Why stock and Property market "crashes" are still years away

Leonard D Neubache

Owl
Gold Member
I'm just some crazy old coot who lives in the woods, but I've always wondered if some of the folks talking about a market crash actually realise how far down the rabbit hole that little concept has the potential to go.

Are they going to be sitting on a pile of expertly chosen stock and bond options laughing at how filthy rich they'll be in ten years while the world burns around them and the pangs of starvation set in?

In '33 most of the population lived rurally and survived largely impoverished by a mix of hardscrabble agricultural work and self sufficiency. In the cities (where the minority of the population lived at the time) it was only a strong, culturally homogeneous sense of civil order that kept the block-long soup lines from turning into riots and total anarchy.

I'm not saying AS is foolish. Obviously he's anything but. What I'm saying is I'm personally more interested to know on what premise he believes that there will still be the structures in place to honour the paper trails and the digital ones and zeroes of the old order when the next big one comes (if indeed it does).

That's the direction my curiosity leads in any case.
 

Suits

 
Australia Sucks said:
Suits that being said in my opening post I did point out there is a chance of a mid cycle slowdown in 2019 (or early 2020). 2019 is when the world's tallest building is set for completion in Saudi Arabia. The mid cycle slowdown will likely be a correction e.g. up to 10% pullback in the national property market average and up to 25% pull back in stock prices. In my opinion, the big crash won't come until the middle of the next decade. So you may have a good opportunity to invest in 2019 or 2020.
How long would it take for the stock market indexes to recover to pre-crash levels after a BIG crash?
 

Australia Sucks

Kingfisher
Also let me counter some arguments that are typically used by bears:

Bear argument Number 1:
"Stock markets are very overvalued when looking at metrics like Schiller P.E. and Tobin's Q and hence are primed for a mean reverting crash".

Rebuttal: Yes markets are currently overvalued and will eventually mean revert, just like I will eventually die of old age. History tells us that markets can remain overvalued for many years and can become even more overvalued before crashing. Also the process of mean reversion can occur through a combination of rising earnings and flat or slowly rising stock prices. For example if earnings rise at 8% per annum and stock prices rise at 4% per annum the p.e. ratio will gradually fall. For what its worth I don't think the stock market returns over the next 5-10 years will be anywhere near as strong as the last 5-10 years but I don't think the stock markets will crash either.

Bear Argument Number 2:
"Debt levels are unsustainably high and will cause a depression"

Rebuttal:
Debt levels are very high by historical standards, but due to a combination of economic growth, low interest rates, rising land values (which represent a large part of the collateral underwriting the debts) and accommodating bond markets, debt levels look set to continue rising for years to come. Look at what underpins the debts. In the case of household debt its household income and land values. Land values are rising, household income is generally rising and unemployment is falling. Corporate debts are underpinned by corporate profits which are at record levels (at least in the U.S.) and still rising (in most developed economies). As for government debts a lot of countries still have huge amounts of government owned infrastructure that they can privatize to fund the building of new infrastructure. It can and will happen. Expect a wave of privatizations at some point.

Bear Argument Number 3:
"Interest rates are rising"

Rebuttal:
Interest rates are rising but very slowly and from a very low base. FED rates going from 0% to 2% etc based on history typically is not enough to cause a recession because rates are still low. For example FED rates going from 3% to 5% might cause a recession but we are still years away from that scenario.
 

Australia Sucks

Kingfisher
Suits I really do not have an answer to your question because every recovery is different and its too hard to tell. A while ago I did read an article somewhere talking about all the different recoveries and analyzing the average time it takes to recover. I will try and dig it up for you.

In the U.S. for the last crash the stock market peaked in late 2007 and hit a low in early 2009. It again hit a record high in 2013. By historical standards that was a very quick recovery, with the average time from memory being something more like 7 or 8 years (not 100% sure, will have to dig it up for you).

Sometimes it can decades for the market to hit a pre-crash high, with Japan (Nikkei225) still being below its 1989 high.
 

