Some people get daily reminders to drink water.
I get daily reminders of how much of their own Kool-Aid financial commentators drink.
Even those who you’d think would be “in the know” are ignorant of the true drivers of the economy.
And I’m not talking about just anyone…
Société Générale strategist Albert Edwards, famed for his constant pessimism, warned that today’s resilience in the stock market reminded him of how things felt before the 1987 market crash against the backdrop of surging bond yields.
“The equity market’s current resilience in the face of rising bond yields reminds me very much of events in 1987, when equity investors’ bullishness was eventually squashed,” Mr. Edwards wrote in a note.
“[M]y own view is that a recession still lurks, but like many I have held that view for a while now and have been proved wrong – so far. But there is still plenty of evidence to suggest a recession is imminent.”
See what I mean?
Société Générale, one of Europe’s leading financial services groups, would be regarded by the mass media and the public at large as a leading economic commentator and, dare I say, trusted to know what they are talking about.
But alas…
Only the History of the Real Estate Cycle Can Set You Free
I do urge you to take a minute now to review some of my previous notes to you about the strength of the U.S. economy.
If you do, you’ll know I believe the chances of a recession this year are basically zero.
And it comes down, as it always does, to your knowledge of the history of the 18.6-year real estate cycle.
So to assume that today is simply another 1987-type event shows that this market commentator isn’t looking at the real estate cycle.
He wants history to repeat because that’s the pattern he knows.
And history does repeat, but not in the way he thinks.
Looking at our current cycle timeline, the U.S. economy has already experienced its own 1987-type market fall.
That was in 2020,amid the pandemic lockdowns. It was the mid-cycle slowdown.
But here’s the key to this.
In 1987, the U.S. did not experience a land price-led depression or recession.
In other words, with land prices supported and still growing, the “recession” was mostly in equity markets. Once the market bottoms were in, the economy then raced to its land market peaks in 1989.
Today, U.S. land prices are strong and growing.
Source: Yahoo Finance
And so, the only parallel between 1987 and today is this: with U.S. land prices continuing to rise, the U.S. economy should be strong, with record levels of investment, jobs, infrastructure spending, and credit creation.
We are, therefore, a few years away from a land market peak and then a bust.
That was where the U.S. economy was in 1987, and that’s where it is today.
Most important of all, even revered market commentators from Société Générale cannot possibly time the economy correctly without knowledge of the land market.
Can you see now why this knowledge is the market edge you must develop?
Isn’t it valuable to know what the real historical parallels are, what happened next, and what you should do right now?
It’s up to you… You can either chase the opinions of the Kool-Aid crowd or join me.
While everyone thought the markets would crash in March and April… my readers were positioning themselves in the right stocks at the right time.
They even scored a 52% gain on a homebuilder stock in just over three months.
We’re nearing another buy point in the markets… and you can join us right here.
Regards,
Phil Anderson
Editor, Cycles Trading with Phil Anderson
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