Is everyone benefitting but you?

Tuesday, 11 January 2022 — Melbourne, Australia

[8 min read]

Dear Reader,

Something strange is happening.

You see signs of it everywhere you look.

And once you see it, you can’t ‘unsee’ it.

‘I just don’t believe how much prices have jumped. These prices are far exceeding what I think is a fair and reasonable market price.’

That’s a buyer’s agent in the Sydney property market.

‘It is definitely the hottest market I’ve ever seen with the low supply, the lower interest rates and the cost of borrowing, money being so cheap.’

That one’s from Brisbane.

‘We thought it would stop for a pandemic, but it hasn’t. I think it’s gone against all the experts and predictors out there; it just keeps going.’

Those are the words of an auctioneer right here in Melbourne.

The property market is in a ‘frenzy’, according to the ABC.

And it’s not just Australia, either. The UK property market is ‘frankly obscene’, states one estate agent in London (and estate agents are — by a long way — the last people you’d expect to talk the market down).

In fact, in the year to June 2021, the average UK home ‘earned’ more than the average worker.

Then you have the US…

‘Will Real Estate Ever Be Normal Again?’ asks The New York Times.

The market in many parts of the US has gone berserk. Here’s one story the Times quoted that more or less shows you how things stand. It involves a property in Austin, Texas:

‘It was listed on Dec. 30, 2020, for $370,000, and it seemed like mere minutes until buyers and agents began lining up in the bitter rain to tour the house one by one, a process that took hours.

‘Agents texted Google Maps screenshots to one another, noting the red traffic jams around the property.

‘By the 11 a.m. deadline on New Year’s Day, the house had received 96 offers, with the winning bid clocking in at $541,000 — a mind-boggling 46 percent above asking.’

If that isn’t a frenzy, I don’t know what is.

But what if I told you that this is all part of a bigger pattern?

One that extends far beyond property…and far beyond Australia.

The Grand Cycle

See, though the real estate market tends to garner more coverage than the wider financial markets, it’s not just property prices displaying this kind of behaviour.

The ASX 200 made a new all-time high in August 2021.

The Nasdaq has gone near vertical in 2021, making new highs all the way. The most recent was in mid-November.

Then you have copper…

Cotton…

Liquid natural gas…

Even that most ‘hated’ of commodities — coal — has gone nuts…

If you’ve missed any of these moves, charts like that probably sting. When you’re on the outside, it can feel like everyone is benefitting but you.

The question is — why?

I think I know.

Now — before I go on, a quick disclaimer: I’m not here to try and convince you we’re in the middle of a bubble or markets are on the cusp of collapse.

There are plenty of doomsayers out there who’ll tell you that story.

They’re pretty good at it, by now.

After all, most of them have been telling it since 2008. Predicting that markets are about to collapse is a great way of getting people’s attention. ‘Doom porn’, you might call it.

The problem is those doomsayers have been wrong for the best part of a decade and a half. Markets have powered to new highs. Even the pandemic couldn’t hold them back for long.

Anyone who’s been out of the market in this time might have felt smug, but they’ve missed out on some of the best wealth-creating opportunities in history.

So assuming we share that goal — wealth creation — let me explain why markets are roaring higher.

It comes back to that idea I discussed yesterday: land. (Check out yesterday’s piece here if that went over your head.)

See, land prices move in a very predictable way. We call this the Grand Cycle. It works like this:

Each cycle lasts approximately 18 years. We tend to see seven years of land price growth, followed by a short recession. Then we see another — much bigger — seven-year period of booming land prices, followed by four years of decline and economic hardship. Then the cycle begins again.

That four-year period tends to be when we see housing and stock market crashes. We also tend to see banking problems, recessions, and other catastrophic events like that.

This graphic tells the story fairly well:

This is all driven by land prices, remember.

A booming land price drives everything from property to banking credit, to the wider financial markets (at least, if you’re a student of land, history, and the Grand Cycle, that’s what you believe).

Once you start looking at things this way, everything sort of clicks.

The last ‘bust’ was 2007–11. That’s when land prices globally went into reverse and the world banking sector went to the brink.

