Real Estate Cycles & International Value
Posted on January 21, 2016 by Martin Armstrong
QUESTION: Mr. Armstrong, your real estate cycle turned up from 1955. It does not match the Case-Shiller index which peaked in 1890s and bottomed in 1920 and then began to rally after 1940 into the 1955 period. Something seem strange with that index given the huge Florida real estate bubble which burst in 1927. Can you explain why the Case-Shiller seems to be off so much? Here is a chart that has been going around the Web.
Thanks
ANSWER: This is the typical problem with people creating an index and then trying to extend it back in time. They ALWAYS ignore the currency and project purely a domestic view. During the 1890s, J.P. Morgan had to bail out the U.S. Treasury for it was dead broke. As people feared the government would declare bankruptcy, private assets rose in NOMINAL terms. This was matched by the massive exit of foreign capital from the USA.
The Case-Shiller index bottoms in 1920, but this was the point of a massive rise in the dollar’s value. Foreign capital poured into the USA to park because of World War I. This, in turn, led to wild speculation in Florida, which as you correctly stated, burst in 1927. Because rhis isdex is national, it also suppresses regional booms. As real estate peaked in Florida, the hot money then shifted to stocks creating the Phase Transition into 1929. It was this capital flows between asset classes into stocks where that concentration led to the 1929 bubble.
The Case-Shiller index, which suddenly rose from the Great Depression, does not take into account the dollar devaluation that sparked that rise as it did in equities. That was virtually a 60% devaluation of the dollar that moved it from $20 to $35 on a gold standard by FDR. Was that rise “real” or currency related? Sorry, the real rise begins post-war from 1955. That was the real housing boom.
The Case-Shiller does not accurately reflect the changes in currency. One must look at everything in terms of international value before they can see if they really made money or just broke even because the currency declined. From a value perspective, the 1929 high was more than three times that of the 1890s. So the high of the 1890s was purely a rise due to the collapse in the dollar; it was the hallmark of the panic of 1893 and was best expressed in Grover Cleveland’s speech before Congress.
We use international value rather than nominal local currency. If you fail to use the international value, the end result will always be erroneous for you will NEVER see when foreign capital will rush in or flee. You simply must look at the world in this manner or you will lose your shirt and everything else. Those who thought gold was in a bull market after the 1980 Crash, lost a lot because they failed to grasp international value.
This entry was posted in Uncategorized and tagged International Value, Real Estate, Real Estate Cycle by Martin Armstrong. Bookmark the permalink.
Posted on January 21, 2016 by Martin Armstrong
QUESTION: Mr. Armstrong, your real estate cycle turned up from 1955. It does not match the Case-Shiller index which peaked in 1890s and bottomed in 1920 and then began to rally after 1940 into the 1955 period. Something seem strange with that index given the huge Florida real estate bubble which burst in 1927. Can you explain why the Case-Shiller seems to be off so much? Here is a chart that has been going around the Web.
Thanks
ANSWER: This is the typical problem with people creating an index and then trying to extend it back in time. They ALWAYS ignore the currency and project purely a domestic view. During the 1890s, J.P. Morgan had to bail out the U.S. Treasury for it was dead broke. As people feared the government would declare bankruptcy, private assets rose in NOMINAL terms. This was matched by the massive exit of foreign capital from the USA.
The Case-Shiller index bottoms in 1920, but this was the point of a massive rise in the dollar’s value. Foreign capital poured into the USA to park because of World War I. This, in turn, led to wild speculation in Florida, which as you correctly stated, burst in 1927. Because rhis isdex is national, it also suppresses regional booms. As real estate peaked in Florida, the hot money then shifted to stocks creating the Phase Transition into 1929. It was this capital flows between asset classes into stocks where that concentration led to the 1929 bubble.
The Case-Shiller index, which suddenly rose from the Great Depression, does not take into account the dollar devaluation that sparked that rise as it did in equities. That was virtually a 60% devaluation of the dollar that moved it from $20 to $35 on a gold standard by FDR. Was that rise “real” or currency related? Sorry, the real rise begins post-war from 1955. That was the real housing boom.
