© Property Sharemarket Economics

WAR, RECESSION, INFLATION

Navigate through the Age of Turbulence

War. Stock market destruction. A cost-of-living crisis. Bond market rout. Recession.

Open your news feed on your preferred app and you will see it all. It is pure carnage
out there.

Interest rates are soaring. Government borrowing costs are going through the roof.
And inflation is not coming down, which is pushing heavy borrowers (e.g., property
development companies) to the brink of default).

On top of that, war is breaking out around the globe. And what’s going on is truly
horrific.

And instead of marshalling a collective response we’re spending all our time arguing
about who is to blame. There are mass protests on the streets and violence.

Welcome to the Age of Turbulence.

If you think things will eventually calm down, they won’t.

You are going to have to live with it. And you’re going to have to make big financial
decisions with all this going on.

I am not going to lie. It’s EXTREMELY difficult.

But you do need to know what to expect. And make sure you know how to prepare
yourself for what’s to come.

Because the upheaval of today is not random. It’s all part of a long-term cycle. And
the good news for you is, if you have some understanding of how the cycle plays out,
you can navigate the storms of the future.

ONE LONG CYCLE TO RULE THEM ALL?

Let me introduce you to the Long Cycle.

This is a long-term cycle, approximately 50-60 years in length.

It was discovered by Nikolai Kondratieff, a Russian economist in the 1920s, who

studied business cycles.

His research uncovered that Western economies went through long-term periods of
growth and decline. Based on his research – which was published in 1926 - he knew
the Great Depression was coming in the next few years.

So synonymous with this cycle did Kondratieff become that it is now known as the
Kondratieff Wave (or the K Wave).

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 WAR, RECESSION, INFLATION
Navigate through the Age of Turbulence

The Kondratieff Wave is seen today as a commodity price wave. It is divided into two
distinct phases: 25-30 years of rising commodity prices – the up-swing - and 25-30
years declining price – the down-swing.

But it was so much more than a commodity price wave.

Kondratieff noted that when prices rose, it was often driven by the roll out and mass
adoption of a suite of new technologies.

The pace and intensity of the economy picked up. It experienced a lot of change.
Because there was so much, whenever the economy experienced a lull, something
else would arise to move things forward again.

In the downswing, when prices fell, there was less intensity, more speculation, and
conditions became more easily depressed.

We are presently in the upswing. It began in 2001. If you think back to that time, one
trend stood out: the relentless rise of commodity prices between 2001 and 2011. See
the chart below.

Source: IMF - World prices

This surge in commodity prices was in part fuelled by the rise of China. But it was
also the construction boom of the 2000s that was global.

It led to the term “Commodity Supercycle”, one which is coming back in fashion today.

No wonder. We’re still in the upswing of the Kondratieff Wave.

So strong is a Kondratieff wave on the upside that even the absolute carnage that was
the Global Financial Crisis or GFC (to be more accurate, the bust of the last completed
18.6-year real estate cycle, where the world’s credit system seized up and land prices
collapsed) couldn’t halt the insatiable demand for raw materials.

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Refer again to the chart above; the GFC took place between 2007 to 2009 - but note
how each line in the chart above actually rose for most of this period.

For commodity-producing nations, such as Australia and Canada, these were the
heady days where the “Aussie” and the “Loonie” were strong relative to the almighty
US dollar. (The Aussie was the stronger of the two because much of the demand was
coming from China).

This is the type of generational wealth and prosperity these commodity cycles might
potentially bring to nations that that are well-placed to take advantage of them.

This was one of the reasons why real estate in Canada and Australia held up – and
even increased sharply – at the start of the 2010s – unlike other parts of the world,
such as Europe, which took much longer to get going.

The Long Wave is a powerful dynamic indeed. The one cycle to rule all others, perhaps.

If that’s the case, this makes the coming years challenging, because there is a darker
side of the Kondratieff Wave.

THE AGE OF GREAT POWER CONFLICT

Kondratieff also found more significant implications to his cycle than the movement
of commodity prices.

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For example, his research showed that his Long Cycle was also a technology wave.

Each wave began with the mass roll-out of a new technology that powered it forward,
changed business practices and created new demand for resources.

What’s that been in this cycle? Well, it has been the internet age – but more specifically
fast, mobile internet.

And high-speed computer processing power. This wave burst into life with high-speed
internet and then grew exponentially with smartphones, 4G and all the services built
on the back of it.

It has changed everything. None of the other technologies could have happened
without this, from social media to the mobile economy, to the block-chain. And now
it has brought us generative Artificial Intelligence (AI).

Who knows where this will lead humanity in the coming years?

But the consequence of innovation is that a lot of older industries get disrupted.
And a lot of people therefore get left behind, stuck in the old ways of doing things. It
creates much unhappiness and distress, and even internal strife.

We are seeing a lot of this now. But it has happened before. During the late 1960s
and 1970s, for example.

And even more than that, because there’s so much innovation and opportunity,
countries (and their corporate champions) increasingly compete with each other to
be leaders in these new technologies and to sell them to the world.

This competition eventually gives way to conflict.

It breaks out everywhere.

You’ll find when it comes to mainstream reporting on war zones, for instance, rarely
if ever will you be given the entire truth. In other words, the true reasons why these
wars happen in the first place.

Take the Israeli/Palestinian conflict today. Have you seen the media mention this to
you?

