Sometimes, it’s worthwhile to take a step out of your comfort zone and broaden your horizons.
I have written to you about the simple fact that the United States has led the world both into and out of every 18.6-year real estate cycle for over 200 years now.
However, don’t let this blind you to what’s occurring outside of the States…
The real estate cycle is a global phenomenon these days.
And today, I want to show you what I mean.
Because what occurs in America reverberates across the world.
And being Australian by birth, the following headline in Australia’s leading financial media outlet piqued my interest.
Source – Australian Financial Review
To explain, Dr. Andrew Forrest is one of the richest people in Australia. He is a mining magnate and the CEO of giant miner Fortescue Metals.
Developing Your 18.6-Year “Lens”
If you are a current member of my services or a regular reader of these newsletters, then the following statement should have been the first thing you think of.
Mining magnates like Forrest understand the power a government-granted license provides.
It allows companies like Fortescue Metals to own huge tracts of land, borrow prodigious amounts of money against that land, and then privatize the income – which is the “rents” – from the precious metals and other resources like iron ore.
No wonder Andrew Forrest is a multibillionaire!
The above article also covers the decision to expand WAE Technologies Limited, a UK-based engineering firm, from the U.K. into the U.S.
On the surface, you may consider that just normal business practice. Global firms do this all the time.
Here’s your takeaway though: once you develop your own 18.6-year real estate cycle lens to view news like this through, the truth about what is occurring jumps off the page.
Here’s what I see in the above article. The bolded text is my own.
‘This is very real. We’re mobilizing capital, equipment, and expertise,’ Dr. Forrest told The Australian Financial Review during a visit to London on Monday (Tuesday AEST).
‘In the United Kingdom, we have a record of expanding WAE very significantly since we purchased it. But we will put even greater capital into the United States, where the incentives just make it inordinately difficult not to invest there.’
There’s your clue.
The Power of Government Incentives
What are these “incentives” that Dr. Forrest is alluding to?
It’s none other than President Joe Biden’s $369 billion Inflation Reduction Act (IRA).
President Biden’s IRA, which passed Congress last year, offers subsidies, grants, and tax breaks to set up businesses in the U.S. related to the clean-energy transition.
Or to translate – a government-granted license.
Are you surprised now that Dr. Forrest has taken the bait?
This guarantees protection from innovation or competition, vastly lowers taxes to improve company earnings, and pushes the stock price higher.
WAE Technologies’ main business as a Fortescue company is building batteries and powertrains for electric versions of U.S.-made Liebherr mining trucks, which Dr. Forrest will use to replace Fortescue Metal Group’s diesel fleet in the Pilbara.
(The Pilbara is a vast area of Western Australia rich in natural resources.)
Once WAE sets up shop in the U.S., the British operation will eventually switch its focus to supplying truck makers in Europe.
Being a green energy company aligns very well with the stated aims of the IRA. It gives WAE a chance to develop an enduring market advantage.
But finally, where do all these gains end up once they manifest?
It is always the land that ultimately captures these gains, which guarantees a real estate cycle.
One that repeats like clockwork.
If it’s good enough for someone like Dr. Forrest to turn this knowledge into his enduring advantage…
…what are you waiting for?
Regards,
Phil Anderson
Editor, Cycles Trading with Phil Anderson
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