Australia Sucks

Kingfisher
Leonard I get where you are coming from. The scenario you are painting of a civilization collapse of some sorts is always a possibility which cannot be ruled out.

You can't completely hedge the risk but using part of your portfolio you can partially hedge that risk by doing things like owning physical gold and silver, some physical cash (in case the banks shut down) and having some rural land somewhere.

These are the types of actions I recommend people take as an insurance/hedge to what you are saying, while they keep most of there money invested in things which create wealth like stocks and real estate, etc.

Also if you have some idea of when the crash is coming you can reduce your exposures to stocks, small business and property investments, etc that are overvalued and increase your cash weightings so you are ready to take advantage of crash induced bargains (assuming society does not collapse of course).

Also I think its important to keep a physical copy backup of things like the title deed to properties you own, etc in case the electronic systems have problems.
 

Australia Sucks

Kingfisher
https://www.marketsandmoney.com.au/...-means-10-more-years-of-growth-cx/2015/11/24/

Here is a link talking about how there might be (still on the drawing board) another world's tallest tower completed around 2025 or 2026 in Iraq of all places. It fits in neatly with the thesis that the 2019/2020 tallest tower in Saudi Arabia is likely to be the mid cycle slowdown whereas the big crash is more likely in the middle of next decade (hint its speculated that the Iraqi skyscraper is due for completion in 2025 or 2026)

In this link there is a video showing what the tower might look like:
https://www.theguardian.com/artandd...est-building-planned-in-ex-warzone-basra-iraq
 

Australia Sucks

Kingfisher
Another bear argument that I want to address is this in regards to corporate profit margins being too high.

Bear Argument:
"corporate profitability measured by corporate profit margins and corporate profits as percentage of GDP are very high compared to historical averages and will mean revert thus bringing down stock markets"

Counter argument:
Corporate profitability is structurally higher than it was just a few decades. The are a few reasons for this.

One reason is that these days more of the largest corporations are tech/knowledge/service focused and typically have few fewer employees than the former industrial type giants of decades past. A lower wages bill means higher corporate profits. Also tech/information/services companies tend to have higher revenue per employee due to the nature of the business. A good example of this is Apple is the world's biggest company as measured by market capitalization. In 2016 it had roughly 116,000 employees. General Motors by contrast which is much smaller compared to Apple had around 209,000 employees in 2016. Here is an article from last year looking at revenue per employee of tech companies:

https://www.businessinsider.com.au/...apple-facebook-google-others-2016-2?r=US&IR=T

In contrast the sales per employee of general motors is far a fraction of the tech companies.
http://csimarket.com/stocks/singleEfficiencyet.php?code=GM

The second reason is that industries have become more consolidated/concentrated through a combination of bankruptcies, mergers and acquisitions, meaning the largest companies are now bigger and there are fewer competitors.
https://www.economist.com/news/spec...-old-some-neware-once-again-dominating-global

Its no coincidence that this has occurred in tandem with the occurrence of low interest rates (easier to finance takeovers) and the rise in big government. The reason big government helps them is because the large corporations have the power to lobby the regulators to create regulations in their favour. They can find loopholes in the regulations and can bear the cost (and can also create unfair regulations which benefit large companies) whereas their smaller competitors struggle or go out of business.

Due to the success of capitalism some winning companies will become larger and larger. Eventually these companies (because actually capitalists hate competition) will influence the government to tilt the odds in their favor. In practice how this happens is through the regulatory, tax, and intellectual property mechanisms, planning laws, government tender contract wins, etc so that they can dominate the market.

Conclusion:
Corporate profitability (margins and corporate profits as % GDP) will still have cyclical fluctuations but on average will be higher than the corporate profitability was say 30, 40 or 50 years ago.
 

lavidaloca

Pelican
Gold Member
You have made the biggest comeback of any poster I've seen on here. Originally making somewhat troll type threads to providing some solid information.

Personally I don't see a reason for a crash at the moment. I'm at 95% equities / reits and 5% cash. I don't see any merit to upping my cash position at the moment.

