Quoted from Superslouth Posts today
If you want to know why I think the current real estate cycle will be the biggest of all time,
consider the following:
China has plans to build the world’s longest underwater tunnel, beneath the Bohai Sea,
connecting the bustling northern port cities of Dalian in Liaoning province to Yantai in
Shandong province — by 2026
Actually, it is three tunnels, one for cars,
one for trains and one for maintenance.
That’s 123 kilometres underwater —
three times.
‘Using the tunnel, it will take only 40
minutes to travel from Dalian to Yantai,’
reported The Hindu in February. ‘At
the moment it is a 1,400-km drive and it
takes eight hours by ferry.’
========
Here’s what the article doesn’t tell you
— this will add extensively to the land
value on either side of the tunnel, just as a bridge would. Projections expect the freight
revenue alone to pay for the tunnel in just 12 years.
Speaking of bridges, in July, Nepal opened up the Khurkot bridge spanning the Sunkoshi
River. The bridge was built with the help of the Asia Development Bank at a modest cost of
US$1.8 million.
This opens up the shortest land route between India and China, should it ever be required.
‘It’s expected to reduce the prices of basic consumer goods in the area and enhance the ability of
farmers to get their goods to market,’ says the bank. No one ever says what it will do to land
value.
China also has desires to develop a new, far longer, ‘new silk road’ from Chongqing to
Duisburg, in Germany. At present, the existing train trip takes 22 days and runs through
Russia.
That trip is always a trade risk to both China and Germany. The new proposed route would
go through the city of Urumqi in Western China then head through Kazakhstan and Belarus,
then into and through Poland, and then to Duisburg.
There are then plans to link this with a maritime route; out through Hong Kong, down the
South China Sea, around the Maldives, up into India, across the Bay of Bengal, the Arabian
Peninsula, the Mediterranean Sea and finally sail up into Europe.
Better trade and access points always increase land value
===
The huge uplift in land values coming worldwide
Thailand’s ruling class, which is actually a military junta, approved a US$20 billion
infrastructure project in August that includes two high speed rail lines to eventually provide
a direct link to China. This will go ahead. Estimates put completion in 2021.
It’s part of China’s plan to build a high speed train link from the Chinese city of Kunming all
the way down to Singapore. This will pass through Laos, Thailand and Malaysia. The China
Daily says this could increase the GDP of the nations involved by some $375 billion.
The UK Telegraph reported the following on the project:
‘Constructing it will be a mammoth engineering task. It will require 154 bridges and 76
tunnels, as well as 31 train stations, just to get the line the 260 miles from Boten on the Laos-
China border to Laos capital Vientiane. An estimated 20,000 Chinese workers will be needed
to build it, with the completion date set for 2019.’
And that’s just to the Laos border.
You can bet those in the know have already started buying up the land beside the proposed
route. Don’t be surprised to see the top Thai military brass make a few visits to Switzerland
in the years ahead. They’ll have to put their gains somewhere. (Actually, it might be better to
see where they vacation.)
Construction of the line from Kunming to Singapore, after the Thai approval, begins in 2015.
The lines will connect Bangkok and other cities with airports, seaports, cargo depots and
other border areas. Existing rail lines will also be modernized. Major land speculation is on
the way here. And major credit creation to facilitate it.
The Chinese government has announced it will merge its two largest railway equipment
manufacturers into one corporation as a way to cut costs and win more overseas
construction contracts. The merged company will have combined revenues of US$32 billion
and 118,000 staff.
===
China is also partnering with Brazil and Peru to build a railway to link the Atlantic and
Pacific oceans through South America. It will be 3000 kilometres in length from the coastal
cities of Peru to the coast of Brazil.
The project is only at the government thought stage, but note what it will do: challenge the
trade position of the Panama Canal.
The South American nation of Nicaragua also unveiled this year its version of a proposed
canal, at a cost of $40 billion to link the Caribbean with the Pacific.
Frenetic building activity is going on all around the world.
The Congo is planning the world’s biggest hydropower dam, the Grand Inga, and Dubai has
unveiled plans for its new $32 billion air-hub, to name two more projects.
Dubai’s air-hub (possibly to be the world’s largest) will simply rise out of the desert. The
market expects Emirates Airlines to take up residence there by 2025.
I do not recall seeing so much building activity so early in any past cycle. In Hong Kong,
some quite new and large infrastructure projects are underway.
For example, according to Wikipedia, the new West Kowloon Cultural district will feature:
‘A new museum of visual culture, numerous theatres, concert halls and other performance
venues ... directly financed by the government with an upfront endowment of HK$21.6 billion
for construction and operation... Taking up 40 hectares, the district will include 17 core arts
and cultural venues as well as space for arts education.’
But it’s not just Asia...
===
The resurgence of the UK
===========
The tech revolution will drive land value even higher
Overall, when investors are sceptical of markets, they act to hold money out and keep more
in cash.
When this happens, markets, paradoxically, go up. The act of holding money back avoids
the excess optimism that in the end kills every bull market.
