MARKET BLOODBATH! Recession incoming! What should you do? Turn market turmoil into your investment edge in just 10 minutes a day.

Unless you live under a rock (and hey, sometimes I wish I could join you at times if you do) then no doubt you would have been similarly swept up in the noise, blood, and thunder of the recent market action.

Take a look at the following headline.

Ah yes, the use of “sharply lower” and “market rout” stirs the soul of the investor does it not?

But what actually happened here?

Well, it was just a little old carry-trade unwind that’s all. No need for hysterics. All part of the fun in the markets today.

So, what precisely is a carry trade? We shall discuss this at length below. Here’s what’s even more important though.

You know now what the financial and social media want you to do during such times.

But are you aware of what you should actually do instead? A habit that, rather than instilling fear and panic, can potentially drastically improve your investment fortunes?

A habit that will only take as little as 20 minutes a day.

Judging from recent feedback I’ve received in my inbox and on social media, it’s clear that very few people are doing this. It’s therefore a VERY opportune time to learn it then.

Read on now and learn a trick only the most financially savvy use and reap the benefits.

But first, let’s revisit the cause of the market turmoil: the ending of the yen carry trade.

Let’s break it all down then. What exactly has happened in markets recently, and are the media reports correct? Is there a global recession now due?

Is it too much to ask you to revisit March 2023? Maybe it is.

So, let’s instead examine this carry trade. What happened was this. The carry trade refers to investors borrowing money at near-zero interest rates in yen, and then redeploying that cash into higher-yielding assets around the world, such as stocks and bonds.

Typically, the cheap cash raised in Japan is redirected into higher-yielding US Treasuries, with investors collecting the difference between the (zero) interest rates set by the Bank of Japan and the much higher rates set by the Federal Reserve.

Now, this is not an old trick at all. Astute readers of Phil Andersons seminal work “The Secret Life of Real Estate and Banking” would have taken note of what he wrote on page 298 detailing the lead up to the boom of 2006.

“Borrowing at a low rate, an investor was able to earn a slightly higher rate…for $10 million down a speculator was able to purchase $500 million of two-year treasury notes. The difference between the yields and the cost worked out at about $4 million per annum.

The true money-making schemes are never marketed to the public”

Indeed, they aren’t, until they unravel of course.

However, don’t forget where we are right now; the last, final, most speculative years of the real estate cycle. Simply borrowing from one of the cheapest global creditors out there in Japan isn’t enough during such times.

You need to do something with your risk-free returns right?

So, for most of this decade, the obvious thing to do with those returns was to then roll them into the Magnificent Seven stocks (also known as the Mag 7). The biggest and best seven technology companies in the world: Microsoft, Alphabet, Apple, Amazon, Meta, Tesla and of course Nvidia.

And this rotation worked like a charm.

Until a few weeks ago, when it didn’t anymore.

And what caused this was, in effect, the symptom of the carry trade unwinds. Recent announcements by the US Fed about their interest rate policies turned heads as it flagged a September rate cut, right before a US election no less!

But after the Bank of Japan unexpectedly raised interest rates 15 basis points last week amid the prospect of rate cuts by the Federal Reserve, the yen strengthened sharply.

This reduced the interest rate differential between yen and dollar assets and increased the costs due changes in the exchange rate. The lower profits available sparked a wave of margin calls, leading to speculators unwinding their positions and selling assets, including stocks.

And like that, you have a waterfall effect in equity markets.

What does that mean? Let’s take a look.

When you look at the markets next time, try to think of it like a living , breathing entity. It has good days, bad days, occasionally forgets its meds or gets up on the worng side of the bed – that sort of thing.

But it also has, and needs, energy to sustain and move itself, be it higher or lower. Ok, now remember that as you review the following charts.

Feel free to click each one to open them in their own browser window.

First, the chart of the Dow Jones Industrial Average up to 31^st July.

Note that the Dow was having a strong move higher on 31^st July.

But the next day was a down day, big bar but…. nothing to be worried about (on its own). What happened then?

Another down day. Well, now we are thinking that this isn’t good. You are now hearing stories coming out about bad or much lower earnings out of the US than analysts expected, plus something to do with the Bank of Japan raising its official interest rates on July 31^st?