For the people who sit it out and wait to buy at the best time. Last year my investments made upwards of 20%. That would mean a crash would only leave me slightly worse. Add in all the other good years before and people need to just keep investing a similar amount each month. No point in sitting on a bunch of cash waiting for a crash.
 
What if you think a correction is coming and you just wanna get out of debt first? Good or bad reason to keep from investing?
 
AS you are using a very different definition than the accepted definitions of crash from 10%. Although a crash by your definition is very rare in world history you are guiding us that we have until mid 2020s. Thinking now of a scene in Good Will Hunting where the guy regurgitates a lot of text and the other guy gets the girls number. Copying links does not make anyone an expert or advisor.

I believe you have something to say but try to make your own original statements and leave the attitude on the letter up side of your keyboard. You once asked me what about your posts I found retarded.

Off The Reservation said:
Australia Sucks said:
Off the Reservation that was a bit uncalled for. What exactly was it about my post that you thought was retarded?

I am not a troll I am being genuine.

As for my whole story it was just a combination of bad luck.

I did not score a Colombian flag due to poor logistics.

The guy was short and weak and is lucky I did not break his fucking nose.

Typical backwards Cusquenian business owners (or their also uneducated staff) who are too retarded to understand how to run a business...

Within thirty seconds of sitting down a waitress came with a drinks menu and asked me if I wanted anything. I politely declined with a "no, gracias".

He is lucky I am calm guy who tries to stay out of trouble.

I would need a full seperate thread to list all of my bad experiences

Medellin: ugly and bitchy women

Fuck Peru!!

In general the anti-foreigner sentiment in Cusco is very intense.

The locals in Cusco should be thankful we tourists provide their ungrateful, uneducated, useless, backward asses with a living.

in stark contrast to Peru I would recommend Chile as a top game destination.

in Brazil, in some of the smaller cities you could buy a small house/cottage walking distance to an amazing beach for that price.

Disclosure: I have not been to Brazil

NovaVirtue I do not appreciate you trashing my game.

I have every right to be angry when guys on this forum and other forums hyped up Cusco and made it sound like it was a major/easy game city

Some even touted Cusco as the easiest city in South America to get laid. Maybe once upon a time it was possibly true.

it is not all rainbows and unicorns as some posters here would have you believe.

One lesson I learned from this is make sure you test a city for at least a week before commiting to it for a longer period.

the girl has to be a least a 5 or it does not count

it is clearly no longer the case that a foreigner can just show up and fuck the easy local Cusco sluts.

So yeah, I have a right to be pissed off because I was misinformed which led to me fucking up my holiday planning.

my experience is more recent [] than most other posters on this thread

I have made heaps of contributions to Rooshv since I joined.

Within 15 minutes of being there I got asked 3 times if I wanted anything. Then I got angry and left.

And don't even get me started on the ubiquitous but useless traffic police in Cusco.

The average girl was nothing special through.

I predict the bar will be bankrupt within 6 months.

Sometimes (not always, but often) when I walk into a store and say for example "Buenas tardes, como esta?"

I remember one time me and two Peruvian girls were sitting in a different bar a few weeks ago.

I have not a chance to see much yet because my girl was tired and I got drugged

Also I found Medellin girls to have high bitch shields and are less friendly

I also forgot to mention Santiago Chile. That place was day-game paradise.

Technical analysis is squiggly line voodoo.

I am a tourist who actually bothered to greet you in your own langauge at least have the fucking manners to greet me back.

The food and service there was terrible

It is a fact and you can look it up on the internet.

She was maybe a 5.5 and was mediocre in bed, but she put out on the first night.

Kronenberg I was in the bar for less than two minutes.

For example I will stay in cheap hostels (but in a private room) and catch cheap buses and look for the cheapest tour agency

Kangaroo my view is that these type of ETFs overall are low cosy, well diversified solid investment vehicles for the long-term passive investor but it depends on how they are used.

That being said the average Limenian girl is still mediocre.