Over the past four years, I do not ever recall seeing so many sceptics about the bull market
as we’ve seen since 2009.
Moreover, there is actually less stock available to buy in the US than there was in 2009,
despite all the latest IPOs and new listings. Corporate stock buybacks and takeovers have
outstripped the new listings.
In the immediate short term, however, please keep in mind, the world has now had its four
years of rising stock markets after each usual 18.6 year land-price-led real estate slump. For
the time being, the gains are now pretty much built in and we are due a fairly solid retrace of
the four year up move.
But after that, we will see the resumption of the biggest real estate cycle of all time. For all
the reasons outlined above, and more, the gains are going to be stupendous.
TO BE CONTINUED
=====================================
The Sykes–Picot Agreement
The rise of ISIS and the betrayal of the Arabs in the First World War
1916 began the carve-up of the Middle East along the Sykes-Picot line to replace the
collapsing Ottoman Empire. The carve up was simply a line on the map from the ‘e’ in Acre
to the last ‘k’ in Kirkuk. They did the deal in secret.
This line underpinned the post-war
settlement and 1919 peace conference.
They didn’t mention that it conveniently
split the known oil resources of the
Middle East between the war’s victors
Britain and France.
(We’ve been doing the same ever since.
The world began fighting over it again in
1939.)
The Sykes-Picot line in 1916 ended up
a total British betrayal of the Arabs.
Lawrence of Arabia pointed out as
much.
To extract the oil — and the rent —
the West needed stable states with a
compliant leader, which is what the US
and NATO play games at now, as does
everyone else.
Osama Bin Laden directly referenced this created line in his ramblings, but it went largely
unnoticed at the time. We are now paying attention because the new Caliphate coming out
of Mesopotamia (ISIS) directly referred to the Sykes-Picot line as well
The new Caliphate itself has appeared exactly 90 years after the Turkish general Kamal
Ataturk declared the Ottoman Empire and Caliphate dead in Turkey in 1924. This was in
order to introduce his more secular rule.
Everything goes in cycles. But not just any cycles. They are specifically timed. Repeats will
often be seen in 100 year time frames.
Here’s how the Dow Jones looked one hundred years ago, starting 1909 through to 1919. This
includes the entire period of the First World War. The Dow low was at the start of this war.
The Dow Jones Index 1909-1919
Note the September 1916 market action — a break into all time new highs for the Dow. That
would have been very emotional. It ties in with our expected emotion for Sept 2016 that we
have noted already, though for other reasons.
In the chart above, also note the strength into the 1919 market high. I expect similar into
2019, being the mid-cycle high point for this the current real estate cycle.
(PS: to show you what happens at 100 year anniversaries, there was a good example that
came up in early August 2014 where everyone in the UK was asked to turn their lights out at
11pm on August 4 as a mark of respect for what happened in 1914 as Britain went to war.
‘The lamps are going out all over Europe; we shall not see them lit again in our lifetime,’ noted
British Foreign secretary Sir Edward Grey at the time.)
Here is how the Dow has looked, 2009 up to current
The Dow 2009 to 2014
The market repeat and pattern shape can never be quite the same of course. If it were,
somebody far smarter than me would have noticed it already. And each decade is always a
little differently placed within the real estate cycle too – mostly. Don’t forget that. But have
a look at the two charts for an interesting comparison so far.
The present market and cycle counts
All the cycle counts point to a strong upward bias in US markets.
If we have a look at the decades 30 years back, 60 years back, 90 years back (and actually
beyond that in set counts), they are all exceedingly bullish decades.
Here are charts of the Dow over those respective repeats.
The Dow in the 1980s (30 Years)
The 1950s (60 Years)
The 1920s (90 Years)
Do note the action in late 1929 and after. 90 years forward will be 2019. An excellent time
frame to be alert for.
As you can see, over those repeats, markets went up — strongly — in all of those time
frames. This happened despite major conflicts the US was involved in at the time (Korea,
Vietnam, Middle East).
The US is likely now in perpetual war to feed that mighty military industrial complex. There
are so many jobs dependent upon it now that I doubt this can ever change.
In conclusion...
Overall, when investors are sceptical of markets, they act to hold money out and keep more
in cash.
When this happens, markets, paradoxically, go up. The act of holding money back avoids
the excess optimism that in the end kills every bull market.
Over the past four years, I do not ever recall seeing so many sceptics about the bull market
as we’ve seen since 2009.
Moreover, there is actually less stock available to buy in the US than there was in 2009,
despite all the latest IPOs and new listings. Corporate stock buybacks and takeovers have
outstripped the new listings.
In the immediate short term, however, please keep in mind, the world has now had its four
years of rising stock markets after each usual 18.6 year land-price-led real estate slump. For
the time being, the gains are now pretty much built in and we are due a fairly solid retrace of
the four year up move.
But after that, we will see the resumption of the biggest real estate cycle of all time. For all
the reasons outlined above, and more, the gains are going to be stupendous.
TO BE CONTINUED
Expand
(20min delay)
