History doesn’t exactly repeat itself, but it does run in almost identical waves. Just understand that, by design, all asset markets cycle and you'll be able to predict the future, gain profits and grow your money!💰
Waves & Cycles
One of the most robust theories of such cycles was articulated by economic historian Carlota Perez, in her influential book Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages (2002). It suggests that humanity is about to enter a new “golden age” of broad economic growth.
The Soviet economist Nikolai Kondratiev (also written Kondratieff) was the first to bring these observations to international attention in his book: The Major Economic Cycles (1925).
It is in our human nature to look forward not backward. But knowing the past can be very insightful in anticipating the future, especially so in Wall Street, Business and Real Estate. Basically all “Asset Classes” have a predictable pattern. Many investors have a tendency to extrapolate current events into the future and expect things to continue to perform the same way without timing the true nature of the cycles and trends at hand.
Cycles and changes in demographic trends have great impact on our economy and the markets- locally, nationally and globally. Predictable consumer spending patterns combined with demographic trends, allow us to forecast the economy years and even decades in advance. The cycle is a roadmap, but you will still have to do the driving. So what can we learn from the past that can help us navigate the roadmap of asset classes and grow our investments into a profitable journey?
Why Is This Essential?
It is essential, a matter of rich or broke, that we understand the market!
Why?! Because if you want to succeed you will have to go against what is perceived as the psychological emotional effects of “unknowing” traders. All markets go through different cycles that bring up different emotions to those engaging. Because most don’t have a strategic plan to navigate on, they fall victim to their emotions of fear and greed. Meaning they don’t know when to get in (buy low) and get out (sell high). Seasoned investors know to navigate the 'mass hysteria', keep their cool and strike at the right time with the right strategy; they sell when everybody is buying at the peak and they buy when everybody is panicking at the bottom. That is how big profits 💰 are made.
What Is A Business Cycle?
The business cycle, also known as the economic cycle or trade cycle, is the downward and upward movement of gross domestic product (GDP) around its long-term growth trend. The length of a business cycle is the period of time containing a single expansion/boom (up) and contraction/recessions (down) in sequence.
The problem with global economic, political & technological cycles is their duration extending over multiple decades some even centuries. Most of us don’t live to see or experience the magnitude of multiple instances, still it is essential to understand their pattern and their implications for the economy and thus for your profits. The more we know, the more we learn the better equipped we are to adapt and anticipate for the future.
We want to firmly state that we don’t intend to provide an exhaustive list of all possible typology of cycles. What we aim to do here is bring to your attention that there are “invisible” (to the inexperienced eye) long term cycles that determine the developments of your asset investments. We'll only tip a few of the most prominent cycles and trends, but we strongly urge you to take the time and explore in depth all the different cycles that might be of influence for your specific investment asset classes. Never stop learning 🧐.
As we go through life, we change our spending in very predictable ways. These predictable spending patterns of a demographic as a whole impact the economy, business, and product trends. Everything from the demand for real estate to inflation rates, cycles of innovation, economic growth, immigration rates — locally, nationally and globally. By analyzing the individual spending pattern with the size of the current demographic volume power we now have information to successfully predict how spending will develop for decades to come.
The Kondratieff Wave (K-wave)
The ultimate 60-80 years economic model cycle (also called supercycles, great surges, long waves, K-waves or the long economic cycle). Economists have identified five Kondratieff Waves since the 18th century. The first resulted from the invention of the steam engine and ran from 1780 to 1830. The second cycle arose because of the steel industry and the spread of railroads from 1830 to 1880. The third cycle resulted from electrification and innovation in the chemical industry and ran from 1880 to 1930. The fourth cycle was fueled by cars and petrochemicals and lasted from 1930 to 1970. The fifth cycle was based on information technology and began in 1970 and runs through the present. Some economists believe we are at the start of a sixth wave and that this one will be driven by biotechnology and healthcare.
Other smaller waves that occur within the framework of the K-wave:
What we can see is that there are always smaller waves at work within a bigger wave. Think of it like: in 1 K-wave (technological wave) = there are approximate 3 Kuznets infrastructural waves at work. In 1 Kuznet infrastructural wave there are 2 Juglars fixed investment waves at work and so forth. In every wave there are new opportunities for your investments to catch up with the waves and profit! 🤑
Socio-Political Revolutionary Cycles
There are also larger political and social revolutionary cycles that occur within a 250 years framework. These revolutionary cycles also impact the business and innovation cycles.
The turn of the 2020s will mark an extremely rare convergence of low points for multiple political, economic, and demographic cycles into an “Economic Winter.” Dent Research expects the result to be a major financial crash and global upheaval bigger than the Great Recession of the 2000s—and maybe even the Great Depression of the 1930s. An “Economic Winter” has historically been the greatest time in history for wealth creation and accumulation for those in the knowing 🧐💰💰.
Joseph Kennedy Sr. made a large fortune as a stock market & commodity investor and later rolled over his profits by investing in real estate and a wide range of business industries across the United States during the great depression. He survived the crash "because he had a passion for facts, a complete lack of sentiment and a great sense of timing" meaning - He knew when to get in, get out & apply the strategies necessary to ride the waves into great wealth. In 1929, Kennedy's fortune was estimated to be $4 million ($58.4 million today). By 1935, his wealth had increased to $180 million ($3.29 billion today).
The Frey and Osborne study from the Oxford Martin School estimates 47 percent of today’s white-collar jobs in the U.S. and U.K. could be automated by 2035. A recent World Bank study suggests that 69 percent of all Indian jobs are vulnerable to automation.
Historian Carlota Perez depicts the next "golden age" to probably involve:
smaller carbon footprints, a collaborative economy, preventive healthcare, creativity, experiences, exercise, lean use of materials and industrial ecology. It would mean a general shift from products to services, from tangibles to intangibles, from mass production to customization. Whereas mass production emphasized economies of scale (cheaper identical goods) the new digital technologies thrive on diversity and adaptability. The higher the price premium, the better-paid jobs. And a shift away from owning to renting or sharing products.
What Does This Mean For Real Estate Profits?
The Real Estate market is your best friend but she speaks her own unique language! Learn to speak Real Estate and you will understand not only how to clearly positioning the market, but also how to work the right strategy to capitalize on any market stage instead of going against the grain.
To best capitalize on the phase of the real estate cycle you’re in, you must understand and implement different real estate strategies. Most strategies will partially work at any time during the cycle, but some are more effective during specific phases. To optimize your business you need to use the strategy that’s most effective and profitable on the current market.
We have done a deep dive in different approaches of the real estate market cycle so we urge you to grasp the basics by reading:
A greater understanding of all the “invisible” forces at hand is how the experienced investors profit from the oblivious. This is how big money has been made over and over again, throughout history 🤗💰.
Nevertheless, you cannot simply keep implementing the same strategies that have worked in the past. It is also crucial that you navigate the greater socio-political, demographic and economic shifts that are impending and understand where the new waves are heading. Knowing what’s coming and being prepared to ride the waves to make and grow your money, is the ultimate advantageous edge of the wealthy and super-rich.