If you plan is to dollar cost average a fixed monthly amount into an index over many, many years to come then that is a sound plan as the dollar cost averaging will tend to smooth out the result and you will do okay.

I don't have any cash.

In terms of other ways to play the property boom, property developers like Tamawood (ASX: TWD) and Sunland Group (ASX: SDG) are doing well and this should continue.

They cannot compete with Chilean girls.

With all this on my side, I still didn't get a notch.

After getting my Iphone pickpocketed in Cusco some weeks ago yesterday I got robbed at gunpoint in broad daylight.

due to the culture in Peru, almost everywhere has bad game logisitcs in Peru.

I would caution against buying an index fund (unless it is for a stock market which is undervalued like Brazil or Russia

I did not have a Chilean mobile number because I was only there for one day and I did not have an Iphone (to get a number for whatsapp, viber, etc) because it was stolen in Peru

After a period of regulatory tightening/shakeup in the vocational education market, the better players in the industry are set to do well.

if you are an average looking guy it will be a massive uphill battle even to fuck a 5

BB1 I do not work in the finance industry.

I found closing real difficult in Sydney for whatever reason.

I almost never get IOIs from girls

This is a major logistical hurdle to fucking girls as they are generally pretty serious about obeying the curfew.

Solid actionable advice would be giving concrete strategies about specific times and locations (and meetup groups, etc) to game, what style of game to use, what girls to target, etc.

Aussie women love guys that work with their hands.

then afterwards I scheduled a date with the massage girl later that night (she was only a 5.5 but things are so desperate in Cusco I had to lower my standards this much).

its not Moscow or Kiev but the girls are pleasant looking enough

They like dumb footy players or steroided bodybuilders. If you are goodlooking and jacked you can fuck lots of aussie girls as they are really slutty.

Scrambled, in future If you want to attack everything I post please p.m. me instead of posting it on thread as it is derailing the thread, and others probably do not want to read a mud-slinging match between two posters. Thanks.

If you are an average looking guy Aussie girls will treat you with complete and utter contempt and disrespect.

I have lived my whole life in Sydney and have done thousands of approqches in Sydney.

Then on the way walking to the restaurant I tried to hug her and hold her hand but she resisted and said she wants to be "only amigos". At the point I cancelled the date and walked away.

They are unbelievably stupid, even the ones that go to university and study law or medicine.

It makes me angry when guys talk out of their ass.

The one to add is: Off the Reservation is a troll. That was supposedly in response to me saying that I saw a lot of hot women in Australia, which you then went on to criticize what I might say about American women - when you haven't been to the US and didn't know what I would say. (But they really some of the best women for those of us who aren't into massage whores.)

The fact that I love the women in your country does not make me a troll. (I don't go around focusing on cows, I ignore them and look at and look for QUALITY.)

When are you going to learn that people's response to what you say or write is more about YOU than them?

You said you wouldn't do this any more after I called you out as being all about envy.

I believe that you have something to contribute, I really do. But you self admitted to not having any cash and not working in the finance industry, which I assume means you have some money tied up in the markets. Explain to us how your making gains from the worlds best bull market over the last so many years makes you an expert?

Haven't you seen the extreme care to which the worlds greatest experts go to not make or rarely make very specific calls as to market timing? Now why is it that you know something radically different that they?

Why would I go to the trouble to reply to you and to point out your statements? If it doesn't help you it will help others. They all smack of the same underlying philosophy which I find offensive - be clear I find the philosophy offensive not you. You are it's willing victim.

That philosophy is that you are locked into a set fate determined by others. A certain city will get you 4s and 5s. The market has this many years to go up this much. Only this type of guy gets such and such girls. I know you are thinking I'm off topic and you are annoyed by now. Example here: people can make money in an up and down market, people can make money choosing better stocks than the index, people can lose everything being idiots in an up market. It really doesn't matter if the market is going to go up until 2025, or if Cusco is the easiest city to get laid in the world. What matters is your approach to it. You think none of these things have to do with each other. But an awake person finds the one in the many, and everything you say whether it is about Chile women, Australian stocks, or dissing the forum because a certain city wasn't pussy paradise is basically the same.

