Phil here… First, happy Thanksgiving to my readers in the U.S.
I’m thankful for everyone who writes in with feedback… a question… a comment… a link or story they think I’d find interesting, and more.
And today, I’d like to take some time to respond.
As always, if you have a question, feel free to drop me a line at [email protected]. Just know I can’t give personalized investment advice.
First up, a smart reader who’s learned to question the mainstream financial media…
Hi Phil, love your work. I had to question the expert financial world predicting doom and gloom for the world and in particular the U.S. economy all through this year. My wife and I spent three months traveling throughout the U.S. between May and September this year. Everywhere we went businesses were crying out for labor. To me that’s a sign that the economy is doing pretty good. That doesn’t point to recession, not yet anyway? Cheers.
– Alan B.
Hi Alan. Thanks for emailing in. I’m glad you were able to question the expert financial world predicting doom and gloom for the world. Like yourself, I was in and around the U.S. bits and pieces this year and everywhere I went, money was being spent freely. Restaurants were booked out. And again, same in Australia and even in parts in London, directly crying out for labor, there’s absolutely no doubt about it. So I found it hard to be bearish.
I think economists ought get out of their ivory tower. So I’m glad you’ve been able to see that. And the markets to me were also signaling that sectors weren’t doing too badly. Yes, the banks gave us a bit of a fright, but there’s always something that’s going on. Thanks for writing in.
Next, a reader wonders if there’s a real estate cycle in China…
Is China following its own real estate cycle? Any opinions?
– Kwang L.
Kwang, thanks for emailing in. Is China following its own cycle? It’s a good question, but I’m not sure I can answer it so easily. I have been to China. I was in China for nine weeks a long time ago, back in 1986, and it was clear to me exactly like what Jim Rogers had to say, a sleeping dragon.
And it woke up. And I think the transformation China’s had has been amazing and impressive, and I also like what they’re doing with the Belt and Road. Yes, there’s a few problems, debts here and there, but I think overall it’s going to be very positive for the world this century.
But as I have said, at its heart, the Chinese economy and the American economy are very similar. The Chinese local governments, if that’s what they’re called, they sell the land to developers, and developers build houses.
In America, the land used to be owned by the government, sold off.The new owners, or if the city’s expanding, the farmers, they sell the land to developers and they build houses too.
There’s not much difference really. One’s controlled by a bit of a dictator, the other’s controlled by would-be dictators perhaps. I think China will join the cycle over 2026. I think it’ll become more like a world cycle. And this time China won’t have the ability to do what it did in 2008, 2009 and spend, spend, spend at the behest of the Americans. So we just have to wait and see on that one.
There’s too much information in there that’s opaque. The biggest problem I have with China, it’s very hard to get a read on China using the stock market because it’s so manipulated and there’s not a free trading market.
It’s much easier in the U.S. to work out what the economy’s doing by looking at what stocks are doing because it’s a freely traded system. So sorry, but I don’t think I can answer that question directly. We just have to see what happens.
Reader Fabian writes in with proof on the ground in Los Angeles about the housing market still moving up…
Even if the daily gyrations of the market instill doubts in me, I believe you. Here in Los Angeles, they passed several laws allowing single family house owners to build additions or separate dwellings on their property to rent or even sell! And in my area it’s going full swing. A lot of homeowners are building additions even with current interest rates and one owner told me it took 3 years to get the permit (and it’s expensive).
– Fabian H.
Hi Fabian, yes, you should ignore the daily gyrations generally. And yes, there’s a lot of places in the U.S. also in the UK now where cities are passing their laws. They want more development, helps with building.Just in the Australian northern capital city of Brisbane up in the state of Queensland, they’ve just doubled the homeowner grant. All these things will start happening. That’s what pushes the cycle forward. So you can expect more of that and I think it’s bullish.
Next up, reader Nitin A. furthers my argument about how there can be no global recession when defense spending is going up…
India defense order book for the leading government owned corporation. Between fighter aircrafts, logistics and fighter choppers, almost 1000 units order pending, it’s got to be the highest in the world.
Seems like India is entering a big capex cycle just like 2003-2007 but personally I will be cautious because it feels like few important elections could disappoint.
– Nitin A.
Hi Nitin, thanks for emailing in. I’ve been to India twice, a long time ago. So many people, so much potential. They let themselves down with a land market that’s very difficult and opaque and hard to do things with a lot of corruption there too.
But it’s bullish.
