Look to the Sky For the Next Possible Downturn

by | Jan 11, 2017 | All Articles, Technical Analysis, Education

This week we have an article from Phil Anderson on when we can expect the next downturn in the market. I’ve been working with Phil for ten years and have observed firsthand how astute he has been. Many traders will know that strategies that once worked can suddenly stop working. Part of the reason is that the market conditions change. Knowing the environment that we are in (the context) helps us tailor our strategy accordingly. As Charles Dow said, our job is to identify the primary trend as soon as possible and trade with the trend. Phil Anderson’s work gives you an insane advantage to knowing the overall trend of the market.

At the end of his article, I’ve included a link to a 2008 UK magazine where Phil outlined what was going to happen in the following years. I hope you enjoy this post and that it helps you understand the greater cycles that we operate under.

Mathew Verdouw, CMT, CFTe

Visitors to the Empire State Building have often asked whether the weight of the building (over 360,000 tons) is forcing Manhattan’s land to sink lower into the water.

It’s funny they say that.

In the very early 1800s, a Manhattan carpenter by the name of Lozier came to the startling conclusion that the city was dangerously lopsided, having too many buildings—taller buildings especially—on its lower end.

If any more went up, he warned, the island would sink into the Hudson River.

To head off this calamity, Lozier suggested to the city’s mayor that a chunk of Manhattan’s northern end be hacked off, towed down the Hudson and attached to the southern tip. This would redistribute the island’s weight.

The mayor was so impressed with Lozier’s ingenuity that he commissioned him to commence work at once. The mayor handed over wads of cash from the City Treasury.

Lozier advertised for workers to help him with his plan. More than five hundred showed up, braving the winter cold to wait for the boss.

They waited a long time. Lozier made off with the cash he received.

One of the major topics I’ve spent studying over the last thirty years is what I call the 18 year real estate cycle. It’s a regular pattern that’s repeated throughout over 200 years of US history, and even longer in the UK.

This makes the economy a lot more predictable than most people assume. It also gives you incredible insight into which sectors you should be trading.

It gives you a valuable timing guide when to be in and out of asset markets. I was 100% in cash during the GFC thanks to this pattern.

US real estate bottomed out in 2011. Real estate cycle history suggests we’ll get an overall 14-year up move in US real estate until around 2024/5. Then we’ll get another collapse around 2026 like 2008. The boom-bust cycle comes from the property market.

I can tell you one thing. The real estate cycle continues to turn. It’s all happening right before our eyes, and as per my Cycles, Trends and Forecasts property clock.

One effective way to judge where we are in the cycle is with the construction of tall buildings and their completion date. It might sound odd at first, but there’s very good evidence to show that tall buildings usually open in recession. You can read my book The Secret Life of Real Estate and Banking for the full rundown on this.

This cycle has also been unusual in the sense that there have never been so many “talls” on the drawing board so early in the cycle. This tells us just how big the cycle could really get. I think a major boom worldwide is brewing.

But just take a look at some of the record buildings due to open around 2019-2020…

  • Kingdom Tower in Saudi Arabia (World’s Tallest, Due to open 2020)
  • Suzhou Zhongan Center (China’s Tallest, 2020)
  • 1 Vanderbuilt, New York (2nd tallest in City, due to open 2020)
  • Vista Tower, Chicago (3rd tallest in City, due to open 2020)
  • Australia 108 (Melbourne’s Tallest, due to open 2020)

But markets are funny things, at times. This ‘tall building’ indicator is known to quite a few people now.

It’s highly likely around 2019 people are going to notice all the completions, look at the history of this, and then forecast total collapse and calamity

If enough do this, we could conceivably use this indicator as counter cyclical—if enough say it—it might even suggest there won’t be a downturn much to speak of.

The midcycle slowdown is a possibility. However, even more dangerous will be the real estate cycle due around 2026.

Again, we can use major buildings and developments to ‘time’ the economy.

Let’s take a look at some projects either under development or proposed due around 2026….

  • Melbourne Metro Rail Tunnel (2026)
  • Tower 1, Basra, Iraq (World’s Tallest, 2026)
  • Japan’s Tallest Building (Due 2027)

There’s plenty more. I am now in my third real estate cycle over my lifetime. I can assure you the dynamics behind this are something you should be studying. Keep any eye out for more tall or record developments. Once you ‘see’ the cycle at work, you will never look at the world the same way again. That’s been true for me, and thousands of my subscribers.

Best wishes for 2017

Phil Anderson
Trader and Editor of
Cycles, Trends and Forecasts

THE 2008 PREDICTION

THAT FORETOLD THE MARKETS FIVE YEARS IN ADVANCE

In October 2008, Phillip J Anderson went on record on the cover of the UK’s largest financial magazine MoneyWeek and predicted a global recovery to begin in 2010. Not only that, but readers could know this was happening by watching the US stock market — which would lead the way first and go on to make all time new highs.

Anderson was the ONLY person in the world even remotely suggesting an outcome like this at the bottom of the worst downturn since the Great Depression. Click on the image below and read it yourself!

If you would like to sign up to Phil’s service, you can do so here.

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Phillip J Anderson

Phillip J Anderson

Trader and Editor of Cycles, Trends and Forecasts

Phillip J Anderson is an Australian economist, businessman and internationally acclaimed commentator. He is widely regarded as the foremost expert on business, real estate and commodity cycles. Anderson graduated from RMIT University in 1985 with a degree in accounting. He is now the managing director of Economic Indicator Services (EIS), the company he founded in 1991. EIS is an economic forecasting service operating out of London and Melbourne.
 
Phil also now writes for Agora Inc., founded in 1979 and head quartered in Baltimore Maryland and one of the largest and most successful consumer newsletter publishers in the world.

1 Comment

  1. Another great post from Phil. The Cantillon effect has also taught me much about the credit cycle, and how also to trade this part of the market as the Real estate Cycle turns.

    Typical market though, if we actually do NOT have any lasting mid cycle slowdown, for the reasons stated…

    Reply

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