I reject your fatalism in its every form, even if it is the fate that my stocks will go "up."

Is it that you really can time the market or is that you are talking some tall bs. I'm not going to make that call, lets let the market do it. Either you are going to be Australia's first basement billionaire, or you will just make more new threads. See you in 2025.

Oh, and by the way, Australia doesn't suck
 

Cruisen_Chubby

Woodpecker
Kid Twist said:
What if you think a correction is coming and you just wanna get out of debt first? Good or bad reason to keep from investing?

It really depends.

A) What kind of debt is it? (Mortgages and subsidized student loans are typically at low interest rates and are also tax deductible; whereas carrying credit card debt or other notes above 7% should be top priority).

B) think of paying off debt as a guaranteed market return. If your debt is sitting at 10% and you pay it off, that is equivalent to getting a 10% ROI.

(I'm being very simplistic as I'm not taking taxes into effect).

If you truly think a correction is coming
1) Pay down debt, which means:
2) You're paying less interest on a lower principle amount, which means:
3) You'll have more cash left over in your bank account, which means:
4) You'll be able to buy when the market corrects.
 

Cruisen_Chubby

Woodpecker
samsamsam said:
Any thoughts on inflation? Would really help those with fixed rate debt.
And would really hurt those on a fixed income (i.e. retirees).

Seems that there are always pros/cons to any economic shift. You just need to figure out what side you're on and prepare for it.
 

JayD

Woodpecker
There will always be recessions and upwards trends in the business cycle, I would say we are in one right now and steadily increasing towards an upward trend from Post-GFC.



An actual crash I doubt would happen unless some shady shit has still been going on after GFC.
 

Australia Sucks

Kingfisher
Note: Before you read this post, please note that this is a long post aimed purely at addressing Offthereservations last post on this thread.


Off the Reservation coming here to attack me for things which have nothing to do with this thread or investing in general merely derails the thread and detracts from its usefulness. A giant wall of texts of my comments which are cherry picked out of context and off topic to the thread serves no useful purpose other than to entice a flame war.

Firstly this is the wikipedia definition of a crash:
"A stock market crash is a sudden dramatic decline of stock prices across a significant cross-section of a stock market, resulting in a significant loss of paper wealth. Crashes are driven by panic as much as by underlying economic factors. They often follow speculative stock market bubbles." Note how it does not give a % in the definition. Like I said different sources use different definitions. My point is that I would consider crashes as being things like 2008, 1987, the great depression etc. I don't feel that a 10 or 20% market correction in the middle of a bull market qualifies as a crash. Obviously the definition of a crash is a grey area. Which is why I chose a definition which I felt was (based on market history) representative of a catastrophic market decline.

Also where in this thread did I ever claim to be an expert or an advisor? I was merely giving my opinions.

If I do not provide links to studies, etc when I make claims then people will accuse me of taking out of my ass and say my opinions are baseless.

Also you are wrong, plenty of experts routinely make specific calls all the time (calls which they can and do get wrong). I can bring dozens of examples of this if you want. Do you need me to provide examples on this?

Hell, even the federal reserve makes official forecasts for employment, GDP growth and interest rates. There whole job is setting short-term interest rates partly based on their view of future economic variables. Given their abysmal forecasting track record they could just give up and say "we do not know what will happen so we will let the "free market" set interest rates". You don't see them doing that do you? I could bring dozens of examples of authority figures and key people in financial markets making forecasts (and in most cases getting them wrong). To say that important people don't make forecasts about the future is just plain inaccurate.

The point of the thread is to give people food for thought because there is so much bearishness these days I wanted to show people the other argument, the other side of the coin so to speak. The purpose of this thread is to give people paralyzed by bearishness and the sky is going to fall crowd a chance to rethink their views. I even said a few posts after the opening post that yes its just my opinion/speculation and yes I could easily be wrong. When did I ever claim to be some omniscient market guru?

