Community understanding - emailed to subscribers - Wed, 15 Nov 2006

Great example of the depth of community ignorance when it comes to matters economic:

such policies will of course INCREASE land price, and price first home buyers even further out of the market. Hardly a surprising policy coming from one of Victoria's leading land owning family. Sold to the ignorant public by appealing to self interest. Never allow yourself to fall into this category. Study of causes is required.

Easy forecast too. Here is a bit from email May 6th, this year:
"Meet the Baillieu's, says today's Age. Indeed. Conservative parties the world over are always owned and operated by that State's largest license owners. This state is no exception. The stated aim: get rid of Bracks and the labor party. Easy forecast here:, should he / they get back into power,the first thing to do will be eliminate the state Land Tax. Higher land prices are what's needed, though it will be sold to us as ridding the state of burdensome taxes. "

I also said as part of that email:
"If you want to know how to forecast economic behaviour, there are only three things you need to know:
1. how the land market works
2. how the banks work, ie fractional reserve banking, and
3. gann timing for the repeats "

If you want to do number one well, the best couple of books I have found are:
George Miller's 'On Fairness and Efficiency', Chapter Three about the rent, 'The Wonderful Wealth Machine', by Phil Grant, and of course Harrison's 'The Power in the Land'.

Punters seem nervous at present; everyone seems to think that the US real estate market has 'had it', has to collapse soon, can't keep going up, is over priced, and the collapse will be soon. On a recent trip to the US, this was not my impression. I think there is plenty of money around to feed higher asset prices over the next couple of years:

- Investment bank Morgan Stanley has just raised $8 billion (US) for its latest new real estate fund - its biggest capital raising to date.

- Banks world wide continue reporting improved profits, with just about all of them saying, as Westpac in Australia did: "more agressive lending will drive earnings growth for the next year.." Well you all know what that means.

- Sales of prestige homes everywhere in the world continue to surge, with record breaking prices continuing. (So too, property developments in leisure projects around the world.) When that happens, neighbours lift their expectations of what their nearby properties are worth.

- Other government granted licenses world wide are also going strong: Packer is bidding to build, own and operate the Singapore casino license, a 10 storey waterfall and artificial volcano part of the $5 billion plan scheduled for completion 2009.

- Artwork prices continue to shatter all previous records:
Jackson Pollock's painting titled 'no,5, 1948' just sold for (about)$140 million (US) (private sale, both parties wouldn't say the price) but it is now the highest price ever paid for a painting, as is the historical repeat we can expect as we move into the last years of the real estate cycle.

- Tourism continues to expand:
Rocketplane Kistler, a US firm, is building its spaceport in Oklahoma from which it plans to launch its first space tourism flights in 2008. A seat on the first flight is $200,000. All seats on this first flight are booked and paid for.

In competition with Rocketplane is Virgin Galactic, which plans to operate from New Mexico and a second site in Woomera, Australia, "with plenty of open space and proximity to the Asian market" says the bard himself. Virgin has taken advance bookings worth $24 million it says.

- The world's tallest - the Burj Dubai - is still presently scheduled for completion 2009. (189 floors is the rumour.) Completion of such buildings has ALWAYS marked the top of each previous cycle. The builder of the Burj, Emaar Properties, says: "(the building) will beat all records on a scale that will be a dramatic testament to Dubai's faith in the future." Somehow I think we've heard that before.

- Record IPO levels around the world, the latest completion last month of the world's largest, the industrial and Commercial Bank of China Ltd (ICBC), a bank we might note.

- Development sites in many parts of the US are still swapping hands briskly, illustrating the continuing ease of credit. See attached phoenixsite.png (just one example of many I read about)

Do remember though, you won't hear a bell ring at the top. So it was quite interesting for me to see last month, the US army chief, General Pete Schoomaker tell his president publicly that there is not enough money being provided to fight the 'war on terror' in Iraq. Then, a few days later, the UK war general admitting, again publicly, that UK troops in Afghanistan are actually making the situation worse and should be withdrawn 'soon'. Normally, those in high command NEVER speak out or query the political line.

In China itself, the ruling regime has just completed an anti-corruption drive, ostensibly, as party president Hu said, to 'harmonize' Chinese society. Funny thing though, those arrested for corruption mostly seem to be politically aligned to opponents of Hu and his followers. There is a lesson there: when real estate markets do finally turn down in China, the government will be the last to tell anyone, since those still left will be obediently following the stated party line.

So I always urge you to study charts, it is the only way you can accurately gauge what the informed (usually inside) opinion is doing at any moment in time.

To the markets:
major anniversary dates always should be watched, one in particular, October 20, from the crash of 1987. This year, October 20, saw the Dow's first close above 12000 points. This up trend has every reason to continue, especially whilst there is so much uncertainty around: Iraq and related geopolitical risks, the Middle East generally, and global warming stoking fears of global recession. Markets can only ever go up when there are walls of worry to climb.

As a forecast of a potential future turning point, we will have a look at that next email.

Interesting to observe the power shift in both houses of US parliament, being exactly 12 years (144 months) from the last time that happened, in 1994. Then, the Republicans took control of both houses, campaigning on 3 principles: fiscal responsibility, national security and moral values. 12 years later we have the US putting a fence around itself, especially on the Mexican border, (but people feeling less secure than ever), we've been taken to war on lies, have the largest government ever seen with practically out of control spending, and a few male republicans soliciting (male)teenage congressional assistants via email. Who'd have thought...

Stock to Watch - MAR
Phoenix Site
How much house can a $100 million buy?

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