The Case-Shiller does not accurately reflect the changes in currency. One must look at everything in terms of international value before they can see if they really made money or just broke even because the currency declined. From a value perspective, the 1929 high was more than three times that of the 1890s. So the high of the 1890s was purely a rise due to the collapse in the dollar; it was the hallmark of the panic of 1893 and was best expressed in Grover Cleveland’s speech before Congress.
We use international value rather than nominal local currency. If you fail to use the international value, the end result will always be erroneous for you will NEVER see when foreign capital will rush in or flee. You simply must look at the world in this manner or you will lose your shirt and everything else. Those who thought gold was in a bull market after the 1980 Crash, lost a lot because they failed to grasp international value.
This entry was posted in Uncategorized and tagged International Value, Real Estate, Real Estate Cycle by Martin Armstrong. Bookmark the permalink.
Today at 6:17 am by Rocky
» utube MM&C 4/16/24 IQD Update - Iraq Dinar - America - Activate - Massive Economic Deals -
Today at 6:15 am by Rocky
» Central Bank: Washington praised Iraq's measures to resolve 80% of the financial transfer file
Today at 6:13 am by Rocky
» Voices of Resilience: Al-Sudani’s frankness embarrasses the White House
Today at 6:12 am by Rocky
» Al-Alaq confirms the formation of a committee between Baghdad and Washington regarding sanctions on
Today at 6:10 am by Rocky
» Former MP: The Democrat will not hand over power after the regional elections
Today at 6:07 am by Rocky
» Document/allocation of 20% of the lands of Al-Jawahiri Complex to employees of the Ministry of Defen
Today at 6:06 am by Rocky
» Al-Hakim: Al-Sudani’s visit to Washington was a protocol and missed the two most important files
Today at 6:05 am by Rocky
» Parliamentary Security: The National Security Service law will be voted on by Parliament soon
Today at 6:04 am by Rocky
» Reconstruction and Housing: Zarbatieh residential project completed by 82%
Today at 6:01 am by Rocky
» Al-Sudani reveals an intention to establish Al-Faw refinery with a capacity of 300 thousand barrels
Today at 6:00 am by Rocky
» Government readiness to move the Doura refinery to an alternative location.. What are the conditions
Today at 5:59 am by Rocky
» Al-Sudani’s visit to Washington.. Implications and results
Today at 5:56 am by Rocky
» Association of Iraqi Private Banks: The suspension of some electronic payment services yesterday was
Today at 5:55 am by Rocky
» Parliamentary memorandum.. Two solutions were before the Federal Court instead of removing the compo
Today at 5:53 am by Rocky
» Blue fuel... Iraqi steps towards inexhaustible wealth for a century
Today at 5:51 am by Rocky
» For fear of being "upset"... MPs "evade" signing to host Al-Sudani in Parliament
Today at 5:50 am by Rocky
» Al-Sudani’s statement to convert 40% of Iraq’s exports into derivatives.. What does it have to do wi
Today at 5:48 am by Rocky
» An Iraqi-American partnership to benefit from oil field gas
Today at 5:46 am by Rocky
» The Minister of Commerce announces the distribution of the first payments of farmers’ dues for the 2
Today at 5:45 am by Rocky
» Sudanese to members of the Iraqi community in the American city of Houston: Iraq has regained its he
Today at 5:43 am by Rocky
» Romanski announces loans worth $50 million to support the Iraqi private sector
Today at 5:42 am by Rocky
» Prime Minister: We plan to invest production capacities for export
Today at 5:41 am by Rocky
» “Something happened” in Iran and no one is talking about Iraq and Syria. This is what we have so far
Today at 5:38 am by Rocky
» Al-Sudani asks the American Baker Institute for assistance in preparing studies related to the oil m
Today at 5:36 am by Rocky
» The Interior Ministry denies the occurrence of explosions inside Iraqi territory and diagnoses “the
Today at 5:35 am by Rocky
» Tensions between Najaf and Baghdad over the airport... the rule of law over “military force” and the
