form of austerity is needed as an economy slows into a possible recession.
The other thinks that cutting taxes and increasing spending in an economy at full employment with supply side restrictions will somehow reduce inflation.
You couldn’t make it up.
However, let me set the stage to show you what’s most important in all this, particularly if you are a UK reader. Though it has global implications.
No doubt all the above is important today, but this is not what you pay attention to if you wish to see the repeat of the cycle.
The most important lever to unleash pure unadulterated speculation in markets…just got pulled.
No one realized it though.
Give me four minutes of your time to explain the utter enormity of that opening statement above.
Because your life this decade has just changed.
It took 18 years to get to this point.
I’m not prone to hyperbole.
Whenever I write these blogs every week to you, it’s about something that’s important either to yourself directly or of significance as the real estate cycle develops.
But this week!
Let me put it this way; to properly study the full dynamics involved in a complete real estate cycle, be prepared to allocate 20 odd years of your life.
Or, read ‘The Secret Life of Real Estate and Banking’ by Phillip J Anderson. This should save you some time.
Phil shows how it repeats every 18-20 years in the United States from 1800 to the date of publication in 2008.
But if you read each chapter carefully, you may have noticed, as I did, there are about half a dozen seminal moments you really need to be on watch for in every cycle.
One of those seminal moments is this: at some point in the cycle there is always something that happens, often caused by a change to government policy, that supports a surge in bank lending.
And wouldn’t you know it?
With almost uncanny timing, so accurate it boggles the mind that mere politicians could be so studious, I read something that I recall last occurred late 2004.
I know, I need to get out more often.
But in amongst the fighting and jostling to nominate a new Tory party leader, rising inflation and energy prices I spotted one of our seminal moments.
Source: FT
I honestly almost fell off my chair.
Simply because I knew all too well the significance of this so-called “financial services bill.”
A radical financial services bill, drawn up by former chancellor and Tory leadership contender Rishi Sunak, will be published on Wednesday. It will pave the way for ministers to be able to “call in” regulatory decisions made by the BoE [Bank of England] that they do not like.
Nadhim Zahawi, who succeeded Sunak as chancellor this month, will endorse Sunak’s plan for a more “growth-focused” approach to City regulation in his Mansion House speech on Tuesday.
Personally, I’ve applied for my own hot-line to use in cases I don’t like decisions made against me.
Good enough for them, yeh!?
Back to reality, it does make me wonder who exactly has caused the sitting parliament so much grief from the Bank of England’s Prudential Regulatory Authority. Pretty soon they will have to drop the ‘Authority’ bit of their title.
Former PM Johnson was said to have been ‘impatient’ with regulators due to their resistance to reforms proposed to the EU’s “Solvency 2” regime. Johnson wanted his reforms to loosen capital requirements for insurance companies.
He also proposed a 50-year mortgage that could be handed down through the generations.
“But that day has now come with Perenna, a UK specialist lender, being granted a licence by the financial regulators to offer mortgages with fixed rates up to 50 years in length.”
But as I said, the lever that’s been pulled is the wiping of the regulatory slate clean to allow excessive lending to really kick start the economy.
This will require a dismantling of laws and rules specifically designed to save governments and banks from themselves. And as a cherry on top, insert rules which means only those whose views align with the sitting governments will be allowed.
Don’t believe me? Re-read what the article said above.
Rishi Sunak summed up the mentality very well with his ‘Brexit manifesto’ saying “to help investors and insurers put money into assets like infrastructure that stimulate growth and will reap long-term rewards.”
Again, I don’t want to slip into hyperbole with you here.
But the contention of the Property Sharemarket Economics (PSE) team that the single greatest wealth creation exercise in history will mark the peak of this real estate cycle cannot happen without this.
And history can prove it to you.
Your window has opened, but you’re on the clock!
There have been innumerable decisions made by governments just over the last two years that make you shake your head.
But most people’s memories are short, and we tend to forget them. Ironic, because governments absolutely count on us doing precisely that.
I mentioned seminal moments before. For me, something that defines them is you don’t tend to forget them easily.
Albeit having yourself immersed in the cycle like I am offers certain advantages here too.
So, I have been waiting patiently ever since I first read Phil’s book for an event which last occurred 14 years ago now.
Let me show you what that was; please note the date on the article below.
Source: NYT
This explains why a seminal moment has occurred. It’s not simply the context behind the Chinese PBOC decision to raise rates into an economic environment beset by inflation (though asset inflation mostly, not supply/commodity related).
It’s even more than the fact that this decision above almost occurred at the same time last real estate cycle (1993 to 2012) as it’s occurring today, in this cycle.
No, it’s the lever that was pulled. And it kickstarted the to-date biggest ever wealth creation event in recorded history.
From the above 2004 article. Emphasis in bold are my own.
At the same time, however, the decision to raise interest rates and partially deregulate them as well could ultimately enhance China’s long-term growth and give its economy much greater stability.
It represents an historic embrace by Beijing of free-market tools of economic management despite possible internal political repercussions, said Tao Dong, the China economist at Credit Suisse First Boston’s office here. “This probably will anger a lot of people, but I give the government high marks,” because of the need to curb inflation, he said. Indebted property developers and laid-off workers are likely to rank among the angriest.
I mean, c’mon. If I authored this exact same article today, would you really notice any difference to today’s events?
The formula is quite simple: expanding credit + rising interest rates = pure asset speculation.
Look what happened around the world from 2004 to the land market peak in 2007 and eventual stock market peak later in 2009.
We are here again.
I simply can’t be any more frank with you than this. Not since the first ever blog I wrote to you.
The second, more speculative, half of the cycle has been lit. It’s on, it has started.
This is what will herald the greatest, most over the top and indulgent period of human history.
These next few years can change your financial life.
And I have just provided you with early access! Front row seats, before this even becomes public knowledge.
Are you ready now? Do you know what you need to do to both profit and protect?
This should be your first step; a membership to the Boom Bust Bulletin (BBB).
It will teach you the history of the 18.6-year Real Estate Cycle and why it repeats (surely by now you can see this yes?) and guide you to the opportunities the cycle presents as it turns.
There is only one thing better than identifying a mega-trend that’s about to take off before anyone else.
And that’s knowing how and when to take the opportunity earlier than the majority realize it.
The Boom Bust Bulletin can help you develop that market edge.
All for $47USD a year. That’s less than a takeout coffee a week!
I really don’t want you or your family to be left behind.
Make the decision to join us on this amazing journey.
Sign up now.
Best wishes,
Darren J Wilson
and your Property Sharemarket Economics Team
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