Also if you read all my comments in this thread you will see I clearly made the point that individual investments still have to make sense whether the market is bullish or bearish.

I even commented that I thought that if people wanted exposure to U.S. stocks it should be a small cap value ETF or individual stocks which are undervalued because the S&P500 looks overvalued. I also pointed out that emerging market ETFs look like better value then U.S. stocks.

I never claimed that people could be reckless and buy anything just because the market is not going to crash. In fact I made the opposite claim.

You are reading too much into what I say and putting words in my mouth. As well as ignoring stuff that I did say. In the thread on index investing I clearly pointed out that I personally buy individual stocks (and have outperformed the market) which sounds contrary to what you are saying about me thinking I am locked into a set fate determined by others. You are constantly misrepresenting me.

Also for you to try and imply I am just some idiot who got lucky and made money in a strong market is not true. If you read my posts on the index investing thread I made the point that I started investing in mid 2007 and bore the full brunt of the bear market that started in late 2007. So yes, I have endured a bear market.

Also when did I ever claim that people will automatically outperform an index by picking individual stocks? I clearly remarked that a lot of time and effort is needed to do it and I never said that success is guaranteed if you try it, in fact I said the opposite. I just pointed out that people should give consideration to active investing because it provides a opportunity to outperform and passive investing seems to be increasingly in vogue these days so I thought I would show the other side of the argument.

I don't have a problem with you criticizing anything I said in this thread, but if I did not say something in this thread, leave it out of this thread because it simply causes derailment.

The external environment does influence things. There are things you can control and things you cannot and both sides have an influence on outcomes, its not only one or the other.

I never said people cannot make money in an up or a down market. Can you make a 20% return in a year when the market is crashing? Yes, however, the odds of you making a 20% return in an strongly up market are higher than the odds of you making a 20% return in a crashing market, especially if you are a long only investor. To deny that external circumstances effect us is absurd. Its like if you are in basketball team and you are awesome and the rest of your team sucks and you say to yourself "It doesn't matter if the rest of the teams sucks because I am awesome, therefore we will win lots of games". In life, your own actions and ability influences outcomes as does the external environment/factors. Both have an influence and both are important to consider.

p.s. not that its relevant to this thread (its an investment thread) but I have been to Atlanta airport and Loss Angeles airport as well as seeing many Americans overseas. If the vast majority of Western women (e.g. Australia, U.S.A.) were thin and feminine, the Rooshv forum would probably not exist. You made a generalization about Australian girls for the most part being thin and feminine, when clearly women that are both thin and feminine in Australia are the minority as anybody who has ever spent substantial time in Australia would tell you. That is why I called your comment a troll comment. Especially the arrogance of you making that comment about women in my own country (you were only temporarily in Australia) after you told me not to comment on Colombian women because I have insufficient knowledge. Also I will no longer reply to non investment related arguments/topics in this thread.

OfftheReservation I created this thread and as the thread creator I kindly request that you not post in this thread because you are merely trying to stir the pot rather than wanting to add genuinely useful discussion. There is a huge difference between valid intellectual discussion and debate versus pot stirring and try to incite a flame war. For what its worth a lot of other posters found the thread to be useful.
 

Australia Sucks

Kingfisher
Also offthereservation I will add one more point which I forgot to mention and the point is that my stock market investments are in ASX listed stocks and the Australian market has not experienced anywhere near the gains of the U.S.A. market. Its still below its pre-GFC peak. I have still done pretty well despite that. So trying to paint me as the lucky beneficiary of a massive boom is misleading and I clearly stated this much in the thread about index investing vs active investing. You seem to have a nasty habit of glossing over important details/comments and instead choosing to make straw man arguments.
 
Regardless of whether or not we are years away from a crash now is the time to START investing. Why? Because now is always the time to start. Why? Because that's how investing works.

Waiting years for a low point to dump in an lump sum sounds great but in reality it will probably cost you years of realized gains. I'm not saying dump in large amounts now. No. Start small and learn. Then when a crash happens you'll have the know how and confidence to make big moves.

