As one asset dies, another…

  • Best performing ‘asset’ this year?
  • Look to the sky

Ah, one of the (new) inevitabilities of life: that the old media in all its forms is slowly filing off to meet its maker.

As Bloomberg sadly reported this morning:

Even having Lachlan Murdoch and billionaire James Packer in your corner isn’t enough to save you these days.

Ten Network Holdings Ltd., the smallest of Australia’s three main commercial broadcasters, has entered voluntary administration after losing the support of Murdoch and Australian media owner Bruce Gordon to carry on borrowing.

We can only guess that the executives and staff at Fairfax Media Ltd [ASX:FXJ] are thinking, ‘There but for the Grace of God go we.’

Yes, that other member of the old media is clinging on. But in name only. Its private equity buyer only really wants the digital businesses. The newspapers? Pah!

And private equity groups are a ruthless bunch. Once the ink is dry on the takeover, they will deposit the newspaper business in the nearest ditch.

Or perhaps, if no-one will take them, could they shift the papers business to an online-only operation? Makes sense. Granted, we’re not saying that will work either.

But whichever way you shake it, the old newspaper business is dying…fast.

Markets

Overnight, the Dow Jones Industrial Average gained 92.8 points, or 0.44%.

The S&P 500 added 10.96 points, or 0.45%.

In Europe, the Euro Stoxx 50 index closed up 13.92 points, for a 0.39% gain. Meanwhile, the FTSE 100 fell 0.15%, and Germany’s DAX index gained 0.59%.

In Asian markets, Japan’s Nikkei 225 index is up 20.34 points, or 0.1%. China’s CSI 300 is down 0.94%.

In Australia, the S&P/ASX 200 is up 54.63 points, or 0.95%.

On the commodities markets, West Texas Intermediate crude oil is US$46.02 per barrel. Brent crude is US$48.33 per barrel.

Gold is trading for US$1,270.03 (AU$1,683.88) per troy ounce. Silver is US$16.93 (AU$22.44) per troy ounce.

The Aussie dollar is worth 75.42 US cents.

Best performing ‘asset’ this year?

In a moment, I’ll hand you over to colleague and controversial economist, Phillip J Anderson, but first…

If you check out the data we supply at the bottom of each issue of Port Phillip Insider, you’ll notice that one of the listed prices has gone ballistic these past 12 months.

Not the Aussie stock market. It’s only up 12.1%.

Not the Dow Jones Industrial Average. It’s only up 20.7%.

Not the NASDAQ Composite index. It’s only up 28.4%.

Certainly not gold. It has fallen 1.3%.

And neither are we talking about West Texas Intermediate crude oil. It’s down 5.2%.

No, the item in question is a little different. It’s one that few people have even heard of, let alone understand (your editor is firmly in the ‘don’t understand’ category).

Yet, it’s price has risen from US$442.82 one year ago, to (at the time of writing) US$2785.62 today.

That’s a gain of 529%.

As folks without much class may say, ‘How about them apples!’

What is this wonder-gainer? It is, if you hadn’t guessed, Bitcoin. For the uninitiated, Bitcoin is a cryptocurrency.

Don’t worry, your editor won’t embarrass ourselves. We’re not against blabbing on inanely about things of which we know nothing, but even we have our limits to what we can get away with.

We’ll happily say a word or two about the Greeks, or the Roman Empire, the Industrial Revolution, the American Revolution, central banking money printing, politics, small-cap stocks (that is something we know much about), libertarianism, Donald Trump, Brexit, and more.

But Bitcoin…cryptocurrencies…and the ‘Blockchain’. [Editor’s voice: I’m close to embarrassing myself, aren’t I?] We refuse to join the conversation.

The good news is (ta-da), we don’t have to. There are plenty of others who do know all about the aforesaid topic. That includes staff within our building in Albert Park. The last two staff members we’ve hired, both have a deep interest and knowledge of cryptocurrencies.

