Following on from our Ground-Breaking “Incoming Recession” Blog which we originally drafted the first week of October 2019 but after much deliberation decided not to publish until Feb 26th 2020.
In this blog article we predicted this current financial crisis which didn’t start showing symptoms and sending shockwaves through global financial markets until late February all brought to a head by the fallout of the Covid 19 Corona Virus, however, the whole situation has been setting the stage and building up to tipping point for quite some time now (many many months before the Virus came on the scene in China).
Over the last few days since we published the “Incoming recession” blog on February 26th global stock markets have lost in excess of $6 Trillion in value, with the Dow Jones down more than 2,000 points in one day, its largest one day fall in the history of the market.
For many months we have been following and tracking what’s been happening offshore, particularly the US Financial system. We’ve been watching all the asset bubbles inflating to extremely unsustainable levels.
For the most part of 2019 we’ve been making clients aware of this impending situation and advising to proceed with caution and be very selective with the types of property opportunities they purchase. We’ve generally gone against the grain of most other Property businesses in the NZ market, whom many to this day have been continuing to promote various property investment strategies/opportunities that in the current environment of a property market at its peak with a correction long overdue and an economic downturn imminent would be extremely risky at this late stage in the cycle, basically setting people up to fail. Strategies such as buying new property off the plan, where by the time the property is built and ready for settlement the property will very likely be worth less than what you are buying it for, the opposite of what you were promised.
We will be giving crucial updates on what is actually happening, how to best navigate your way through it and more importantly how we will look to capitalise on it.
Before reading any further, if you haven’t read our first Blog READ IT HERE: https://www.propertyinvestorcentre.co.nz/incoming-recession-will-present-the-biggest-opportunity-we-have-had-for-over-a-decade/
We copped a lot of flak from people who had been caught up in the hype of a booming real estate bubble and as usually happens every time they think the gains they have had in the boom will just keep on happening. Those same people are suddenly silent….
Well we are here to warn you change is ahead and its happening right now, it may feel quite scary to some but for the property investors who are organised and prepared this is an exciting time where great opportunities will abound.
What is happening on World Markets?
Currently the “Everything Bubble” is in its first stage of popping. We expect sharp monetary and fiscal reactions to a slowing economy and eventually an overdose which brings inflation and finally the bursting of the debt bubble in a second stage.
The “Everything Bubble” we are talking about is a combination of world share markets, real estate markets, US repo market, Corporate debt and Massive Derivatives to name a few which all make up a world full of highly leveraged debt totalling over 250 Trillion!
This is what 250 Trillion looks like.
This bubble has been growing since the GFC in 2008 which was twelve years ago so you can imagine how enormous this bubble has become.
World Governments are scrambling to try and stem the fallout and you will notice this monetary easing has already started with abrupt 50 basis point interest rate reductions by the US Fed, Bank of Canada, Reserve bank of Australia and India to name a few. Reserve bank of NZ will follow suit soon. Cutting interest rates is a desperate attempt to slow the carnage but in our opinion won’t make any difference. It’s similar to putting a band-aid on a broken leg!
There are a lot of things happening right now, The Brent Crude Oil market has tanked, World Share markets are in freefall and US Yield curves are plunging to all-time lows, remember what we talk about in the Blog about ‘Inverted Yield curves’, well it’s getting worse!.
If you’re wondering how all of this will affect real estate and property investment then our next update we will go through how all of this now sets the stage for a completely different ballgame in the property market to what most have been used to over recent years and how best to navigate through the coming train wreck and come out the other side a winner!
Keep your eye out for our next update!
Shane Allen & Clint Taylor
Property Investor Centre