That was 2^nd August, a Friday. The concerns clearly built up over the intervening weekend as this is what happened on the following Monday (the 5^th).

By now the news is positively dreadful, talk of global recession (again) rings out across the news and social media, feeding further fear and increased selling. The Nikkei experienced its worst day since 1987.

The question is: did you sell? Were you shaken out of all your long-term positions or needed to close your long bets in the futures? It was actually only three days, but I’ll wager it felt longer than that, didn’t it?

This is your red waterfall. The waterfall is a technical term used at times to describe a very quick, very nasty fall in markets. And like a real waterfall, a lot of energy leaves during such dramatic falls. You can now expect it to take some time for that lost energy to be recouped.

In markets, it generally means a period of sideways consolidation. But this newsletter is not really about the markets per se, it’s about you. Is there a difference between what you should be doing at such times compared to what you actually did?

Well now, let’s find out.

Without sounding like I’m lecturing, but can you see the enormous advantage those who study the history of the 18.6-year Real Estate Cycle have at such times?

Just the ability to raise oneself above the white noise to think rationally and logically about things. I guarantee you this. All those so-called experts talking about recessions and an almighty equities crash have failed to mention one thing.

The land markets. Have you heard even a peep about what land markets worldwide have done since July 31^st? NO. And that’s my point.

Those of you who research the cycle know implicitly the timing behind such recessionary calls are wrong. Plus, the true land price led recession is the one where no one is spared. And thanks to your diligent research into the cycle as it turns, you also are aware of the single enormous advantage you hold over everyone else.

The land market peak gives you ample warning of what’s about to happen. And we are not there yet.

As such, here is what you can do instead during times like these. Take a step back and review the bigger picture.

Here is a daily chart of the Dow Jones for 2024 to date. I’ve applied a price measure across the three (so far) major corrections we have had to date. I want to place the current correction in context with the previous ones.

Starting from March 28^th, the Dow fell for 20 days until April 17^th, suffering a 5.6% loss. The next fall began on May 20^th, lasting 10 days until May 30^th and suffering a 5.2% loss.

Finally, the most recent saw prices fall from July 31^st to August 5^th, a 6.6% drop that took 5 days.

Can you see the relationships occurring here? You can only see it if you don’t panic and instead take a step back and look at the bigger picture. The current fall is greater than the last two of the year. It suggests what W.D Gann would call “lost motion”.

In effect, prices have run ahead of time, and we can expect some type of bounce back to occur. Followed most likely by a retest of those same lows. It speaks too of the volatility in markets during the last few years for the cycle.

Suffice to say, we have been here before. Note each fall resulted in a higher bottom forming. In the long term, that’s bullish!

And in accordance with the expectations of the PSE team that markets have actually much further scope to move higher from here.

The simple melding of timing and chart reading allows for this high-level view of things. Not to mention the clear and emotion free way to best manage your portfolio during such times.

You can experience this yourself; you just need the requisite skill (chart reading) and knowledge (the timing inherent in the land markets).

Becoming our latest Boom Bust Bulletin (BBB) member can help you begin this journey of discovery. Develop this incredible advantage over the markets by immersing yourself in the timing of the 18.6-year Real Estate Cycle. Each monthly edition delves into the key drivers that turn the cycle and keep you abreast of the latest developments as they occur.

While also providing you solid grounding in the history of the cycle and why it continues to regularly repeat.

Here’s one more very good habit to adapt during times like these. Believe it or not, not every single stock falls during a correction. By investing 10 minutes after the close of markets each day, you can actually identify the most likely leading stocks for when the markets move higher.

For example, in Australia, here are stocks that made the 52-week highs list at time of writing (August 8^th) when the ASX itself was down 18 points or 0.23%.

My eye is drawn to G8 education (ASX – $GEM). See its chart below.

Consider the pattern above (marked with dotted lines), against the broader market, particularly since July 31^st. This is a bullish set up you are looking for, with prices now at 52-week highs. Start your research for outperformers in the markets like this.

Then trade with the trend of the real estate cycle, a powerful combo.

I’ve helped you start; the rest is up to you.

So, sign up now.