Every working person in the world should be investing a small portion of their weekly pay into a broadly diversified portfolio. $1? $100? What can you afford. Most people here are already banking with brokerages that allow you to automatically dollar cost average set amounts into no fee/no load ETF and index funds.

So many people are looking backwards with 20/20 vision at the recession. But forward with total uncertainty. Here is an economic fact: THE ECONOMY WILL ALWAYS GROW.

If you're truly worried society will collapse then your money will be worthless anyway. Moght as well invest it. Use the rest to get some experience, knowledge, skills... Most of the skills and resources you'd want at that point will be up for grabs/free anyway. Me personally I'd probably snag a camper and head to the nearest national park or forest.

So if you're waiting for the next big crash to invest I think that's terrible. It already happened. If you didn't invest a few years after the bottom you missed those once (really 4-5) in a lifetime big gains. Don't let it stop you from starting to invest small amounts today. Even if you missed the big upside corrections by 2011-12 you still could have started investing weekly small amounts 5 years ago and seen it grow very very well. The economy could tank tomorrow but you'd mostly just be losing profits not principle.

That little amount of return makes a huge compound difference over a lifetime. Google the classic example of the difference to invest $10k at age 20 vs 30 on how much you'll have by retirement. It's whopping. That's essentially what you're doing if you let years go by not putting anything into the market.

Start gaining your own investment experience now. There are still undervalued sectors of the market and emerging asset classes to familiarize yourself with. If you had started investing a few dollars a week in crypto in 2011 you'd now be one of the world's richest people.
 

Australia Sucks

Kingfisher
I will expand a little on my opening post.

History shows that after every major bust tough new banking regulations are put in place "to ensure this never happens again". Eventually after the boom has been going for some time and the memory of the previous crash recedes the bankers are then able to exert their politcal/lobbying force to loosen banking/credit regulations. This then kicks the housing and stock market booms into overdrive. This happens in every single cycle. Just go and read history. A good book to read on this is The secret life of banking and real estate by Phillip J. Anderson. Currently many tough regulations such as the Dodd Frank act in the U.S.A. are still in place from the last boom.

Expect many banking regulations to be removed or loosened over the next few years. The more relaxed lending standards will feed into higher land prices. As will higher government spending on infrastructure (infrastructure investment is booming around the world). If Trump manages to generate any tax cuts that will also feed into higher land prices as all the small business owners will have higher after tax income with which to obtain a bigger mortgage (as well as saving a bigger deposit).

There are a few ways to play the continuing boom in land prices:

Buy Residential property:
Buy residential property directly:

From personal observation over many years of property markets in Australia I noticed that in the early to middle stages of a boom the biggest cities i.e. Sydney and Melbourne typically experience the highest percentage growth in house prices. Then as the boom starts maturing gradually the smaller cities start to outperform. I believe the same process applies to housing markets such as England or U.S.A.

Why does this occur? If the bigger cities kept outpacing the smaller cities every single year then eventually 1 house in a city like Sydney would cost the same as 5 houses in Adelaide. It simply won't happen. Over long periods of time market forces tend to stop this from happening. Why? Because as houses in one city get too expensive the rental yields get pushed lower (typically when prices are soaring rent increases do not keep up), making the place less attractive for investors who start to look to smaller cities for better yield. Also as property in Sydney and Melbourne becomes un-affordable some of new migrants and people already in those cities moving to smaller cities instead.

In a small city for example an extra 50,000 people moving there over a 5 year period can have a meaningful impact on house prices. That being said I still expect that in Australia Sydney and Melbourne house prices will go up but at a slower pace and some of the smaller cities will outperform them over the next 5 years. Its possible (too early to tell for sure) that this process has already started.

