Anderson and Patel Unencumbered Melbourne 20th November, 2019

Name: Anderson and Patel Unencumbered Melbourne 20th November, 2019
Uploaded: 2019-12-09T20:40:36.000Z
Duration: 4 h 20 min 47 s
Description: Exclusive to Property Sharemarket Economics subscribers. Phil Anderson and Akhil Patel discuss the history of the 18.6 year cycle, where the US, UK and Australia is in the current cycle and also answer questions from the audience.

Introduction

The speaker introduces himself and his business, as well as Phil who is the main presenter. He also welcomes attendees from different locations.

The speaker introduces himself and his business called "Astrology for Game Traders".

Phil is introduced as the main presenter and a friend of the speaker for 14 years.

Attendees from different locations are welcomed.

Real Estate Cycle

Phil talks about real estate cycles and how they can be forecasted.

Phil shows a headline about a developer bankrolling a Labour Party campaign, which he says is an example of economic rent in play.

Phil mentions that there is an 18.6-year cycle in real estate that he has been able to forecast.

Understanding Economic Rent and Earnings

Phil explains the concepts of economic rent and earnings.

Phil asks attendees to try to understand two concepts - economic rent and earnings - which are not generally well explained.

A video from Jakarta is shown where people provide a service during traffic jams by pushing cars with dead batteries or other issues out of the way so traffic can continue flowing. This is an example of economic rent in action according to Phil.

Richer people in Jakarta have multiple cars with odd or even numbered registration plates to comply with government rules on driving restrictions based on plate numbers on certain days of the week, which is another example of economic rent.

U-Turn Areas and Economic Rent

This section discusses the u-turn areas in Jakarta, how people earn money by directing traffic, and the concept of economic rent.

U-Turn Areas and Traffic Directing

In Jakarta, there are u-turn areas where cars need to make a turn but there are no traffic lights.

Enterprising individuals stand in these areas and start directing traffic to ensure that things keep flowing.

Drivers who get around quickly will hand a few coins to the person directing traffic as a form of payment.

People who direct traffic in these areas can earn more per hour if they work in heavily trafficked areas.

Economic Rent

The margin of production is the area where people earn the least amount of money in a given area.

Workers themselves decide where it's economically effective to work based on how much they can earn per hour.

Anything above the minimum wage is considered economic rent, which can be taxed without affecting wages or how people want to work.

Developers often take surplus rent from outer suburbs during development, leading to corrupt councils.

Understanding Earnings

This section explains how earnings are valued and determined.

Valuing Businesses

To sell a business like a hairdressing business, you need to determine its value based on what you earned for the year.

As a general rule, businesses that are labor-intensive like hairdressing businesses are usually valued at two times earnings.

Understanding Stock Prices and Earnings

In this section, the speaker explains how stock prices are determined by earnings and how fund managers pay high prices for stocks that increase their earnings.

How Stock Prices are Determined

The market determines stock prices based on a company's earnings.

Fund managers will pay high prices for stocks that increase their earnings.

If a stock is increasing its earnings by 15-20% per year, fund managers may pay 10 times the earnings.

Economic Rent and Real Estate Cycle

Companies that manage to corner the rent usually grow faster than other companies.

Understanding economic rent and real estate cycles can help determine when to buy stocks with good earnings.

Passing on Research Knowledge

In this section, the speaker talks about passing on research knowledge and congratulates someone on their work.

Passing on Research Knowledge

The speaker has left his previous job to do more research and pass it on to others.

He did not want to pass his research as intellectual property to someone else.

Congratulating Someone

The speaker congratulates someone named Ashley on their victory earlier in the summer.

Exploring Economics and Market Cycles

In this section, the speaker talks about exploring economics and understanding market cycles.

Introduction to Economics

The speaker came across Bill while exploring economics and trying to understand how market cycles work.

Henry George was the first person to talk about economic rent and put it into the context of a market cycle.

Understanding Market Cycles

The speaker met Phil about 10 years ago and knew that he was the real deal.

The speaker had a lot of questions about economics in 2008/2009, which led him to explore market cycles.

The Journey to Understanding Economic Cycles

In this section, the speaker talks about how he became interested in understanding economic cycles and why it is important to do so.

Understanding Economic Cycles

The UK experienced a major boom in the 80s called the Lawson boom after Chancellor Nigel Lawson.

Gordon Brown spent eight years saying that he would manage the economy in a way that would prevent the return of Tory boom and bust. He believed he had tamed the cycle when the UK avoided a recession in 2001.