We’re close to thinking that maybe they’re even teaching this stuff at schools. But they’re not.

Aside from those folks, we have another expert. Someone who has bugged your editor for months to introduce to you the idea of Bitcoin and cryptocurrencies.

We demurred. Because we didn’t understand it. We wanted to know more. We wanted to be sure that this was something that should and would interest you.

While we’ve done so, the Bitcoin price has kept on rising. It’s up 258% over the past six weeks alone.

So, what’s the deal? What’s it all about? Importantly, what’s the ‘money’ and investment angle?

For that, you need to go here. Our in-house cryptocurrency expert explains all. Details here.

Just note, what he explains isn’t for everyone. But, if you understand the importance and the game-changing potential for cryptocurrencies, it’s something worth checking out.

See for yourself, here.

Now, over to Phil Anderson…

Cheers,
Kris


Look to the Sky For the Next Possible Downturn
By Phil Anderson

One of the major topics I’ve studied over the last 30 years is what I call the 18-year real estate cycle.

It’s a regular pattern that’s repeated throughout 200 years of US history, and even longer in the UK.

This makes the economy a lot more predictable than most people assume. It also gives you incredible insight into which sectors you should be trading.

It gives you a very valuable timing guide when to be in and out of asset markets. I was 100% in cash during the GFC thanks to this.

US real estate bottomed out in 2011. Real estate cycle history suggests we’ll get an overall — yet another — 14 year up move in US real estate until around 2024/5. Then we’ll get another collapse around 2026. That’ll be like 2008 and all the others before it. In precise and quite measurable cycles.

The boom bust cycle comes from the property market.

I can tell you one thing. The real estate cycle continues to turn. It’s all happening right before our eyes and as per my Cycles, Trends and Forecasts property clock.

[Publisher’s note: Go here to find out more about Phil’s property clock. Here.]

One effective way to judge where we are in the cycle is with the construction of tall buildings and their completion date. It might sound odd at first, but there’s very good evidence to show that groups of tall buildings usually open in recession. You can read my book The Secret Life of Real Estate and Banking for the full run down on this.

This cycle has also been unusual in the sense that there have never been so many ‘talls’ on the drawing board so early in the cycle. It tells us just how big this current cycle could really get by 2026.

Just take a look at some of the record buildings due top open around 2019-2020…

  • Kingdom Tower in Saudi Arabia (World’s Tallest, Due to open 2020)
  • Suzhou Zhongan Center (China’s Tallest, 2020)
  • 1 Vanderbuilt, New York (2nd tallest in the city, due to open 2020)
  • Vista Tower, Chicago (3rd tallest in the city, due to open 2020)
  • Australia 108 (Melbourne’s tallest, due to open 2020)

There are plenty more major development due around this time too. This time frame is where we can expect a mid-cycle slowdown.

But markets are funny things, at times. This ‘tall building’ indicator is known to quite a few people now.

It’s highly likely around 2019 people are going to notice all the completions, look at the history of this, and then forecast total collapse and calamity.

If enough do this, we could conceivably use this indicator as counter cyclical. If enough say it, it might even suggest there won’t be much of a downturn to speak of.

The mid-cycle slowdown is a possibility. However, much more dangerous will be the real estate cycle extreme, due around 2026.

Again we can use major buildings and developments to ‘time’ the economy.

Let’s take a look at some projects either under development or proposed due around 2026….

  • Melbourne Metro Rail Tunnel (2026)
  • Tower 1, Basra, Iraq (world’s tallest, 2026)
  • Japan’s tallest building (due 2027)

There are plenty more.

I am now in my third real estate cycle of my lifetime. I can assure you the dynamics behind this are something you should be studying.

So keep any eye out for more ‘tall’ or record developments. Once you ‘see’ the cycle at work, you will never look at the world the same way again. That’s been true for me, and thousands of my subscribers.

To find out more, go here.

Phil Anderson
Trader and Editor, Cycles, Trends and Forecasts