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Ascendant Strategy writes the cover story for MoneyWeek

Posted by on Jun 8, 2014 in 18 year real estate cycle, Articles, Forecasts |

Ascendant Strategy was invited to write the cover story for this week’s edition of MoneyWeek (out on 6th June 2014).  In this article we make some bold predictions for how the the cycle is going to unfold into 2026/27.  This based on our unique research on economic cycles.  In the article we: provide a forecast of how the main 18-20 year economic cycle will unfold in Western economies into 2026/27 date the start of the nexr recession (the mid-cycle recession) and the one after that (the final major recession/financial crisis) explain why we are confident the cycle will repeat consider briefly the role of land and real estate speculation in driving the economic cycle forward set out key dates to watch for stock markets, commodities, bonds and real estate. Most important of all, we emphasise again our analysis this cycle will involve the biggest boom of all time. In the article we describe two of the tools that we have developed to assist investors with understanding where we are in the cycle and what is likely to happen next.  First of all is the 18 year real estate clock:   (copyright Economic Indicator Services Ltd. 2005) Since the cycle is ultimately driven by speculation in real estate (land) understanding what is happening the in property market is critical to our economic framework. The second tool is the Economic Cycle Lead Indicator, set out in the diagram below, which provides advance warning of the peak of the cycle.  The indicator exceeds and remains above a value of 1 when we reach the mature stages of the boom, which is the time to exercise caution (unlike everyone else); the indicator falls prior to the associated recession and stock market high.   Its current value of 0.9, just above the lowest value of 0.85, is further confirmation that there is plenty of upside to go before this cycle is over. (copyright Ascendant Strategy and Investments Ltd. 2014)   For further information on how we can help you make better investment decisions, please get in touch. A copy of the full article can be obtained...

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How to play the economic cycle

Posted by on Jun 5, 2014 in 18 year real estate cycle, About Ascendant Strategy, Topical news |

This post shows how you, as an investor, can profit from understanding the 18-20 year economic cycle.  This insight on cycles is something that only Ascendant Strategy can teach you. At cyclical peaks… The news about emerging markets in recent months points to the fact that many of them are at or are approaching their respective cyclical peaks, in the way that Western economies were between 2006-2008.  As the stylised diagram below shows, once an economy reaches its 18 year cyclical peak, it will then experience up to four years of economic difficulties.  This happens cycle after cycle, without fail. The question is: what should investors do at such times? The final years of the up-swing of a cycle involves a (credit-fuelled) spending binge during which asset prices, which have risen through the cycle, accelerate sharply and consumption increases conspicuously.  This was the case in western economies in the middle of the last decade and is now true of many emerging economies.  Such trends have been aided by ultra-low interest rates in the recovering West, global capital hunting for yield, lavish government spending on public works, high optimism after a decade (or more) of strong growth and so on. Into cyclical peaks, the business case for investments looks strong, as they are based on good economic fundamentals, continued growth (projecting the recent past into the future), high demand, availability of credit and so on.  Such conditions bring a lot of investors to the party and so there will be lots of competition to acquire assets. When the going is good, exercise caution. Investments must be good value, based on robust fundamentals, current earnings (not capital gains, i.e. future earnings growth) and not dependent on rolling over loans.  We call the final two years before the cyclical peak the “Winner’s Curse”.    You may make some investments that realise gains for a couple of years but when the cycle turns down you may soon find you are holding assets worth less than what you paid for them. How the savvy investor plays the cycle We advise not following the herd.  Be patient and don’t be fearful of missing out.  Examine your portfolio and make sure its value is protected.  The last couple of years into cyclical peaks – when things are overheating – is a good time to dispose of the weaker elements of your portfolio.  It also helps to be in safe and liquid assets. As the cycle turns down, there will be plenty of investors that are over-leveraged and in need of cash.  This is the time when good assets are available at good value.  Furthermore, in a downturn there will be fewer investors, so less competition to bid...

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