Author: Michael Douville
It has taken almost 400 years, but according to Convoy Investments, Bitcoin has surpassed The Tulip Bulb Bubble, where even Sir Issac Newton lost his fortune, as the largest Financial Bubble in History. Everyone wants to get rich! Everyone wants to be part of this phenomenon. When queried, there is a complete lack of understanding what Bitcoin is or can do. It is a “Store of Wealth”, however, you cannot go to Walmart and buy clothes or food with Bitcoin, nor can you fill up your car at the Gas Station. You cannot pay your mortgage, health costs, utilities, or even buy a really good meal with Bitcoin! Yet, there is a rush to spend precious Investment Dollars, Retirement Funds, or worse yet, the Family “Nest Egg” in pursuit of the “Riches” to be made.
This will not end well! Wealth is not achieved by Speculating in the last stage of a spiking and crowded trade; that is a recipe for losses, HUGE losses. Wealth is achieved by understanding the flow of the economy and attempting to purchase good assets early in their cycle. Purchasing assets that will appreciate as time goes on; investing long before everyone else recognizes the potential of your asset class. Such opportunities present themselves a few times in your life. Certainly, March 2009 for the Equities Market or Investing in Bonds after the traumatic ending of the Interest Rate Cycle in 1982 when short term rates broached 20% ;resulting in 35 years of declining rates and rising Bond prices. Just these two illustrate that the time to buy is when everyone is selling and swearing never to enter that Market again. Two possible considerations come to mind.
As China was saving the world in 2009-2012, Iron Ore, Copper, Aluminum, Timber, etc. were in demand and prices rose sharply; they have since fallen sharply. The rise of Commodity prices were also the result of the completion of the Commodity Cycle; typically a 15 year duration: 7.5 years up, 7.5 years down. The down cycle appears to be in the process of completion. No one wants to own Commodities!
Typically, Housing experiences a Mid-Cycle Correction in the 7.5 to 9 years from the cycle completion date. The last cycle would have bottomed and completed in mid to late 2009; the vulnerability stage would then be early 2017 to the end of 2018. A correction in this time frame would constitute a buying opportunity in an ongoing Bull Market. With both the Stock and Bond Market heading toward completion of their respective cycles, this “Correction” could be pretty “Scary”. However, the best price appreciation is generally achieved just prior to the cycle tipping point often resulting in a Price Spike. This event should transpire for Housing in the 2023/2024 time period also coinciding with Commodity Cycle. In order to benefit from both trends, investing in cash flowing residential rentals in the high growth corridors of the US might be considered. One should always consult with your advisor prior to investing.
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