Wind the clock back 18 years from there, and where do you land? The early 1990s recession.

Another 18 years back and you hit…the global crisis of the early 1970s. Most people will tell you that was driven by OPEC. But it just happens to fit perfectly into…the Grand Cycle.

I could write pages about the past, but I’d rather focus on the future.

Why?

Because we’ve just seen the ‘mid-cycle’ recession. It was short and sharp. But land prices didn’t decline. Now we’re entering the second half of the cycle — traditionally the most profitable time.

And — right on cue — we’re seeing land, property, stock, and commodity prices go nuts.

Coincidence?

Nope.

This is all part of what you’d expect if you study the Grand Cycle.

And here’s the best part: there IS a specific playbook you can use to potentially profit from the next phase of the cycle.

In fact, tomorrow, we’ll be sharing the five specific things you can do with your money in 2022 and beyond if you want to set yourself up to capitalise.

More on that tomorrow.

Until then,

Callum Newman,
Editor, The Daily Reckoning Australia

PS: Don’t forget to check out my free podcast here. Already we’ve covered commodities, property, cannabis, day trading, and gold shares. There’s plenty more coming up…and it’s all FREE. Give it a go!

‘I will stand in this breach. I will defend this nation. And I will allow no one to place a dagger at the throat of our democracy.’

Joe Biden

The holiday season is over…now comes the long slog through winter…

First, we would like to thank Dear Readers for sticking with us. We’re trying something new — just straight talk. No advertising. No big promises. If we get through the coming bomb cyclone — the financial/political one — with our wits and wealth intact, we will consider it a success.

In the days ahead, we will also give you a fuller explanation for our move…and hit the refresh button on many of the core ideas we’ve developed over the last two decades. They may seem a little exotic, or even frightening, to new readers. But here at the re-born Diary, we hide nothing.

One of our almost treasonous notions, for example, is our take on modern American democracy…and the role of the US’s mainstream media in destroying it.

Last week was the anniversary of the 6 Jan 2021 ‘insurgency’ at the US Capitol. The press was in full-throated alarm mode. Just google ‘American democracy in peril’, and you will get millions of suggestions.

Johns Hopkins and Harvard have convened panels of scholars to explore the idea. Joe Biden, along with almost every Democrat-leaning polemicist, politician, and DC hanger-on, has warned about it. Dozens, maybe hundreds, of books have endorsed the idea. Writes one of the most popular writers on Substack, Heather Richardson Cox:

‘On January 6, 2021, insurrectionists determined to overturn an election and undermine our democracy carried that flag [the Confederate flag] into the seat of our government.’

Horrors!

Up north, the Canadians are worried. Today, MSNBC carries this story from Toronto’s Globe & Mail: ‘American Democracy Could Collapse’. It goes on to say that a ‘right wing’ dictator could take over in 2030.

[A ‘left wing’ dictator, apparently, is out of the question.]

The danger is imminent! The Atlantic, that paragon of Elite Establishment Wisdom opines: ‘America is running out of time’.

‘One year after Donald Trump led his supporters in an attempted coup against the United States, the nation is still very much in the throes of that attack.’

The coup that wasn’t

But we all saw it on TV. What kind of coup d’état was this? The mob invasion of the Capitol appeared to be just the opposite of a real coup. It was more like a takeover organised by the Three Stooges. The invaders had not a single weapon. Not a single preparation had been made — no plan…no supplies…no press conferences…no tanks, aeroplanes, TV stations…nothing had been made ready.

Even such a low IQ crowd could have searched for it on the internet: ‘How to engineer a successful coup d’état in 10 simple steps.’ Look it up for yourself; it’s right there. Apparently, no one did. Instead, the leaderless mob entered the Capitol building, milled around, took selfies, then…as clueless and lost as tourists without a guide, it left.

Nobody appeared on TV announcing a state of emergency and a new government. Beltway traffic was not interrupted. No columns of olive drab troop carriers crossed the 14th Street Bridge.

Caesar crossed the Rubicon with an army of loyal, hardened troops at his back….after crisscrossing all of Gaul, on foot or horseback, and defeating, outsmarting, and humbling dozens of barbarian tribes. He was strong, bright, and remarkably resourceful. No one doubted that he meant business.

