The latest signal of the 18.6-year real estate cycle turning as I expect is this headline:
Source – Bloomberg
In addition to soccer and golf, we can now add cricket to the ever-growing list of Saudi sports “investments.”
And, as usual, the numbers involved simply get bigger and bigger.
Have you asked yourself: how does this all end? Will Saudi Arabia simply end up owning or part-owning every sport on earth?
Once again, to understand what’s coming in the future, just look to the past. This has happened before…
Want to Lose Your Fortune to a Golf Club?
During the final few speculative years of the real estate cycle, extreme hubris and extravagance show up.
All you need to do is take a look at history. Here’s an example.
Source – New York Times
During the final few years of the real estate cycle into 1989, one of the most famous signs of this hubris and over-the-top extravagance was the market for golf memberships in Japan.
From the above article…
Earlier this year, an avid golfer here reportedly offered $3.57 million to buy a membership at the exclusive Koganei Country Club. But, as a sign of the fanatical attachment of the Japanese to the game, no Koganei member was willing, even for that unprecedented sum, to sell.
Again, here is another example of vast sums being spent on sports-related endeavors.
“… it’s like the stock market, except instead of buying and selling stocks, people are buying and selling golf memberships,” said Sadao Ushijima, director of the Kanto Golf Membership Brokerage Corporation in Tokyo, one of more than 500 brokers around the city who have handled golf membership trades.
Ah, yes, the days when you could trade golf memberships on a tradable exchange. No different from a stock market.
Not only that… the Japanese began buying up all the artwork they could get their hands on AND all the golf courses that came up for sale.
It was so much at the time that Americans began to fear they just might end up owning much of the entire U.S. real estate sector.
Speaking of which, go back in history even further, and you’ll come across a less well-known (stock market) bubble – but just as wealth-destroying.
Source – Clear finances
Whilst not as famous today as the 1929 U.S. equity market crash or the 2000s tech wreck, this crisis still represented a sizable destruction of long-term wealth for many unprepared investors.
The Nifty 50 was a group of large-cap stocks that had strong recurring earnings. These were the behemoths of their day, and some, such as Coca-Cola and McDonald’s, are still with us today.
And the hubris of the day was this: these companies “couldn’t fail.” Of course, by the early 1970s, you put every last cent you could muster into them. The thinking was if you hold on long enough, you’ll be madly wealthy.
If you did that, your portfolio would lose about 40% of its value within about two years.
If you have been reading my research for some time, you would instantly recognize the timing. Each of these episodes was near or at the culmination of each respective real estate cycle.
And each episode ended very, very, very badly.
This is the gift that history can give you: perspective.
So what do you think I feel about this current unprecedented splurge of Saudi wealth across the global sporting landscape?
First, I don’t let my emotions get in the way.
I open my history books and remember the future.
These next few years will be full of speculation and rising markets. But we have to make sure we don’t get caught up in the inevitable bust.
Editor, Cycles Trading with Phil Anderson
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