However, within six months of becoming Prime Minister in 2007, Brown had to deal with probably the most significant financial crisis since the Great Depression.

The speaker questions why people like Gordon Brown and Ben Bernanke talked about the Great Moderation and avoiding macroeconomic volatility when there were periodic booms and busts throughout history.

In September 2008, Brown admitted that this was indeed the worst financial crisis in global history including the Great Depression.

Why Didn't Anyone See It Coming?

Queen Elizabeth II asked why no one saw it coming if it was indeed the biggest financial crisis in history.

Powerful people were convened to answer this question but only came up with an obvious answer - risk management. No one was really in charge of managing risks on a larger scale.

This did not provide any insights for investors on how to avoid significant downturns during real estate cycles.

Live Die Repeat

The speaker felt strongly about trying to understand economic cycles after reading Henry George's work and watching the movie "Edge of Tomorrow".

Economic cycles are an ongoing saga of live, die, and repeat. People confidently predict that they have sorted it out but a couple of years later, they quietly see their businesses shut down and their investment portfolios in ruins.

Introduction

In this section, the speaker talks about his experience with the recession and how it led him to understand real estate cycles.

Understanding Real Estate Cycles

The speaker's family business sold pharmaceuticals to independent pharmacies.

During a recession, banks would call in loans from SMEs, causing financial difficulties for businesses like the speaker's family business.

The speaker realized that people were not seeing the repeat of history during recessions and made it his mission to understand how to know when things are going to happen and provide practical advice to investors.

The collaboration with Phil helped the speaker understand real estate cycles and use that knowledge to forecast the stock market.

The 18-Year Economic Cycle

This section discusses the 18-year economic cycle in the US and UK, which is characterized by peaks and recessions that are preceded by a period of land speculation.

The US Economic Cycle

The first process culminated in 1818, followed by a financial crisis in 1819.

There was a massive crescendo to peak in 1836, followed by a financial crisis in 1837.

Major banking crises occurred every 18 years throughout the first 120 years of US history, including those in 1857, 1873, and 1893.

The UK Economic Cycle

The UK experienced an identical process to the US throughout the nineteenth century.

Heavy speculation led to rioting during economic downturns such as those in 1812 and 1813.

A major financial crisis occurred in the UK after the collapse of Overend Gurney & Co. bank in1866.

Different Timing for Cycles

It is entirely possible for two different economies to have an eighteen-year cycle but timed differently.

Emerging economies like China and Nigeria may have different timing than familiar Western cycles that peaked in2008.

Interruptions to Cycles

World wars were the only things that interrupted but did not stop the cycle.

The Real Estate Cycle

In this section, the speaker discusses the real estate cycle and how it affects different countries. He also talks about how long-term forecasts can be made based on knowledge of the real estate cycle.

The Real Estate Cycle

The real estate cycle started in 1955 after major reconstruction when troops returned home.

There was a burst of activity into a peak in about 1973 and then a major collapse in UK property prices.

The US data starts just after that but there was another boom during the 80s in the UK known as the Lawson boom.

The UK and US are now perfectly synchronized into the peak and most recent peak in 2007-2008.

Fred Harrison wrote a book called "The Power and the Land" which resurrected some knowledge about the 18-year cycle first studied by Homer Hoyt in the 1930s.

Harrison predicted a major boom in UK and American property prices with a peak occurring in 1989/1990 which was exactly correct. He did it again for 1997 predicting chaos makers saying that by 2008 there would be a middle of major financial crisis.

Post Second World War data for other European countries such as Ireland, Italy, France, Netherlands, Sweden, Norway show that they have similar property market peaks around mid-'70s. This is also true for Canada, Australia, New Zealand, Japan.

Practical Applications

It's possible to analyze each phase within each 18-year period to make investments between times using Phil's work and other people's work.

The cycle can be broken down into four or five different phases, starting when things are looking quite depressed and ending with a downturn.

Real Estate Cycle Phases

In this section, the speaker discusses the different phases of a real estate cycle and how they impact the market.

Mid-Cycle Recession

The mid-cycle recession is a relatively minor slowdown in the property and stock markets that occurs after about seven years of expansion.

During this phase, people tend to be fearful of investing due to past crises.

Politicians often take credit for getting an economy out of a mid-cycle recession, leading to increased confidence in the market.

This phase typically lasts for about four years.

