Joe Main

WHAT HAPPENED TO PROPERTY DURING THE GFC? Most people know US property prices crashed during the Global Financial Crisis, but very few understand what actually happened beneath the surface. When you buy a property, you're buying two things. The land and the dwelling sitting on it. What's fascinating is how the relationship between these two changes throughout major property cycles. Research published by the Federal Reserve Bank of St. Louis examined US residential land and building values from 1975 to 2012. In 1998, land accounted for approximately 30% of total residential property values. But by late 2005, that ratio had climbed to a staggering 48.5%! Almost HALF the value of residential property was now attributed to the land. So what happened when the property cycle reversed? Between 2006 and 2012: 🏡 Land values COLLAPSED approximately 69% 🏗️ Aggregate building values actually ROSE approximately 3% 📉 Total residential property values fell approximately 31% Following the crash, the land-to-property value ratio had fallen all the way back to 21.3%. From almost 50% to just over 20%! The buildings themselves hadn't experienced the same collapse in aggregate value. It was the land that absorbed most of the correction. And this is why understanding property cycles is so important. Did it crash or did it just return to the historical average? Land can become extremely expensive during a boom, particularly when cheap credit, speculation and strong buyer demand push valuations higher. But when those conditions reverse, land values can experience enormous corrections. It raises a very interesting question. What proportion of Australian property values today is actually land, and how does that compare with historical levels? Because understanding what happened in previous property cycles might tell us far more than simply looking at house prices. I'll share tomorrow.

GOLD MINERS VS JUNIOR MINERS: WE'VE HAD NO SPECULATION. One of the most important things to understand about commodity bull markets is how money rotates as the cycle develops. Typically, it follows a pattern: • Gold moves first, attracting the initial capital. • Larger gold miners follow, as rising gold prices improve profit margins. • Junior miners and explorers take off, as confidence builds and investors chase greater returns. It's usually towards the euphoric end of a major bull market that the juniors massively outperform the larger producers. But here's what's interesting. We haven't seen that yet. GDX tracks the larger gold miners, while GDXJ provides exposure to smaller, more speculative miners. The GDXJ/GDX ratio has essentially moved sideways for years, even during the extraordinary precious metals rally. Think about what that tells us. Gold has surged, yet miners haven't established sustained long-term outperformance against gold. And within the mining sector, juniors haven't meaningfully outperformed the larger producers. Money hasn't fully rotated down the speculative risk curve. If this were the euphoric end of the commodity cycle, I'd expect the opposite. Investors would be aggressively chasing returns through the miners and increasingly through the juniors. A TOP, OR THE TOP? We've certainly seen periods of excess in gold and silver, followed by some brutal corrections. But when I zoom out across the broader commodity complex, I'm not seeing the widespread speculative behaviour I'd expect at the end of a major secular bull market. Not yet. That doesn't guarantee the cycle continues, but it's an important piece of the puzzle. Remember, a major correction can mark the end of a wave without marking the end of the entire bull market. That's why understanding relative strength and where money is rotating matters so much. There's a big difference between calling A top and calling THE top. Top of a wave maturing of the cycle. Miners shoukd outperform from this point of the cycle.

THIS CHART GOES BACK 100 YEARS… AND WE’VE ONLY BEEN HERE THREE TIMES BEFORE. This is Oil vs the Dow Jones Industrial Average on yearly candles. Basically, when this chart is this low, oil is historically cheap relative to US equities. Now look at the previous major lows: 1929. 1966. 1999. And now… 2026. Those dates aren't exactly random. Each of the previous periods occurred around major turning points for US equities and was followed by a very difficult long-term period for stocks, alongside major rotations between asset classes. Equties had dead money for over a decade. Now look at the technicals. The yearly RSI is sitting around 40, an area that has historically acted as support for this ratio. Then look at Stochastic RSI. The previous major oversold extremes on this chart occurred around 1929, 1966 and 1999. And now we're back there again. But here's where things get really interesting. Look at the small chart I've added in the top right. That's the fundamental side of the equation. It combines a range of US equity valuation measures including trailing P/E, forward P/E, CAPE, price-to-book, EV/EBITDA, Tobin's Q and market cap-to-GDP. And what periods jump out as major valuation extremes? 1929. 1966. 1999. And the current period. So we've got two completely different ways of looking at the market telling a very similar story. The technical chart is telling us energy is historically cheap relative to equities. The fundamental data is telling us US equities are historically expensive. Coincidence? Maybe. But this is exactly why I love combining technicals, fundamentals and macro rather than looking at any one thing in isolation. Does this mean US equities crash tomorrow? No. Does it mean oil goes straight up from here? No. This is a big-picture macro chart. I'm not looking at what happens next week. I'm looking at where capital could rotate over the next 5 to 10 years. And when I keep seeing the same message across oil, commodities, bonds, valuations and relative-strength charts like this, I'm paying attention. It's also one of the major reasons I'm personally very cautious about US equities at these valuations and far more interested in the opportunities developing across energy and commodities. 1929. 1966. 1999. 2026. History doesn't have to repeat. But when everything aligns it's rarely coincidence!