House hunting is hard. Just ask Lauren Sanchez.
She’s the girlfriend of the world’s richest man, Jeff Bezos. They’d been touring mega-mansions all around California for the best part of 2019.
They settled on a new Beverly Hills mansion and paid US$165 million for the privilege. The price paid shattered the prior record for the most expensive amount ever paid for a California house.
Now this tells you everything you need to know about the real estate cycle, actually. We’ll get to that in a moment.
Jeff Bezos is the founder and CEO of Amazon.com Inc [NASDAQ:AMZN]. This company is quite possibly the biggest money making machine ever devised. One day, Bezos could well become the world’s first ‘trillionaire’.
That is if some space mining company doesn’t get a hold of an asteroid first.
There’s almost no aspect of our online lives that Amazon hasn’t influenced. And the Amazon advantage? It’s not necessarily what they sell (which is basically everything).
It’s that they conquered the problem of logistics: being able to handle “the last mile” of delivery efficiently. Amazon gets you what you bought online to your home as quickly as possible.
But with the world in lockdown, the revenues of this retail giant should have been hit. There was belt-tightening going on as unemployment soared.
But was this really the case? So much belt-tightening?
If you want to know what’s going on, ignore people’s opinions. Learn how to “read” what the chart of stock prices is telling you.
This is what your Property Sharemarket Economics (PSE) team specialises in. Let me show you.
What’s the chart telling you about Amazon? Let’s bring it up.
Here’s the monthly chart.
The share price is breaking into all-time new highs. In the middle of a global pandemic. It tells you Amazon is growing revenues.
Is this surprising? Well you could argue that as the world’s largest online retailer it enjoys advantages that other companies don’t.
What about the more traditional stores then? You know, the old ‘bricks and mortar’ ones? Remember those? Surely they can’t be doing so well.
(Retail stores remain the largest employer in the US.)
Let’s look at another chart. This one is of a Real Estate Investment Trust that owns the shares of large retailers in the US. This should tell us about what’s happening ‘on the ground”.
It’s the weekly chart of the VanEck Vectors Retail ETF [NASDAQ:RTH].
Aside from Amazon, this ETF contains bricks and mortar retailers such as Home Depot, Walmart and Lowe’s. Just to name a few.
It also is trading around all-time highs. It suggests these retailers in the US are adapting and growing earnings too.
It doesn’t suggest a lot of belt tightening going on either. Nor, that a long, drawn out recession is coming as many in the US are claiming. Rather, it tells you people are opening their wallets.
Now, no one is denying that risks remain. A lot depends on the virus. And whether we’ll get hit by a “second wave” of infections. We don’t know yet.
Or do we?
The possibility of there being a long drawn out recession for the US is currently not backed up by the charts.
And if something more serious is on the way, you’ll see it first in the charts.
They tell you the unfiltered truth that you’re not going to read in the news. You just need to know what to look for.
As mentioned above, Mr Bezos and his girlfriend are paying the most ever for a house. Which they did right at the start of 2020.
If you follow the real estate cycle, this should not have come as a surprise to you.
Here’s a chart your PSE editors sent out to subscribers at the start of 2019.
Source: Ascendant Strategy and Investments Ltd
We do this for subscribers at the start of every year. The secret is, knowing how to put all the charts together to suggest how the year may unfold.
Focus on the red line. That’s the 20, and 60-year repeat. It’s what we suggested the Dow for 2019 would most likely follow.
And it did.
Years ended in ‘9’ almost always mark the end of a strong bull market run. That was so useful to know. We have 200 hundred years of data to back this statement up now. That’s detailed in my book ‘The Secret Life of Real Estate and Banking’.
We also suggested that subscribers watch for confirming information about the end of 2019 being the peak – and recession to follow. Like the US president telling everyone how good he had made the US economy.
And someone probably paying a record price for a US house to live in.
It was just ‘time’ for that to happen. Yes really.
If you’d like to know more about how to read the economy through the charts, click HERE.
You’ll also get our ‘line’ for 2020, and beyond. Can you afford not to know this?
and your Property Sharemarket Economics team.