Economy & Property Market Update & Predictions For 2019

January Is a great opportunity to reflect on the year ahead. It’s a perfect opportunity to redefine your objectives. We have an interesting financial backdrop at the minute which is changing. Amber warning lights are going off in the stock market and in today’s episode, Mark talks through the possible indicators that you should be looking out for, which might be able to guide your future actions. If you want to protect yourself and prosper in 2019 as well as the next five years, Marks investment advice is well worth your time. KEY TAKEAWAYS Asian, Uk and US stock markets have all dropped in the last few weeks. Some of the cleverest economists in the world don’t know as much as the inside of the stock market. The real economy is the growth, asset values, and jobs. The stock market looks ahead to a year or two years time. It’s not perfect, the timing can be off but it’s the best indicator we have. It’s more likely we are closer to the next recession. Since 2010 and we came out of the last recession, corporate non-financial debt grew to nearly 10 trillion, from 6 trillion. In the same period corporate earnings only grew by 60% of that number, 40% has been financed by debt, government debt. Trump is spending a lot on infrastructures, financed by debt not tax income. The stock market is flashing amber if it were a traffic light. There are issues in the system. The next five years isn’t going to as good as the last five years. The stock market is showing certain indicators of where the economy is going. Cyclical Stocks compared To Non Cyclical stocks. Cyclical stocks are ones that do well in the good times, like house builders who always do best when there are lots of jobs, and the economy is doing well. Those cyclical stocks are down across the board. The stock market is marking stocks down, as it expects theses will be impacted most by a downturn. Some companies do better in a recession. Letting agencies do better in a recession, as more people want to rent more than buying. They are a counter-cyclical stock, like pharmaceuticals whose stock is up over the last couple of months. The counter-cyclical do better in a downturn. The expectation is baked into the price of this stock. The Yield Curve. The US issues bonds and loans, which are called a Treasury. The UK government are called Guilds. You are then giving your money to the government for a set interest rate, at certain times in the year. The price of those bonds is set by the market but there is a fixed rate back to the investor. At the minute you are getting less interest for the longer you lock your money in. The treasury curve is inverted. When institutions are not as safe, then they will go and put that into more safe places like US and UK government bonds. The US and  UK governments have never defaulted on their debt. This has meant the curve has been inverted. What is likely to happen? The stock market will have struggling returns over the next five years. This is all against a backdrop of high employment rate, wage growth and better economies. Generally, the real economies are growing well. These are lagging indicators, they lag what happens in terms of the market. What else is not going to do quite as well? Banks, anyone dealing in credit, and housebuilders. We are in the latter part of the cycle. I won’t be selling my properties in a recession and then buying them after. The cost of buying and selling such as the valuation, bank fees, solicitor fees is around 10-15%. You need to think about the staff time when you are buying and selling which is at least 5% of the price of the property. Then all the taxes on selling the property. This could cost you in the total of 20-30%.   It’s the developers that have to sell their stock that always do the worst. Market moves shouldn’t affect you as much if you focus on rental income and on long term investments. If you can do smaller units, smaller houses which are more likely to be let and have higher yields you should be fine. If you focus outside of the capital it can be a safer strategy. It’s important to develop high-income generating properties. Maybe up to around 15%. You get a good cash-flow every month, and the banks like them as they look less risky. Focus on those bread and butter deals. It’s a good time to negotiate harder and use the negativity around to your advantage.   BEST MOMENTS ‘Amber warning lights are going off.’ ‘We probably are in the second half of the cycle.’ ‘40% has been financed by debt.’ ‘A bubble has effectively been created.’ ‘Is the bubble going to be a bang or release slowly.’ ‘Banks and construction always do well in the good times.’ ‘The counter-cyclical do better in a downturn.’ ‘The marker doesn’t expect things to better in the next few years.’ ‘We are in the 7th innings of a 9th innings cricket game.’ ‘You’ll have to time it perfectly and a 20-30% increase the other side of the recession to stand still.’ ‘Buying and holding properties is still a good idea.’ ‘It’s the developers that have to sell their stock always do the worst.’ ‘It’s important not to over-leverage.’ ‘It’s important to develop high-income generating properties.’   ABOUT THE HOST Bio - Mark Homer Mark Homer is an entrepreneur investor.  He has worked with investment since he was 15 years old using the laws of wealth! He is a spreadsheet analyst with an impressive following from major publications including BBC Radio, The Wall Street Journal, The Independent, as well as co-authoring the UK’s best selling property books.  Mark has always looked for the best investment vehicle, and at the end of 2007 with Rob Moore the co-founder of Progressive Property his joint portfolio produced more profit than any of the other investments he’d tried in the last ten years, combined. CONTACT METHOD Email: [email protected] LinkedIn: https://www.linkedin.com/in/markhomer1 Facebook: https://www.facebook.com/markprogressive Twitter: https://twitter.com/markprogressive‘Brought to you by Progressive Media’: https://progressivemedia.uk/