Second Half of the Cycle

The second half of the cycle is characterized by bursts of speculative mania and outright speculative behavior.

People start piling into the market during this phase, extrapolating trends indefinitely into the future.

This is known as the "winner's curse" phase because buyers are fairly close to the peak and may find themselves in negative equity situations quickly.

This phase typically lasts for about four years.

Real Estate Cycle Averages

In this section, the speaker discusses average lengths for each phase of a real estate cycle.

Average Lengths

On average, a real estate cycle consists of seven years of expansion, seven years of second-half expansion, four years of crash and recovery, for a total of 18 years.

However, within any given cycle these are just averages and things might last longer or shorter than expected.

Real Estate and Economic Cycles

The speaker discusses the real estate cycle and how it applies to the stock market. He explains that paying attention to this cycle is important for investors, as there is a significant downturn in property values at the end of each cycle.

Real Estate Cycle Applied to Stock Market

The speaker took data from the Dow Jones back to 1800s and cut it into 18-year segments, averaging them together.

The resulting diagram shows a slow start, followed by a burst of activity into a peak around seven years in. Then things either come down or go sideways for a number of years before having the second stronger half of the cycle into the peak around fourteen years off the start.

At the end of each real estate cycle, there is an average fall in property values of 35% in real terms. In some locations, you can even be owning an asset which has negative land value.

The impact on the stock market is around a 50% drop at the end of each cycle.

Economic Impact

Investors who are in the market during this time lose half their investment portfolio.

People who experience this psychologically almost sell out very close to the bottom because they hold on thinking things will be coming back but they don't.

Cutting back public services during a recession is mindless behavior and can lead to angry people rising up against governments.

Real estate cycles are intimately tied to politics and economics.

Understanding the Economic Cycle

In this section, the speaker discusses the economic cycle and how it affects investments.

The Economic Cycle

The economic cycle consists of peaks and troughs.

We are currently in the mid-cycle slowdown, which started around 2011-2012.

It can be difficult to pinpoint exactly when a cycle starts or ends.

Recessions may have already been happening for six months before they are confirmed by economic data.

Economic data across the world suggests that we are currently in a slowdown period.

Central banks will try to keep things flowing during this period by keeping credit moving into the economy.

Governments are starting to talk about investing in infrastructure, which will contribute to a significant boom in the second half of the cycle.

Investing During Different Parts of the Cycle

Long-term investments become effective during periods of low interest rates, making real estate investments great because they push up land prices.

Lending requirements for equity deposits and income may loosen significantly due to new banks obtaining banking licenses.

Real Estate Cycle and Indicators

In this section, the speaker discusses the real estate cycle and indicators that can be used to predict its phases.

Lending and Financial Services

Lending money for buying a house or Apple features within it is a great recipe for winning business.

Increasing competition in the smartphone market will lead to new business opportunities in financial services.

Google has opened its own banking service, while Apple has launched a credit card with Goldman Sachs.

Tall Buildings as an Indicator

The announcement of the world's tallest building indicates that the peak of the cycle is about to arrive.

At the very peak, there will be someone saying that high prices and low lending standards are rational and prices will never go down again.

Prices start going down after such statements, leading to an ensuing downturn where tall buildings open with no tenants.

The Shard in London as an Example

The Shard in London was initially built as an office building but had to repurpose as a hotel during a recession when they could not get offices to pay high rents.

The rooms at The Shard are larger than typical hotel rooms due to its initial purpose as an office building.

Other Indicators

A mid-20's person driving a Bentley or Lamborghini is a sign that things have gone over the top.

Charts are important for stock market forecasts based on real estate cycles.

Introduction

In this section, the speaker talks about change management and how it can be difficult to get people to see the value in talking to clients. He suggests taking a break before moving on to discussing charting packages.

The speaker discusses change management and how some people don't see the value in talking to clients.

He suggests taking a break before moving on to discussing charting packages.

Charting Packages

In this section, the speaker talks about his experience with using a stock market charting package called WD Gann and how it has helped him interpret cycles in the market. He also introduces Optima software, an Australian product that he recommends for market analysis.

The speaker discusses his experience with using WD Gann's stock market charting package and how it has helped him interpret cycles in the market.

He introduces Optima software, an Australian product that he recommends for market analysis.

Optima Software

In this section, Matthew, the creator of Optima software, speaks briefly about what inspired him to create the software and how it takes a scientific approach to building tools for traders.

Matthew speaks briefly about what inspired him to create Optima software.

