This Time is Like No Other

I know I am in the minority when I say that the world finances are on the brink of a major sea change.

Of course the world sees only new high’s on the stock exchange, record highs in the real estate market, commodity prices once again surging.

Me on the other hand as a student of the collective unconscious and the market complex specifically, see something I have never seen in my life time and I believe the unpredictable nature of this complex fighting its way to the surface is likely to unleash an equilibrium balancing shift that will be shocking to say the least.

Symbolism is currently at its richest. We have this archetypal figure in Trump who is trying to portray himself as a saviour of biblical proportions. But for all his bluster in my opinion he is more symbolic of a shadow projection of a major segment of society who is tired of the status quo, who is tired of political correctness. For those who understand the shadow in all its unbridled “darkness” will see how badly this side of our psyche needs to be expressed. It is quite informative how so many of the people who vote and support Trump are scared, embarrassed or shy to say so. The reason is because the complex masked behind these feelings that have not been integrated into our Psyche are gaining so much energy (libido) that it is clear they can no longer be suppressed.

At the open of the market Buy 25 VXX and 75 WDTI for the Sefirot Freestyle fund.

Housing Regret

Property is the national religion in Australia. Remember this is a country that has gone more than 20yrs without a recession. Remember Australians call this place the “Lucky Country”. Remember the Austrian business cycle?¬†Well the central banks the world over would have us believe that the business cycle is no longer the force it used to be.

Today I am not going to rant on about the impotence of the central banks ability to create the stability they believe is vital to the economy. My thesis as an Austrian and as a Jungian is that the business cycle cannot be eliminated because it is natures way of dealing with excesses and inefficiencies, and slipping my Jungian hat on, the interfering with the natural order causes a displacement of the equilibrium of the psychic energy in the actors making up the economy. This displacement is what I call the “market complex”.

Zoning into my subject line. From my observation deck there is an almost hysterical narrative in the daily media relating to the booming residential property market. It is on everybody’s lips and I mean everyones. Property is flying and there is an ABSOLUTE belief that property can only go up which is creating this self-fulfilling feedback loop where people are too scared to miss out and therefore will do anything to purchase a property.

The thing is the economy is really not doing well, yes there are pockets of prosperity but with the drop in many of the core commodities making up our resource economy this has put a significant break on the economy (despite the weakening currency). Retail is doing it tough and wage growth is simply not keeping up with the cost of living. Unaffordability according to my index not the ones concocted by government mandated statisticians is growing so many of the factors required to support this dramatic rise in residential are simply not present. I see one factor doing all the heavy lifting and that is the artificially low interest rates the world over. The minute you manipulate the driving forces influencing the market you introduce the prospects of a Complex. As Jung describes the complex as a force that can erupt at any time with an intensity that is directly related to the psychic energy it constellates.

We arrived in Australia as a family in December 2007, and our extended family who had converted to the Australian property religion told us “you have to buy immediately”. I resisted and in April 2009 when the Australian property market was experiencing its first modest pullback in 30+ years I bought a great property in a good deal. The market stabilised and started climbing again and it was all happy days. My wife and I saw great potential in our large by Sydney North Bondi standards 5 bedroom house to apply for a rezoning and develop 2 smaller modern semi-detached homes on our property. It took us almost 2yrs from start to finish to get the zoning and archetictural designs to our desired standards, and then the market was soft. In all the time we had lived here it was the most negative people had been on property and the market was incredibly soft. The agents we were speaking to thought we could just get our money back despite an approved “DA” on the title deeds.

Certain things came about regarding the development specifically and my business life in general, then we were offered a great price in the current market by a developer and my wife and I decided this was a message and we should take the deal which included a nice profit on the 2009 purchase despite the costs incurred so we sold and became renters. There is no doubt that our decision was the responsible one at the time; however, I would be lying if I didn’t say that I don’t feel a certain amount of regret with the benefit of hindsight when considering how much money we left on the proverbial table. In fact the reason why I know I have developed a “complex” about this is because I can identify how my body and mind react when the subject of residential property comes up for discussion.

U.S. Housing Price Index Since 1900

In conclusion, I am a student of economic history and while I may be wrong on my timing, what is a decade here or there, I believe I will be right in the fullness of time. As you can see in the chart above residential property markets enjoyed uninterrupted positive growth of more than 100 yrs in the USA; cycles like this have a way of imbedding neural pathways into ones brain and psyche that one cannot even contemplate something to the contrary, this in my opinion is what has happened to the Australian psyche.

I am not predicting a complete bust, as there are many positive demographic drivers that will help support the property market at an unknown equilibrium clearing rate. However I will continue to stick my neck out and say that the current levels are unsustainable.

Oil & Dr Copper

The one position in my current portfolio that is losing money is the crude oil position. Is this a concern? No not really my view is simple, oil is not going to zero at least not for the foreseeable future. There is natural demand for oil it isn’t a product like an iPhone or Twitter. Oil carries a lot of geopolitical inputs into its market price and therefore is prone to over reactions and excessive volatility.

Now I love trading market extremes, this has been my catchphrase for more than a decade. Knowing that oil has a bottom gives me confidence to take on this trade. I haven’t done an exhaustive analysis of how far from its mean and a host of other technical indicators to do this trade. For me it is simply heavily oversold and for me following all the news in the media this is a classic example of what my book calls a “market complex”. Can it get even more oversold, hell yes but that will present even a better buy opportunity. For now I am probably going to keep my powder dry. I have a healthy lead on my benchmark and don’t see any reason to be aggressive.

oil

I thought I would also just highlight the price weakness in copper, as many call it Dr Copper for its qualities in forecasting economic conditions. Copper in the longer term chart show perennial weakness since 2012 and today it is in freefall.

Dr Copper

copper 15 min