In the quarterly figures for March in Australia capital city house prices Hobart performed the best followed by Melbourne then Sydney with Canberra nipping on the heels of Sydney and Melbourne.
http://www.abs.gov.au/ausstats/[email protected]/mf/6416.0

here are some articles about the Hobart (a tiny city around 232,000 population) property boom http://www.themercury.com.au/reales...t/news-story/8a85f436146878a7702d8425181ab3de
http://www.abc.net.au/news/2017-01-...ic-standing-in-state-of-states-report/8202344
Note aside from the fact of the tourism boom that Hobart is the most affordable capital city in Australia. Perfectly consistent with my thesis of affordability pushing up house prices of the cheaper cities at this point in the cycle.

Also some of the regional areas with good lifestyle factors within NSW (the state that Sydney is located in) have already started to boom. Places like Wollongong, Newcastle, and the Blue Mountains. Australians should be looking to invest in real estate in places like Newcastle, Hunter Valley, Wollongong, Blue Mountains, Hobart (will benefit from the tourism boom), Brisbane, Geelong, Adelaide (it will pick up eventually), Perth (mining will eventually rebound), etc.

Conclusion:
Booms start at the "core" cities and then gradually percolate out to the "periphery". At this point in the cycle if you are buying real estate do not invest in the overpriced mega cities like New York, Los Angeles or San Francisco, etc instead look for vibrant and growing second tier cities (obviously a shit hole ghetto city is not going to do well) with some population growth and infrastructure development happening, but which have not yet had large price increases. I do not know the U.S.A. or U.K. real estate markets well here enough to comment on which cities are good there. Perhaps others with the requisite local market knowledge can comment?
 

Australia Sucks

Kingfisher
Other ways to play the continuing real estate boom:

-Buy shares in property developers focused on building homes and condos/apartments. Of course you still need to make sure that the company is well managed, the balance sheet is sound, they are building in the right locations, etc.

-Buy shares in mortgage lending or mortgage insurance companies. You could even invest in mortgage broking companies. I do not like the idea of investing in real estate agency companies because I feel in the long-term the internet poses a structural threat to their margins and market share as websites that allow users to self list and self manage their property sale gradually gain traction. An example of this in Australia would be:
https://www.buymyplace.com.au/sell-...MIvJC5_JyT1QIVFYaPCh3ScgPOEAAYASAAEgLWl_D_BwE

-Buy bank shares. As property markets continue to move higher so will mortgage and credit cars debt levels, allowing the banks to grow their loan books and earnings. Just make sure you get out of bank stocks in time before the next bust (possibly some time mid next decade but we will have to watch how things unfold). Holding bank stocks during a downturn is not great.

-Buy shares in real estate investment trusts (REITs). I would probably focus on REITs that own either vacant land, farm land, residential real estate (both houses and condos), fast food/restaurant buildings, health care and aged care facilities, and warehouses.

Retail properties will suffer from the continued shift to online shopping, so avoid them. Office space could potentially be impacted by offshoring of labour (both physical and online), and more people working from home. I am just unsure about office property and not confident either way so I would personally stay away. REITs that own manufacturing facilities are another one where I would show caution as its hard to say if in the future it will again become trendy/popular to send manufacturing en mass to cheaper countries. That depends on too many factors (currency, wage differentials, trade policies, taxes, etc) and is too hard to predict so stay away.
 
The easiest option for real estate investing is REIT ETFs. The broader ones usually give a decent return around 5.5%. There's too much profit taken out by the actual property owners to see the kind of return you'd get owning directly. But you have zero headache and your money is spread out over many places. Let's just hope the derivatives and ninjas are over.

I think owning an actual rental is good if you're not traveling internationally. Even then I'd say only if you can get reliable long term tenants or a multi-unit that can bear some non-occupancy periodically. The long term appreciation sounds dandy but until you sell or refinance it's not a true asset.

Having a positive cash flow from just one rent check minus the mortgage, maintenance, taxes is tough. Onoccupied a month or two you're in the red.

Some people I know in TX got lucky selling mineral rights on their properties. Monthly check from oil company. That's rare. Helps to have a "ranch". Less taxes too. Just plop some ol cock sucking cattle and barbed wire.
 
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