Today at 5:34 am by Rocky
» Al-Sudani from Washington: We agreed with Abu Dhabi on joint management of Al-Faw Port
Today at 5:33 am by Rocky
» "Al-Party" talks about the region's elections and reveals the reason for refusing to pay salaries di
Today at 5:31 am by Rocky
» Russia's oil is taking more of the Middle East's shares in the Indian market.. How much has Iraq los
Today at 5:29 am by Rocky
» Early next month.. Traffic confirms that the electronic payment system is working only
Today at 5:27 am by Rocky
» The Service Council accuses state departments of refraining from disbursing bonuses because of the m
Today at 5:25 am by Rocky
» Electricity: The Baghdad street lighting campaign will be completed before the middle of this year
Today at 5:24 am by Rocky
» Oil poses two conditions for moving the Doura refinery to an alternative location
Today at 5:23 am by Rocky
» The Foreign Minister reveals the truth about his resignation and the reason for his departure to Erb
Today at 5:22 am by Rocky
» Progress: Al-Halbousi’s acquittal has become conclusive, and his return to the presidency of Parliam
Today at 5:20 am by Rocky
» Disagreements strike Al-Maliki's coalition over choosing the governor of Diyala
Today at 5:19 am by Rocky
» The Union accuses Türkiye of exploiting the political situation for a ground incursion into Iraq
Today at 5:18 am by Rocky
» The Democratic Party: Barzani is eagerly awaiting the results of Al-Sudani’s visit to Washington
Today at 5:17 am by Rocky
» Frame: Al-Halbousi in the news and his return has become a pipe dream
Today at 5:16 am by Rocky
» A parliamentary request to capitalize on Erdogan’s visit to Baghdad to end the water crisis
Today at 5:15 am by Rocky
» utube 4/18/24 Iraq: Over 14 Agreements Signed Between Iraq and US BREAKING NEWS from Congress.
Yesterday at 6:28 pm by Rocky
» Al-Sudani urges the US corporation Honeywell to help finish the Basra refinery
Yesterday at 3:48 pm by Rocky
» Al-Sudani Meets with Representatives of Western Media Outlets in Washington
Yesterday at 3:46 pm by Rocky
» Chairman of the Investment Authority signs the United Nations Convention on International Mediation
Yesterday at 3:44 pm by Rocky
» PM: We will sign a contract to establish the Al-Faw refinery with a Chinese company
Yesterday at 3:42 pm by Rocky
» PM arrives in Houston as part of his visit to USA
Yesterday at 3:41 pm by Rocky
» Militia Man & Crew 4/18/24 Bush signed it and all presidents implemented it. Iraq’s funds have been
Yesterday at 2:46 pm by Rocky
» Iraq is close to launching the electronic signature
Yesterday at 8:12 am by Rocky
» The Basra government discusses with an international oil company the implementation of social benefi
Yesterday at 8:11 am by Rocky
» The Prime Minister confirms to an American company: Gas projects in Iraq are a priority for the gove
Yesterday at 8:10 am by Rocky
» The Minister of Planning discusses with the World Bank mechanisms for scheduling external loans
Yesterday at 8:09 am by Rocky
» Oil sets the twenty-seventh of this month as the date for opening contracts for the fifth complement
Yesterday at 8:08 am by Rocky
» “Electronic begging”...professionalism and fabrication of stories” generates millions of dinars dail
Yesterday at 8:05 am by Rocky
» Al-Sudani calls on the American company Hanwell to contribute to the completion of the Basra refiner
Yesterday at 8:03 am by Rocky
» An American company expresses its willingness to establish LED lighting production lines in Iraq
Yesterday at 8:02 am by Rocky
» Including Iraq.. Iran announces the possibility of exporting 300 megawatts of “renewable electricity
Yesterday at 8:01 am by Rocky
» Political forces present two options to find an alternative to Al-Halbousi
Yesterday at 7:58 am by Rocky
» Parliament is awaiting the arrival of the budget schedules and the government is studying higher spe
Yesterday at 7:56 am by Rocky
» The International Monetary Fund adjusts its expectations for the development of the world’s economie
Yesterday at 7:54 am by Rocky
