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Dear Readers,

Welcome to your last PCI newsletter for 2025. Delivered rather appropriately on the date of the summer solstice here in the Southern Hemisphere.

And for this one, I thought I would bring you something memorable. One that will, during your own Christmas break, resonate and percolate around in your mind.

Because as the year closes out, it seems we are now in full swing into silly season. Rarely have I uncovered an article that better represents just where we are in the financial world right now.

In fact, it’s more akin to something I would expect to read about in the history of the 1929 US stock market bubble.

Take a look.
Source – Australian Financial Review

There is one word I absolutely don’t enjoy reading when it comes to markets:” gambling”.

Not when we are this late in the current real estate cycle. But here we are.

There is a profound and systemic change occurring in financial markets. I’ve read or seen very little about it, but it is happening. I’m certain you’ve not heard about it either.

That is what today’s focus will be. You simply must know what’s going on here.

There is an ever-growing grey zone between investing and gambling. What is a contract and what is a security. Where betting markets are looking more like financial markets, and vice versa.

More importantly for you is this question: do you, or would you, even know the difference?

Let me take you now into the murky world of predictive markets.

And why, in understanding what they do, a greater truth is revealed. I have written to you for years now about the “everything bubble.” But what does it mean? How does it manifest, and how exactly do you know that you’re participating in one?

Prepare now to be shocked by the magnitude of this growing problem.

And why, by the time you read this, you must completely understand the ramifications for yourself and your family. And act upon it.
Are people more honest when honesty costs them money?

So, what exactly are predictive markets? Honestly, there isn’t a clear or simple definition. They are an amalgam of certain seismic changes underway when it comes to the day-to-day business of funds and asset management.

Any such change that threatens the long-term strategic management of the world’s biggest funds will, in time, affect everyone involved. Even retail investors like you and me.

Today, every fund and money manager across the globe is busy filling up their holiday break reading list with PDFs from the world’s very best fund managers such as Vanguard and Blackrock. These documents are integral to the investing process used by most institutions.

Most large investors have traditionally relied on forecasts of expected returns for certain asset classes over a three to five-year horizon. They use these estimates as inputs to decide how to allocate their portfolio.This is known as strategic asset allocation.

And this has pretty much been the gold standard for investment funds. It gives them an idea of where the truly big money may be deployed in the years ahead, allowing these funds to position accordingly.

They can ill afford to show results to clients that underperform these benchmarks, and so they all must basically follow each other.

Unless you are the manager of the Oakleigh 18.6 Strategic Portfolio that is. But I digress.

However, advances in AI across the financial industry means the old ways are now considered too slow, and not reactive enough to handle the modern-day news cycle.

There is perhaps a more profound change occurring in financial markets that is being driven not by the big institutional investors, but the leading global retail brokers.

And it’s this blurring of what constitutes investing and what is instead gambling, and the deliberate ‘gamification’ of investment and trading apps, that has really driven the surge in predictive markets.

It allows traditional investments to be turned into outright speculation. And few have cornered this market as successfully as Polymarket.
Source – Forbes

The article above contains a great overview of what Polymarket is and what it offers. Here is an extract:

People are now betting on everything. Prediction markets are amplifying those signals.

The timing of the U.S. government shutdown. The likelihood of Taylor Swift cancelling a tour date. The exact day LeBron James might retire. Even the Nobel Peace Prize winner — a market that moved so sharply it triggered a leak investigation. And, increasingly, bettors are wagering on corporate outcomes: whether Meta will surprise-launch its next AI product, if Starbucks is headed for an acquisition bid, or when Amazon will announce another round of mass layoffs.

They’re happening on Polymarket, a fast-growing prediction-market platform where people wager real money on real-world events. Polymarket operates legally in the United States under specific regulatory constraints, and its markets have grown rapidly despite ongoing debate over how real-money forecasting platforms should be overseen.

Already, within a few sentences, one can start to see how these platforms exist in between the margins of what is and isn’t properly regulated.

Polymarket is famous for correctly calling the winner in a recent very close race for the office of New York City mayor. A massive swing in odds on the platform saw huge amounts of money flood into the eventual winner. Meanwhile, as this was happening, those covering the election had zero idea who the polls truly favoured.

In effect, the betting market surfaced the likely outcome first, and the traditional forecasters adjusted only after the market already moved.

Here’s how the above article explains this (the bolded text below is my own):

To be sure, this isn’t about gambling. It’s about information. Betting markets turn belief into financial risk, creating a ‘truth signal’ that moves faster than polls, pundits, or official reports. When thousands of people are willing to lose money on what they think will happen, the result is a dynamic forecast of political outcomes, corporate decisions, economic trends, and cultural shifts.

