Real Estate & the Financial Crisis

Financial Crisis

QUESTION: Hello Armstrong, Thank for you the great post “The Future – Putting it All Together”. It helps a lot to get a good overview, considering everything is connected. One question, you say “Real estate is nice for some part of a cash holding, but it is taxed to hold it and it is not liquid.” regarding where to put your money when it all comes crashing down with the Sovereign debt crisis. Is this just for risk management, considering we are currently in a long wave down from 2015.75 to 2032 in real estate? Referring to your forecast on the real estate market. Also is this model for the US only, or global?

Thank you!

ANSWER: There are two types of investment – the hedge and the speculation. The overall real estate is in a decline. A friend of mine in the business said more than 33% of the houses in New Jersey would all come on the market if prices ever got back to 2007 levels. The areas that has risen sharply when looked at closely are those attracting foreign capital. This is the hedge trying to get off the grid. They are often buying places and not even renting them out as in Scandinavia. We even see some of that in Dubai. This is money simply parking.

The real estate cycle peaked and it is headed down in terms of appreciation. This is the general market and not the high-end, although that has begun to turn down in many places often due to taxation of rising regulation as in Miami or Sydney Australia.

However, because of the Sovereign Debt Crisis, we will begin to see this surface with the Obama-Boehner Debt Crisis Crisis that pushed off into 2017 when they would not be accountable. As this starts to become more and more aware to the general public, that is when the confidence in currencies begins to drop. That appears to be on schedule for 2018.

All tangible assets will rise in value according to the decline in a currency. This will be “currency inflation” that is expressed by the old joke a man is frozen until a cure is found and he can be revived. He put his $1 million into stocks and calls his stock brokerage house upon his revival. They say his portfolio is worth $50 million. He jumps for joy until the operator breaks in and says he owes $1 million for the next 3 minutes.

When we swap to a new currency, then tangible assets will make that transition in value. It is not that you will make a profit, the name of the game is that you just break-even.

There are still some areas where there will be profit opportunities. Stay tuned for those.