He explains that they take a scientific approach when building tools for traders based on feedback from users.

Optima Software Overview

In this section, Matthew from Optima discusses how their software can help people make better decisions and avoid pitfalls in thinking. He also explains that their software is not easy to use but provides a toolbox for research.

Optima Software Features

Optima's software is quantitative and measures all possible variations to provide sound statistics.

The software caters to a wide range of clients with different needs, from portfolio managers running billions of dollars to individuals with $5,000 forex trading accounts.

The software is intense and takes time to learn, but it provides a toolbox for research.

Understanding the Market Cycle

In this section, the speaker talks about understanding the market cycle and how it can help position trades accordingly. He also mentions the importance of context in making investment decisions.

Unfolding the Market Cycle

The speaker gives an overview of 18.6-year cycles and how they unfold year by year.

A question is asked about the effect of President Trump on the market cycle. The speaker suggests that Trump's focus is on himself and that he may pressure the Fed to lower rates if there's any hint of a downturn next year.

The speaker notes that mid-cycle slowdown doesn't involve land value and that there may be some pressure brought to bear if there's any hint of a downturn next year.

The speaker suggests that we are currently in a mid-cycle setup where there may be some trace but no significant downturn yet.

The 14-Year Cycle

In this section, the speaker discusses how history tends to repeat itself and how it takes 14 years for a crisis to occur.

History Repeats Itself

History tends to repeat itself.

It takes 14 years for a crisis to occur.

Trump's Irrelevance

In this section, the speaker talks about how Trump is irrelevant in the grand scheme of things and how his actions have little impact on the markets.

Trump's Impact on Markets

Trump is practically irrelevant.

Tariffs and other actions have not affected the markets significantly.

US markets are underpriced and coiled for a break.

The Roadmap

In this section, the speaker introduces "the roadmap" as a tool that can help investors predict what will happen year by year within the context of an 18.6-year cycle.

The Roadmap Explained

The roadmap is a crystal ball that helps investors predict what will happen year by year.

The roadmap is based on an 18.6-year cycle and overlays ten-year bits of the Dow on top of each other.

The Dow usually makes lows in years one or two, has a bit of recovery in years three and four, accelerates in year five, has a sell-off in years seven and eight, peaks at nine, and goes down from there.

The roadmap has been incredibly accurate and has helped investors reduce stress.

Real Estate Cycle Forecasting

In this section, the speaker discusses how they use historical data to forecast real estate cycles and stock market trends. They also touch on the potential impact of political changes on the markets.

Historical Data Analysis

The speaker uses historical data to analyze real estate cycles and stock market trends.

They mention that when a year ends in nine, history suggests there is a US stock market peak approaching.

The speaker notes that it's currently the first half of the real estate cycle, which could lead to a significant correction but not necessarily a crash.

They discuss how different types of cycles can be locked together to create more accurate forecasts.

Political Changes and Market Impact

The speaker mentions that political changes, such as a change from Republican to Democrat in government, could induce panic in the markets.

They suggest being wary of potential US stock market peaks due to political changes.

Forecasting Methodology

The speaker explains their methodology for constructing forecasts based on 20-year and 90-year cycles.

They provide examples of past decades with similar conditions to current ones and how those decades performed in terms of bull markets and sell-offs.

Real Estate Cycle Forecast

In this section, the speaker discusses how they build a forecast for the real estate cycle by taking different combinations of decades segments and analyzing market events from previous years.

Building a Forecast

The speaker presents three different forecasts based on data from 10, 20, and 30 years ago.

The blue line represents the forecast based on the decade in the first half of the real estate cycle, which is most relevant to where we are currently.

The red line is a third force that is considered relevant due to similarities in previous decades.

The speaker predicts a low at the start of the year up until about the middle of the year with a series of tops during May, July, and August. They also predict a final push up through Christmas into the beginning of next year.

Actual Results

The actual results show that the market has been even more bullish than predicted at the start of the year.

However, there were still tops in May and July with some corrections along the way.

The speaker acknowledges that while they may not get it right every year due to unforeseen market events or cycles not working precisely every year, their track record has been pretty good as a general guide to how things will unfold year-on-year.

Q&A Session

In this section, questions are asked regarding stock market crashes and research done on British cycles over 400 years.

Stock Market Crashes

When asked about mid-cycle stock market falls, the speaker explains that the picture is much more mixed than at the end of a cycle, and it doesn't make sense to average it out due to very different patterns in previous cycles.

