QIANMEN HOSTEL – We met with some English-speaking real estate experts a few days ago. (Catch up on the first part of this story here.)

They run a consultancy in Beijing. They invited us to their office. We sat in a conference room with them for an hour. I peppered them with questions while Kate and the kids did schoolwork.

The biggest takeaway from the meeting was simple… Beijing property prices are FALLING…

3,000 Miles and Counting

Greetings from China! My family and I are traveling around the world, living out of a suitcase and having an epic adventure.

We’ve spent the last seven weeks traveling around China by high-speed rail. We started in the south, then we made our way west along the Silk Road, then we turned east and explored the center. Now we’re in the northeast. We’ve traveled over 3,000 miles so far.

Today we are in Beijing, China’s capital city and the third-largest city in the world, sleeping in bunk beds near Tiananmen Square. (We’re paying $36 a night total for our four bunks.)

In a couple of days, we will make the 1,200 mile overland trip to Hong Kong. We’ll stay in Hong Kong for 10 days then head to Japan…

Here we are on the Great Wall this weekend…


Exploring the “wild” side of the Great Wall of China

Picking Up Clues

We’re having the absolute BEST time. This trip has completely bonded our family. If you ever get the chance to take a sabbatical with your spouse and children, I hope you take it.

If I died tomorrow, I’d die with a smile on my face, knowing I made this trip with my family. My life is now complete.

Anyway… while we’ve been traveling around China, I’ve been on the lookout for anything that might help me understand what’s going on in the world’s financial system… asking questions… connecting dots, as Bill Bonner says… picking up clues.

I think the decline in Beijing property prices could be a big one.

In China, there’s an intense cultural desire to own a home. Families have traditionally stored their wealth in property. Owning an apartment is often a prerequisite for getting married.

“Every Chinese person aspires to own their own home,” my Beijing hosts told me.

The Biggest Bubble in History

As you already know, over the last 40 years, China has been one of the greatest economic miracles in human history. It transformed itself from an agrarian economy to a rich country that looks and feels to me a lot like America… all in one generation.

Then, in 2009, China dropped a $600 billion stimulus package into its economy in response to the global financial crisis, flooding the market with cheap money and easy mortgages.

You probably won’t be surprised to learn that property prices in China over the last 40 years have SOARED.

They call it the “Iron Bubble.”

Wang Jianlin, who made his fortune in real estate and was until recently China’s richest man, called it the “biggest bubble in history” in 2016.

I couldn’t find data prior to 2003. But since 2003, property in Beijing is up about 15x. China’s other big cities have seen similar growth.

Higher prices stimulate more supply. So you also probably won’t be surprised to read that over the last 10 years, China has been through a construction boom of such scope and scale… the world hasn’t seen anything like it since the construction of the Great Wall 600 years ago.

(It’s ongoing. As we travel around China, we see thousands of new apartment buildings under construction in every town, city, and even village we pass through.)

I don’t know what percentage of China’s economy is dedicated to property and construction. But when you consider all the labor, machinery, cranes, raw materials, land purchases, surveys, new bus routes, convenience stores, restaurants, and sundry services that come with big new developments, it must be over 25%.

A decline in this industry would represent a massive blow to China’s economy…

And so it was, that on Friday, in a fancy conference room, on the 20th floor of a Beijing office tower, three experts told me prices in Beijing – China’s flagship property market – had fallen 15% in the last two years…

“Uh-oh,” I thought. “Is this the beginning of a bear market in Chinese property?”

– Tom Dyson

P.S. Recent news stories show the Chinese government is beginning to panic about this decline… and it’s introducing measures to revive prices. We’ll see…

P.P.S. Keep an eye on the stocks of these two companies:

Country Garden

China Evergrande

They are the largest property developers in China. Their stock prices will be sensitive to any declines in construction or property prices. They’ve already fallen 20% and 38% respectively from their highs earlier this year…


Mental health… the Dow-to-Gold ratio… and how the kids will feel when they return home… All this and more on readers’ minds today. Plus, we hear from an old acquaintance of Tom and Kate’s…

Reader comment: I am absolutely fascinated by your voyage and the interesting reports you share with us.

Reader comment: Tom and Kate, I met and had breakfast with both of you at a conference in Kiawah Island, South Carolina in late 2009. It was just the three of us at breakfast on a getaway day. We discussed our various Wall Street careers, Tom’s at Salomon and mine at Bear Stearns.

What I was impressed by and still remember is how interested both of you were in our conversation. I am so pleased to see you both doing so well together again. I wish you all the best on the rest of your journey.

Tom’s response: Hello! I remember our conversation and even what I ate for breakfast that day. Kate says “hi” too. I just read her your message out loud.

Reader question: What do you think will happen with the children when the odyssey ends? And Daddy and Mommy go back to work? Since perhaps no one has ever done this before, how will all this travel affect the children as adults in more mundane lives? Thoughts to ponder…

Tom’s response: They’ll either love traveling or they’ll never want to leave home again.

Reader comment: You’re a brave man with an adventurous spirit – both for traveling the world with your family, but more importantly for facing the hard work of addressing your mental health head-on so you could reconcile with Kate to rebuild your family. Thanks for sharing your journey in all of these ways – it’s really enjoyable to ride along with you from the comfort of my own home and family life.

Reader comment: Just started reading Tom’s letters from around the globe. Very informative… downright exciting! My question… how do you figure the Dow-to-Gold ratio… what factors go into it? I will now be a daily reader.

Tom’s response: Divide the level of the Dow Jones Industrial Average by the gold price in dollars per ounce. As I write, the Dow is at 27,115 and gold is at $1,490, so the Dow-to-Gold ratio is 18.2.

And thanks for writing in, as always. Your messages are an integral part of this project, and Kate and I look forward to them. Keep ’em coming at [email protected].

Please note I’ll never reveal your identity or include any potentially identifying details if I decide to publish your question or comment.