I remember when I “gave up” on traditional economics…
I always found economics fascinating. And when I was going through university, I remember all the teachers and the “academic economists” were explaining their theoretical ideas.
For instance, it was believed that you couldn’t have high inflation and high unemployment at the same time. The theory was that it was always a tradeoff. A country could have one or the other, but not both.
The only problem is that it wasn’t true.
This was during the late 1970s and early 1980s. And whenever I walked down the street, I could see with my own eyes that it wasn’t true.
The world was experiencing high unemployment and high inflation. I’m sure many of us remember that period.
And when I asked my professors why this was, they couldn’t give me a straight answer. They just told me that high inflation and high unemployment couldn’t exist at the same time. That’s what their theories told them.
In essence, they pulled an ostrich maneuver.
Their economic models couldn’t explain the world, so they pretended it wasn’t happening.
That’s when I “gave up” on the traditional view of economics. And I made what some probably thought was a “radical” decision.
I decided I was going to travel the world and explore ideas outside the mainstream.
And I told myself I wasn’t coming home until I learned how things actually worked.
And I had my epiphany in India…
The Most Important Market in the World
Here’s what I discovered: If you want to understand economics, if you want to do economic forecasts, you must understand the land market.
Very few economists understand this. And essentially zero “mainstream economists” think this way. But let me show you what I mean…
In 1818, land sales in the United States peaked. This was followed by an economic downturn. In 1836, sales peaked again. This was followed by a depression. The next peak was 1854. Again, a depression followed.
I could go on and on.
But what we’ve seen is that for the first 144 years of real estate enclosure in the U.S., land sales and/or real estate construction peaked consistently every 18 years.
Here’s the chart I shared in my book, The Secret Life of Real Estate and Banking.
And here’s what’s important for us as investors: After every 18-year peak, an economic downturn followed.
This basic principle – the cyclical nature of the real estate and land market – is what has informed my worldview as an economist.
But how and why do these cycles happen?
That is a topic we will discuss in future editions. So, please stay tuned.
But what I’d ask us to recognize today is this: The future is not unknowable. The rising and falling of the land market has been the most prescient indicator I have uncovered in over 34 years of research.
For example, this is exactly why I’ve been expecting a low in the markets in March 2023.
Thirty years ago – in 1993 – stock markets made a low in March.
Sixty years ago, in 1963, the market made a low in March.
And 90 years ago, in 1933, stock markets made a March low.
This is, as I like to say, a way for us to “remember the future.”
Few will take the time to understand this. But for those who do, it can be enormously profitable.
More to come…
Regards,
Phil Anderson
Editor, Cycles Trading with Phil Anderson