The speaker also mentions that during the 2000-2002 cycle, the markets came down 50 percent.

British Cycles

When asked about research done on British cycles over 400 years, the speaker mentions Fred Harrison as someone who has done research on this topic.

Market Cycles and Investment Strategies

In this section, the speakers discuss market cycles and investment strategies. They talk about the longest bull market ever, significant corrections, and how the market tends to do the opposite of what everyone is saying. They also discuss property funds, US CTF funds, and balancing investments during times of volatility.

Investment Strategies

The start of UK cycles was in the late 17th century when building societies were formed.

The speaker advises clients to hold their investments for the next two or three years during times of volatility.

The speaker feels comfortable with property but not so sure about US ETFs.

The speakers discuss whether to move a substantial amount of cash or just hold investments during times of volatility.

Riding Through Mid-Cycle Slowdown

Long-term investors can ride through mid-cycle slowdowns.

Clients may not like two to three years of negative returns on their investments.

It's difficult to pick the absolute top of markets; it's better to focus on making profits over time.

Time horizon and client relationship are important factors in investment strategies.

Australian Stock Market

A question is asked about how the Australian stock market will play out with respect to mid-cycle correction given that the last two mid-cycle corrections in Australia were devastating.

Stock Market and Real Estate Outlook

In this section, the speaker discusses their opinion on the Australian stock market and real estate outlook over the next 2-3 years. They also touch on factors that may impact these markets.

Bullish on Australia but not on its Stock Market

The speaker is bullish on Australia overall due to its conservative government and plenty of land.

However, they are not bullish on the Australian stock market due to several issues such as lack of manufacturing and potential ecological crisis.

The speaker believes that if resource companies are impacted by climate change concerns, it could negatively affect the stock market.

Potential for Great Stock Picking Opportunities

Despite concerns about the finance sector being too large in relation to the stock market, there is still potential for great stock picking opportunities.

The biotech sector in Australia is one area with great potential for growth.

Real Estate Market

While the discussion mainly focused on the stock market, real estate was briefly mentioned as a good proxy for tracking market trends.

Property Market Cycles and Resource Booms

The speaker discusses the property market cycles in Australia and the UK, highlighting how second and third-tier cities tend to outperform top-tier cities in the second half of the cycle. They also mention how resource booms can affect certain property markets like Perth.

Property Market Cycles

Second and third-tier cities tend to outperform top-tier cities in the second half of the cycle.

Property developers find cheap sites at the center of cities during depressed times, where demand is greatest, before moving on to other parts of the city or country.

A large agency produced research showing this pattern as a forecast for the next five years in the UK.

Resource Booms

Resource booms can affect certain property markets like Perth.

The Kondratiev or long wave cycle is expected to peak around the same time as real estate cycles.

US Dollar Collapse and Chinese Competition

The speakers discuss whether there could be a collapse of the US dollar as being the world reserve currency due to central banking policies. They also talk about China's role as a creditor nation and competitor to the US.

US Dollar Collapse

One speaker finds it inconceivable that Americans would ever permit a collapse of their currency but suggests that Donald Trump's disruptive policies could change things.

In 1970, America went off gold and demanded that commodities be paid for in USD. To help this system, they demanded that Treasuries be bought by other countries.

Chinese Competition

China is now officially a competitor to the US, and Trump has suggested that they can't own US companies or buy into them.

The Chinese are getting money as a creditor nation, but with new restrictions on buying US companies, there may not be many options left for them.

The gold price could prove interesting to watch in the next seven or eight years as there might not be many other places for the Chinese to put their money.

The US Dollar and China's Belt and Road Initiative

In this section, the speaker discusses the US dollar and China's Belt and Road Initiative.

The US Dollar as World's Major Oil Producer

The US is now the world's major oil producer and exporter.

Interesting times are coming forward, and we'll have to see how that plays out.

China thinks about doing its Belt and Road initiative, which is positive.

It has to do something with what it's generating, which will be some astounding stuff.

China's Belt and Road Initiative

China's Belt and Road initiative is very bullish overall.

Chinese are building stuff, which can profoundly lower the price of things.

Shipping things from central China into Duisburg in Germany is lowering the price of stuff.

Where that gang going to go has to go into Lambeth.

Real Estate Cycles in China

In this section, the speaker talks about real estate cycles in China.

Real Estate Cycles in Major Cities Around the World

Real estate markets in major cities around the world are increasingly working together so they're synchronizing.

That includes major Chinese cities.