And Mr Trump? On 6 Jan 2020, he was already firmly ensconced on the banks of the Potomac, hamburger and Diet Coke in hand. As Commander and Chief of the whole of US forces, he could have gone along with the media’s ‘terrorist attack’ claptrap, called out the army to restore order…suspended the transfer of power…and given his troops, as did the president of Kazakhstan, the command to ‘shoot to kill’ anyone who objected. Surely there was at least one silly colonel, passed over for promotion, who was dumb enough to follow his orders!

But no. No coup. No undermining of democracy. No nothing…except a great media hubbub, broken glass, mock anxiety, and one unarmed and now dead woman, shot point-blank by a trigger-happy Capitol guard.

Et tu, media?

Why then does the mainstream media persist in portraying the Capitol invasion as something it wasn’t? That is our question for today…and tomorrow. It’s a question about consensual democracy itself…and how it pitches headfirst into something a whole lot less ‘consensual’…and how it connects to the economic collapse we see coming.

First, we need to elaborate on an idea that we take for granted…one that most people take for absurd. That is, we don’t think the right to vote is such hot stuff. Few people will say so. But given the opportunity, even in a hotly contested election such as in 2016, 43% of eligible voters didn’t bother.

We don’t want to use the government to force others to do what we want. We’d appreciate it if they would return the favour. But many people think that a ‘democracy’ is controlled by ‘the people’, and getting a majority of these yahoos together gives you the right to tell everyone what to do.

The great Italian economist Vilfredo Pareto showed that whatever you call your government — a monarchy, a theocracy, a democracy…it just doesn’t matter. The government is never actually controlled by ‘the people’. They are too busy just trying to earn a living. Instead, there is always a small group of insiders and movers and shakers — a rich, powerful elite he called ‘the foxes’ — who take charge.

In the Soviet Union, Nazi Germany, Cuba, and other totalitarian countries, they were the Party insiders. In pre-revolutionary France, they were the aristocracy. In strong-man dictatorships, they are the cronies, enablers, and fixers. And in the US today, the elite includes Wall Street, universities, the Fed, both political parties, the bureaucracy, lobbyists, think tanks, no-profits, the military/industrial/pharmacological/medical/welfare surveillance complex…and notably, the press.

Not coincidentally, these are by and large the people who own the US’s public companies…and whose wealth has increased by about US$30 trillion over the last 12 years — thanks to policies controlled by the elite themselves.

What makes a consensual democracy tolerable is not the democracy part; it’s the consensual nature of it. People respect each other’s opinions and their rights to do with themselves and their property as they please. When that consensus is lost, the result is misery — a civil war…oppression…resistance…a breakdown of law and order…or other disagreeable trends.

Follow the money

Of particular interest to us is the monetary flimflam. One of our Diary dicta: when the money goes, everything goes. And as the elite tightens up its control, it inevitably strangles business and investment. And it must also bribe the discontented mobs with stimmies and giveaways. This leaves it in need of finance, which it typically gets by distributing ‘printing press’ money…leading to further discontent and economic discombobulation.

But wait. What is the media’s role?

As we will see tomorrow, the press is meant to question authority. It is supposed to represent the public in its desire to get to the bottom of things. Does this war really make sense? Should we spend the public’s money on this? Why do you think this will make voters better off?

But instead of asking the tough questions, the mainstream media became a shill for the government and the leading propagandist for the whole elite agenda. Now it just passes along the party line…no matter how at odds with the reality people see before their own eyes.

Mr Trump was never clever enough to be a real Caesar. And the press despised him for it. Even when he spoke the truth, rarely, and if only by accident, the press excoriated him. So what were the flyover voters supposed to think? Could they depend on the elite to count the votes fairly…or the press to report the results honestly?

And when the real Caesar appears, won’t the public rejoice?

We don’t know. But the toady media, after a little tidying up, will make damned sure to croak his praises.

Stay tuned.

Regards,

Bill Bonner,
For The Daily Reckoning Australia