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Hi all,
I study how big cycles in real estate, commodities and markets move money around and I use that knowledge to pick sectors and stocks that usually do well at certain times.
I will show you, simply and clearly, how the 18.6 year real estate cycle and a few investing rules can help you find good stocks, protect your money, and aim for better returns.
WHY THE CYCLE MATTERS
The 18.6 year real estate cycle is a long pattern where land, credit, and prices go through big up and down swings over many years. This cycle was discovered by Fred Harrison, popularised by Phil Anderson whom I learned from and this cycle has predicted all the crashes in the last 200 years, including 1929, 1979, 1999, 2008 and 2020.
Knowing where we are in that cycle helps us guess which types of companies and industries are likely to do well next.
When the cycle moves into the second half, things like materials, resources, banks, and real estate often do better.
When the cycle moves into the bust part, safety and cash matter more.
My Example
I personally have made an average of 35% gain year over year in my last 7 years of investing, accumulating $400,000 during that period in my early 20s.
Of course, I know there are so many of those that made so much more, but I was still a noob when I started so I made many mistakes. Not saying that I’m still not learning, but I’ve gone a long way since then.
THE SIMPLE RULES I USE
I use a few clear rules when I invest. They are easy to follow and help protect money.
RULE ONE
Find undervalued stocks. Most investors chase what’s popular — but value is found where attention isn’t. An undervalued stock is simply a strong business trading below what it’s truly worth.
Start by asking three simple questions:
Is the business durable? Look for consistent profits, low debt, and a moat — something that keeps competitors out.
Are fundamentals cheap? A P/E below the company’s historical average or sector peers can signal value, especially if free-cash-flow growth is steady.
Is sentiment temporary? Short-term fear, not long-term decline, usually creates the best opportunities.
When price falls but the core business hasn’t changed, that’s when discipline beats emotion. Buffett said it best — “Be fearful when others are greedy, and greedy when others are fearful.”
RULE TWO
Identify strong sectors using the cycle and find the right stock in a strong sector.
Why sectors matter?
Not all stocks move the same way. When the cycle shifts, money rotates into different sectors like materials or banking.
If you know which sector is improving, you can look for strong stocks inside that sector.
We’ll be sending future newsletters on this and how sectors work in the 18.6 year cycle.
But for now, keep in mind that the second half, where we are, focus on the banking and real estate sector with technology booming on the side.
Once the sector is identified, find stocks that meet as many criteria from my Rule 1 above as possible.
RULE THREE
Always protect your money first. As we get nearer to the peak, try and rebalance your portfolio.
Reduce your exposure to high-risk positions. Switch and diversify into cash, bonds, commodities. This discipline helps your portfolio survive tough times in the cycle.
RULE FOUR
Don’t chase the stock or the market.
If you miss the bottom, do not panic buy when a stock shoots up. That is chasing.
A better plan is to buy when stock is not trading at an over-valuation. Usually if a stock is not too highly priced according to my value metrics in Rule 1, I buy in.
My position sizing depends on how good the entry level and trading set up looks like.