Executive Global
®
Productivity | Strategy | Profitability
Real estate will never be the same. I covered this a lot in the past and will continue to in the future. I had a breakthrough in my research when I realised that because real estate lasts nearly forever (visit Europe if you don’t think so), that I must subtract people that are dying from the peak buyers, traditionally at 42. Why? They are permanent sellers. Why this is major is that it makes the long-term trend in the economy’s largest sector, real estate- bearish for damn near EVER
How do we or any developed country, or the largest emerging country China that has worse demographics ahead than the developed countries due to its past one-child policy – ever recover from the greatest real estate bubble in history by far? (And China’s households aren’t having more kids now that they are encouraging births, as they have learned it will hurt their standard of living too much.) Paradoxically, China’s massive crash and actual falling demographic trends for the decades ahead, will open the door fully for India to become “The Next Big Thing” globally as China did from 1983 into 2021. So, that’s why I’m bullish globally. The emerging world, led by India, will drive the next global boom into the peak of the 500-year cycle around 2140-50. And the US with continued strong immigration (Unless we’re idiots and continue to fight it too hard) will still be the best house in a slowing developed world. And we still lead in technology, with India the best up-and-comer there. But we have to first get through the bursting of the largest overall and greatest by far real estate bubble in history!
This table in this article shows how much Boomers dominate homes, and they tend to be the larger homes bought at their peak family cycle, which have gone up the most and will fall the most as they predictably die. And again, this is not trading down as for some into retirement. The big insight here, is that the over-sized Boomer generation is disappearing forever. We have never had a larger generation age and die off as a younger generation emerges. And they still dominate the larger homes which will be hit harder when they are sold, and there won’t be as many Millennials to trade up into them, especially when real estate starts to crash and look dangerous for the first time since 2008. That’s why we’ve never felt the ageing of past generations, especially since the massive Baby Boom hit in their Spending Wave from 1983 into 2007. And again, the ageing trends are only worse in the rest of the developed world outside of the small regions of Australia/New Zealand and Scandinavia. And China has the most extreme real estate bubble, due to its policy of stimulating through building empty homes and offices in the first emerging country to start to age rapidly and not need them! They are the first major emerging country to have declining demographic trends like the developed have seen, starting with Japan since the 1990s.
THE GREATEST DEBT BUBBLE EVER
But where does the debt crisis likely start? The last thing households want to default on is their property, and risk losing that. So, it’s the other debts, especially credit cards that will tend to begin to default first and trigger this larger global financial asset bubble, housing bubble and debt bubble. It’s just a matter of how much minor debt defaults or economic slowing it takes, to reveal the dangers of the longest, greatest debt and financial asset bubble that is the most global and longest ever!!!
It’s this U.S. sector of non-mortgage loans starting with credit cards and revolving loans, that have grown even more rapidly from $300B to $1.1T just since 2010, that will start the defaults, and start the avalanche of larger mortgage debt defaults that ultimately create the greatest financial crisis in history. Credit card debt has almost doubled, exploding from $680B to $1.280T just since early 2014.
Households and businesses need to curb spending, sell non-strategic assets, including real estate, and hunker down for a potential “Crash of Our Lifetimes in all financial assets. Real estate with mortgages will be the most vulnerable.
First, look for signs that the economy is starting to not look as good as most have expected, likely by October. The stock market should pick up on this first. And it may have already peaked for a long time in early June with the S&P 500 at 7,620 on June 2nd. Stocks could peak a bit higher as late as September or so. But a major crash could start between August and October, and continue for up to three years into mid-2029 or so. The investors and businesses that hunker down and get more into safe bonds, especially 10- and 30-year U.S. Treasury bonds- will make money while most investors and businesses struggle.
Businesses should cut expenses and focus on the products and markets that will hold up the best (i.e., where you are strongest). Investors can start by shorting stocks through ETFs like SQQQ (1/3 to offset 3X leverage), but that is the best just for the first crash wave that could be 50%+ in just 2 – 4 months. Then get more conservatively in the TLT ETF that is long-term 10- and 30-year Treasury bonds. These bonds will be the safe haven in a crash, as they were in 2008 when even gold crashed a good bit… as the US government can print money to pay their interest and principal. They will become the safe haven, not gold, as already proven in that 2008 crash.
HUNKER DOWN NOW, SWOOP IN LATER
The time to reinvest for businesses and consumers will be around early-to mid-2029, as it takes near three years for such large business shake-outs and stock crashes to bottom. Then you can reinvest in the next boom dominated by rising India and Southeast Asia vs. China and E. Asia in the past. Your business can buy or take over assets from your failing competitors, and invest in the growing sectors that emerge again.
There is no better time to advance the long-term value of your business or investments, than seeing a major crash before it occurs and getting defensive before that, like NOW! Very few investors and businesses will see this one coming after governments have convinced more people they will not let the economy fail after 17 years of massive stimulus…The problem is: the government and businesses have created this bubble! They are the cause, not the solution. You have to protect your assets and business by hunkering down and being the business that survives, as the best always will. Be the investor that got out of the riskiest investments and re-allocated for a few years into the safest, like 10- and 30-year Treasury bonds! Or, if you’re an aggressive investor, you can short stocks, at least for the first and most dramatic crash of 50% plus in 2 – 4 months historically. Sit out the longer crash in safer bonds. Then re-invest in your business and stocks for the next great boom between around 2029 and 2037. EG