If that's the case, then he would expect China to follow the same real estate cycle as the U.S.

Hypothesis on Real Estate Cycle in China

Short answer: He doesn't know if there is a real estate cycle in China or not.

Longer answer: One reason for uncertainty is that China has only recently joined western-style capitalism with buying/selling/speculating/real estate.

Another reason for uncertainty is that it hasn't yet seen a major real estate-induced crash.

Research by the IMF suggests that real estate markets in major cities around the world are increasingly working together so they're synchronizing, and that includes major Chinese cities.

Real Estate Leases in China

In China, land is owned by the government, and speculation is all about housing on the land, not the land itself because the government collects the rate because it owns land.

During that period of lease, if rent is not reflecting current market conditions, then you're allowing that rent to build up as part of the lease.

Technological Change and Cryptocurrencies

In this section, the speaker talks about technological change and cryptocurrencies.

Technological Change Throughout History

Phil's book includes running through some of the technological changes that have happened in the world.

Starting way back with banking coming through right through to canals railroads computers and so forth.

Despite all these changes, we still have the same cycle repeating.

Potential of Cryptocurrencies

The speaker thinks it's amazing how an agrarian economy 3,000 miles away from Europe in 1802 became an industrial superpower and military superpower of the world.

He doesn't know if cryptocurrencies will be a disruptor or not.

If there is a cycle end at some point, it will take something very disruptive to do so.

Real Estate and Blockchain

In this section, the speaker discusses how blockchain technology can revolutionize the real estate industry.

Blockchain Technology in Real Estate

The blockchain will enable even more speculation and contribute to the real estate cycle.

Fractional ownership of housing is possible with blockchain technology.

Buying and selling houses could be a half-hour process with all information secured on the blockchain.

Other technologies like additive manufacturing could also contribute to the real estate cycle.

Gold Standard vs Fiat System

In this section, the speaker talks about whether we will go back to a gold standard or not.

Gold Standard vs Fiat System

Going back to a gold standard would be a silly thing to do as it was worse during economic downturns in the 19th century.

When people are afraid of the future, they put money into gold which is bullish for gold prices.

A commodities boom and fear about the future are both bullish for gold over a longer-term period.

It's unlikely that we would anchor our banking system to yellow metal but there might be some notional link to IMF Special Drawing rights valued against a basket of currencies.

The History of Economic Cycles

In this section, the speaker discusses the history of economic cycles and how they are influenced by land prices, rent, and interest rates.

The Simple Pattern of Economic Cycles

Economic cycles have a simple pattern that has remained consistent for centuries.

Land prices and rent tend to oscillate between 18 and 23 times the amount of rent paid for a piece of real estate every 18 years or so.

There have been exceptions to this pattern in the past, but it generally holds true.

The speaker predicts that there will be a minor panic on the stock market in the coming year, which will scare governments into taking action to prevent a downturn.

Interest Rates and Economic Rent

Governments can take action to prevent an economic downturn by lowering interest rates, spending more money, and building infrastructure.

Lower interest rates lead to higher asset prices, particularly in real estate.

There may be an inflection point where interest rates rise again, causing a debt issue that leads to a downturn.

This process is not new; it has been happening for centuries.

Predictions for the Future

The speaker predicts that there will be some sort of turn in events around 2026/2027 that could cause an economic downturn.

Earnings, interest rates, and economic rent are all factors that contribute to economic cycles.

Banks may remember the serious issues they faced during the 2008/2009 downturn and take action to prevent another one.

The speaker warns that things may not happen the same way they have in the past, and it may not be obvious when a downturn is coming.

Threat of Government Debt Default

In this section, the speaker discusses the potential threat of a major government not being able to pay its debts when interest rates rise. He explains that inflation could spike in 2026 or thereabouts, which would panic bankers and be devastating for heavily borrowed governments.

Potential Threat of Inflation Spike

Inflation has been non-existent for a long time.

However, it's possible that inflation could spike in 2026 or thereabouts.

This could cause panic among bankers and be devastating for heavily borrowed governments.

Market Breakdown

The market will break at the seams at the weakest point of the structure.

It's important to look for the weakest point, which may not be obvious.

There will always be an insider or two who know what that is.

Conclusion

The speaker concludes by thanking everyone for attending and giving himself and his colleague a round of applause. He encourages attendees to read his book for more information on these topics.

Thank You and Goodbye

The speaker thanks everyone for coming along.

Attendees are encouraged to read his book for more information.