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Source – Offshore Technology

This is a key milestone to track the progress of a Kondratieff wave. Competition for
scarce resources. Do note that while Israel is in the Middle East, it’s one of very few
countries there that have virtually zero oil fields on land.

Not only does full exploitation of these fields require security co-ordination with
other nations, but almost assuredly will need the expertise of the biggest oil and gas
companies to help get the gas out of this field.

Most of these are, of course, US businesses.

Might the US have some leverage here over the Israelis when it comes time to
negotiate an end to hostilities here?

But I digress.

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Here's your key takeaway; none of this is new. It’s an old story told with new players.
And it explains why we are seeing so many conflicts break out all over the place. At
their heart is always a competition for territory, or natural resources.

Here is the full list of Kondratieff Waves since the late 18th century, as outlined in
Chapter 11 of Akhil Patel’s book The Secret Wealth Advantage.

Start Peak End Primary technologies, communication and transport

First 1789 1814 1849 Factory production and canals
Second 1849 1873 1896 Heavy machinery, railroads and telegraph
Third 1896 1920 1955 Heavy industry and machinery, automobiles and
telephones
Fourth 1955 1975 2001 Automated production, commercial air travel
Fifth 2001 2027 2050 Internet and mobile phone, near-Earth economy
Forecast Forecast

Source: The Secret Wealth Advantage, Chapter 11, page 172

Today, we find ourselves in the fifth Long Wave in the sequence, beginning in the
1790s, identified by Kondratieff. That means just a few more years to go and this wave
will be completed.

Because, sad to say, nations that find themselves most benefiting from the rise in
commodity prices end up not using the huge wealth generated wisely. In other words,
the economic rent – the surplus - reflected in things high gold, silver, iron ore, oil
prices.

This surplus is above and beyond the normal cost of mining, extraction, and production.

This surplus is not a “reward” for effort or taking risks; it’s a windfall gain that goes to
the owner of natural resources.

If we had a fair tax system, we would not tax effort (wages, business risk taking) but
would use this surplus to pay for all the infrastructure that society could ever need
or want to make themselves competitive in the global economy.

But instead, governments use that money to pay for extravagant promises to stay
in power and allow miners to privatize and collect the rent themselves. So, society
ends up with very little.

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WHAT HAPPENS NEXT?

So, what happens next?

If the Kondratieff Wave is to move forward as before, you can expect things to heat
up even more.

Don’t forget, at the foundation of each Long Cycle is the enormous innovation and
building that goes on.

Something that is also going on today as governments around the world are building
their economies for a new, technologically advanced, green energy-powered age.

There’s a huge building boom going on around the world.

This is the future that awaits the present K wave. And, in many ways, it also aligns
with our other powerful cycle: the 18.6-year real estate cycle.

These are the two fundamental drivers of the global economy, coming together at
once into the peak years.

You rarely get both happening together at once, at most once or twice per century.

For all the reasons set out above, it means disruption, innovation, competition, conflict,
war.

It means tremendous opportunities for investors in the right industries. Truly staggering
wealth creation.

But it also means that the world is about to get even more violent, and it will break
out in more episodes of trouble.

And, if history is to repeat, this could set up a direct confrontation between the United
States and China. It has happened before, such as into the 1920s peak when it was
the United Kingdom and Germany at war.

It will be a turbulent time.

The only way to be able to take advantage of these years, while staying safe, is to
understand the timing of these cycles and plan your future investments accordingly.

This is the best way to take fullest advantage of the incredible rise in new technology
and the commodities they require while also remaining immune to horrible news that
you are bombarded with every day.

And that’s why we hope you have taken on board the insights from this eBook.

I’d also like you to become our latest Property Cycle Investor (PCI) member.

It’s completely free and you don’t have to do a thing to sign up.

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Once a week I will send you a newsletter that drills down and explains both the timing
for the real estate cycle as it turns plus highlights news and announcements across
the globe as they relate to the upswing of the K-wave.

I’m confident it will become your go-to source for all the latest news and announcements
relating to the real estate cycle and Kondratieff wave.

Know that I will work hard to ensure you are the first to get this exclusive research.

I trust you will gain an awful lot as we travel to the inevitable peak of these important
cycles.

Best Wishes.

Darren J. Wilson

And your Property Sharemarket Economics team.

©2023 Property Sharemarket Economics 9

 WAR, RECESSION, INFLATION
Navigate through the Age of Turbulence

PROPERTY SHAREMARKET ECONOMICS TEAM

Akhil Patel Darren Wilson Phillip J Anderson

Director Editor in Chief Director & Founder

Akhil is one of the Darren is the former Phil is the world’s

world’s leading experts Australian Technical foremost authority in the
in economic, financial Analysts Association area of business, real
and property cycles. (ATAA) ACT Chapter estate and commodity
He has been working President, General cycles. Teamed up with
with Phillip J Anderson Manager of Property a dedicated group of
for over a decade to Sharemarket analysts and researchers
produce unique research Economics (PSE), Editor sharing the most
that combines an in- of the Boom Bust Bulletin, important cycle of all: the
depth understanding of Investor and trader 18.6 year land and credit
business, real estate, and according to the 18.6-year cycle.
stock market cycles. Real Estate Cycle.

Your Property Sharemarket Economics team is active on social media.

Join us there to keep up with all the latest 18.6-year real estate cycle
developments.

DECQM
© 2023 Property Sharemarket Economics. All Rights Reserved.

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