Why do you put your hard-earned money into the markets? It’s to hopefully benefit from a return on said money. Well, I am the same.

But what I refuse to ever do is to place my money based upon a ‘truth signal.’ I will never put my money on an opinion. This is in stark contrast to how traditional money managers engage and manage your money.

And yet these predictive markets have seen almost $30 billion USD in trading volumes this year.

They are gaining serious traction now, and they are eating into the market share of more traditional asset managers. The ‘truth signal’ is a combination of rumours, insider cues, shifts in polls and local sentiment.

The result is a widening gap between real-time signals and institutional response. To understand the scale of this shift, it helps to see just how far prediction markets have spread.
But what if the consensus – is wrong?

We are talking about a market that now aims to predict events such as award winners, celebrity decisions, economic indicators like inflation rate, job numbers and rate cuts or rises, elections, sports, and corporate activities.

Basically, if you believe in something, and crucially can find someone willing to take the opposite bet, then you can action it with your own money by using platforms like these.

It’s a peer-to-peer marketplace which gives rise to the prices and probabilities you’re betting on. And because these are retail brokerage houses, rather than more traditional fund managers, they know very well how to promote themselves.

Take Interactive Brokers founder Thomas Petterffy, who recently told a Goldman Sachs gathering that prediction markets will be bigger than equity markets:

“Eventually, we will have a situation where anything you want to know or are interested as far as the future is concerned, you will be able to come to IB’s platform and see what the consensus opinion is,” he told the event. “Users will be able to invest in their own views and align the predictions with their portfolios.”

Kalshi, a provider like Polymarket, has a partnership with popular US share trading site Robinhood, which hosts its prediction markets. It’s already generated over $US100 million in revenues in under a year.

Last month, Robinhood announced another prediction market related joint venture as it plans to offer contracts on anything from sports to elections.

Increasingly the line between prediction markets and financial markets is being blurred. The CEO of Kalshi, Tarek Mansour, said his plan was to “financialise everything and create a tradable asset out of any difference in opinion.” Alright, I’ve now heard enough.

Please place your real estate cycle lenses on. Ask yourself, ‘where are we now in the cycle?’ We are slap bang in the late stages of the mania or winner’s curse phase. What do you associate with this time? Rampant speculation – check.

All out push to get everyone hooked and soaked in debt – check.

I am worried because these loosely regulated brokerage houses’ main job is to offer you leverage via margin loans. They want you to be indebted to them. They gamify their app and online portals in such a fashion that it’s almost too easy to do so.

They actively want you to believe that you can do better than just investing. That you are part of a brave new world and on the cusp of a revolution in money markets.

This whole thing is one slippery slope. Regulators are hopelessly behind the eight ball in catching up to what’s really going on. But here is what you must understand.

This is nothing less but the surest sign available that the peak in markets is almost here.

And I have been consistent with my plea to you; you must not follow the crowds to that peak. You must instead be a contrarian and prepare.

Do not get involved with this. After reading this today, I trust you appreciate why. Here is something else you can trust to get you properly prepared. A membership to the Boom Bust Bulletin (BBB).

There is no better financial education that you can trust than understanding the land markets via researching the 18.6-year Real Estate Cycle. Through such study you can discover how to ‘time’ the economy. Not some wild bet on predictions, but the hard science of the economic rent and why the cycle continues to repeat on time.

You can benefit from monthly editions and weekly video content to help you fast track your knowledge to ensure you remain on the right side of history.

All this for just $47USD a year. Incredible value!

Here’s one final tell-tale sign of where we are. It’s the signs of hubris and bombast displayed by market participants as we reach the peak. Take these prophetic few sentences from the above AFR article (the bolded text is my own):

The fear is that if prediction markets rise so too will speculation, and when speculation goes unchecked, there are painful and sometimes systemic blow-ups, not to mention corruption and the erosion of market integrity.

On the plus side, deep liquid prediction markets do harness the so-called wisdom of the crowds and in theory at least, may better inform us about future events by creating a financial incentive for more accurate and publicly available forecasts.

99% of the market doesn’t know what you do about what’s to come. Because almost no one truly studies the land market and its impact on every economy.

So, take this time and embrace the wisdom of the few.

Sign up now.
Best wishes,

Darren J Wilson
and your Property Sharemarket Economics Team

P.P.S – Find us on Twitter here and go to our Facebook page here. This content is not personal or general advice. If you are in doubt as to how to apply or even should be applying the content in this document to your own personal situation, we recommend you seek professional financial advice. Feel free to forward this email to any other person whom you think should read it.