Desperate homeowners counting on a “V” shaped recovery in residential real estate prices to bail them out better first take a close look at global demographic data, which tells us there will be no recovery for at least another 10 years.
I have been using the US Census Bureau’s population pyramids as a long leading indicator of housing, economic, and financial market trends for the last four decades. They are easy to read, free, and available online — click here.
It turns out that population pyramids are something you can trade, buying the good ones and shorting the bad ones. For example, these graphical tools told me in 1980 that I had to sell any real estate I owned in the US by 2005, or face disaster. I did exactly that, unloading $20 million worth of properties in California that year. No doubt hedge fund master John Paulson was looking at the same data when he took out a massive short in subprime loans, earning himself a handy $4 billion bonus in 2007.
To see what I am talking about, look at the population pyramid for Vietnam. This shows a high birth rate producing ever rising numbers of consumers to buy more products, generating a rising tide of corporate earnings, leading to outsized economic growth, without the social service financial burden of an aged population. This is where you want to own the stocks and currencies.