They’ve got a big army and navy, if they ever get their act together. I do think they are joining the world real estate cycle and they will add to things. Joe Biden spoke with the Indian Prime Minister Modi, and they seemed to form a relationship, which I think is positive. Looks like the U.S. may be playing them off against China though, but I’m bullish on India.
Again into 2026, we’ve got to be careful now, but interesting stuff. Thanks, Nitin.
Next a reader asks about the yield curve and its relationship to the land cycle…
Can you talk about your thoughts on the inverted yield curve, its relationship with recessions, and how it works in relation to the Land cycle?
– Darren M.
Darren, that’s a good but difficult question in a way as well. People do say that the yield curve inversion is a decent way to forecast recession, and it’s fair.
Except that when I did my book, my biggest learning lesson for the book was that the real estate cycle seemed to have a life of its own, enjoyed throwing people off, trying to get everybody to misunderstand it, but also had a way of completing every time on time. And the way I see the yield curve now is that with the inversion, the usual people forecast the usual result: recession.
I didn’t think it would work this time. So when we get to 2026 and the yield curve inverts again, people are going to look back and say, “ah, but last time didn’t lead to recession.” And it’ll be easy for whoever’s in charge of the Fed at that time, to point back and say, yes, we had an inversion last time, but Fed action enabled us to have a soft landing and we’ll be able to do it again.
And this is where all the suckers will get sucked right in to markets and comfortably ignore what’s going on around them, when in fact they should be paying attention. So that’s what I think the market’s setting up for. Let’s see how it goes.
Next, reader Sunny asks about this stage of the cycle…
Hello Phil, I read your book and it was fantastic. Very eye opening for me.
Are U.S. stocks as of November 2023 in a correction…such as the major indices? If so, is this a normal part of the late stage of the bull cycle? Any reasons why or examples of this happening before?
– Sunny G.
Sunny, thanks for emailing in and for your feedback on the book. I appreciate it. It was eye opening for me too, when I wrote it. I can tell you, after having read Fred Harrison and some of the stuff he was doing with his Power in the Land, I felt like that.
I think we’ve had the correction that happened at the end of October and now we’ve had the move up. I think it’s caught a few people by surprise, a lot of shorts they had to cover. I didn’t find it a surprise.
It’s a year ended in “3” and years ended in “3,” if you have a look at them in 20-year segments, 2003, 1983, 1963, they can be difficult years in the sense that they’re transitioning from a down year ended in “2” into a more bullish year, ended in “4,” and then up into the year ended in “5.” I think what happened was quite normal, maybe November was a little bit lower than I expected, but it’s not unusual. And I think we’ve now seen the lows and it’ll be off to the races, I think, slowly but surely. So, bullish.
Next a UK-based reader asks about a strategy for this turbulent market…
Hello there, the UK housing market is expensive, not cheap at all. Would it be better to hold out before buying ?
Also the stock market has been turbulent for a buy and hold investor… what tried and tested strategy would work for this market?
– Ryan S.
Ryan, thanks for emailing in. Yes, the UK is different to the U.S. The U.S. leads the real estate cycle. That’s why I focus on it.
And I agree with you, the stock market has been turbulent for a buy and hold investor. Seriously. I understand your frustrations there. Me personally, I do what I always try to do, I let the market decide.
I do like to buy patterns that are based on page 67 of Truth of the Stock Tape, by WD Gann, called a Mexican Pete pattern. I like to see the stocks in any market if they’re holding at highs. We then try to work out what is the best on a breakout.
That’s what I do.
The only time I don’t do that is when I can have a clear idea that we’re going to get a down market, which happened in 2022, which happens every seven years.
You can expect the next serious difficulty like that 2029, but that’ll be after the 2026, 2027 difficulty. So I’m hoping now with some of the breaks that we get, we will be able to hold them longer over a year or two. That would be the normal response now.
So we’ll just have to wait and see if the market gives us that opportunity.
But I’m bullish now, and I think the buy and hold will be better now years into four, five, and six.
But again, UK housing, I don’t know whether it’s better to hold out before buying. It’s a difficult question to answer because I can’t give financial advice and it’s difficult to answer because I don’t know whether you’re trying to buy your first house or investment property. But you just have to do the numbers. If the numbers stack up, and then if the earnings stack up, then make your decision.
It’s always the same, always comes back to earnings. I hope that was helpful. Thanks for emailing in.
That’s all for today. Feel free to email me at [email protected]. I love getting questions from subscribers.
Regards,
Phil Anderson
Editor, Cycles Trading with Phil Anderson
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