» A representative talks about the difficulty of finalizing the file of “electing the Speaker of Parli
Yesterday at 7:50 am by Rocky
» Work on preparing a law for diplomatic passports
Yesterday at 7:49 am by Rocky
» A female representative accuses the Ministry of Immigration of corruption
Yesterday at 7:47 am by Rocky
» Minister: Solving the Kurdistan salaries problem is the beginning of addressing other disputes betwe
Yesterday at 7:45 am by Rocky
» About 270 million dollars were sold by the Central Bank of Iraq in the currency auction
Yesterday at 7:42 am by Rocky
» The volume of trade exchange between Jordan and Iraq will exceed 800 million dinars in 2023
Yesterday at 7:41 am by Rocky
» Iraq signs memorandums of understanding with American companies in the fields of electricity, oil an
Yesterday at 6:31 am by Rocky
» The American company that manufactures the F16 expresses its readiness to implement the terms of con
Yesterday at 6:30 am by Rocky
» The volume of expected Qatari investments for the Iraq Fund for Development exceeds $3.5 billion
Yesterday at 6:29 am by Rocky
» Decrease in dollar prices in Baghdad and Erbil
Yesterday at 6:27 am by Rocky
» The President of the Region brings together the Kurdish parties to resolve the election file
Yesterday at 6:26 am by Rocky
» Al-Sudani receives in Washington the Chairman of JPMorgan
Yesterday at 6:25 am by Rocky
» Transport is starting to transform its ports into smart ones
Yesterday at 6:23 am by Rocky
» Sudanese reveals the volume of exchange with America
Yesterday at 6:22 am by Rocky
» "Al-Eqtisad News" publishes the memorandums of understanding signed between the Iraqi delegation and
Yesterday at 6:21 am by Rocky
» Al-Sudani urges an American company to contribute to establishing a chemical materials factory
Yesterday at 6:20 am by Rocky
» Iraq stresses the importance of Lockheed Martin's commitment to opening military aircraft maintenanc
Yesterday at 6:19 am by Rocky
» Iraq is on the verge of a “water disaster” by 2035
Yesterday at 6:18 am by Rocky
» Great satisfaction and optimism with the results of Sudanese’s visit to Washington
Yesterday at 6:16 am by Rocky
» Transport is beginning to adopt a plan to transform its ports into smart ones
Yesterday at 6:15 am by Rocky
» Completed 8,000 loan transactions at the Housing Bank
Yesterday at 6:14 am by Rocky
» Prime Minister: We plan to invest production capacities for export
Yesterday at 6:12 am by Rocky
» Transformation and partnership...a new horizon in Iraqi-American relations
Yesterday at 6:10 am by Rocky
» What is new in the economic dimension of the Washington visit?
Yesterday at 6:09 am by Rocky
» Two letters to the future
Yesterday at 6:08 am by Rocky
» National interests first
Yesterday at 6:06 am by Rocky
» Iraqi-American rapprochement...a national necessity
Yesterday at 6:05 am by Rocky
» Al-Sudani’s visit to Washington and the course of Iraqi-American relations
Yesterday at 6:04 am by Rocky
» Sudanese carries security, economic and development files to Washington
Yesterday at 6:03 am by Rocky
» Armament and military development... features of a sustainable partnership
Yesterday at 6:02 am by Rocky
» Analysts: Sudanese's visit to Washington will achieve excellent results in the future
Yesterday at 6:01 am by Rocky
» Iraqi-American relations...the legacy of the past and the aspirations of partnership
Yesterday at 6:00 am by Rocky
» Sudanese and external necessities
Yesterday at 5:59 am by Rocky
» The Strategic Framework Agreement... 7 important provisions
Yesterday at 5:58 am by Rocky
» Joint statement of the Iraqi-American discussions
Yesterday at 5:56 am by Rocky
» Supreme Coordinating Committee: Iraq's role is vital to the security and prosperity of the region
Yesterday at 5:55 am by Rocky
» Towards an effective bilateral economic relationship between Baghdad and Washington
Yesterday at 5:53 am by Rocky
» She saw it as a new, different chapter in Iraqi-American relations... Al-Sudani’s visit to Washingto
Yesterday at 5:52 am by Rocky
» Al-Sudani’s visit to Washington.. Implications and results
Yesterday at 5:51 am by Rocky