Gamble your way to wealth or believe the hype. Is this the only way left now?

I’d like to share with you this week one of those “a-ha” moments that you may yourself experience from time to time.

It came out of a huge realization that swept over me recently. And I think you will be able to relate to it.

It came about when I heard from my own children a story about a friend of theirs.

Their friend, a young man in his early twenties, likes to bet. Ok, no issue there; many people place bets.

But the ‘bet’ I’m talking about was in fact one placed on a commission-free trading app on his mobile phone.

Anyways, this young man had just brought an option for the newly- listed stock SpaceX. No problem there, maybe, but I am experienced market analyst; this young man is not.

Options are derivatives that give you the chance to benefit from the move in a stock for a fraction of the full cost of owning it. This means you can place a much bigger bet. It can be wildly profitable if you know what you’re doing; it can drain you of all your capital if you do not.

The option in question expired in a week or so. This immediately makes it quite risky.

When my kids asked what he was hoping to achieve, his reply was:

“It feels good to say I’m part of this stock, plus Musk will change the world so – why not? It’s the only way I know how to save the money it takes to buy my own house.”

And that’s when it hit me.

Here is a story of two completely different people, who may as well live in different planets, so little do they have in common. And yet, one could not be what they are without the other.

One is now the world’s first trillionaire, Elon Musk, and it’s thanks to the support of people like my kids’ friend who have doubled down on the hype he has generated through his companies via his wallet.

The other is like the young man above who, like so many young people these days, can’t buy a home of their own and are forced to keep living at their parents’ home…and because of this have turned to making bets like these to try to reap windfall gains.

It’s a tragic situation. The way out that such people are looking for appears to be to “bet or believe.”

Is this their only hope?

What does the 18.6-year real estate cycle have to say about this situation?

What’s the first thing you think of whenever you hear a mention of the 18.6-year Real Estate Cycle?

Here’s what I think of: an insatiable chase to own something for nothing. This is what drives it, and pretty much everyone on the planet is somehow involved.

And so, for that last 14 years, that is what many people across the world have done.

Simply go and look at what house prices have done in that time to see what I mean. They have gone up constantly apart from a couple of short dips along the way.

It has become so commonplace that it represents a way of life: the traditional way to create wealth for yourself (alongside your stock portfolio).

You buy a property, either as an investment or to live in, with the view that this is a multi-decade long purchase that you hold and allowed compounding to do its thing for you.

You can apply the same approach to investing in quality stocks. You identify good companies that can increase earnings over time and again be disciplined and allowed compounding magic to work hard for you instead. And you might collect a whole heap of dividend income over that time too.

It requires patience, and a long-term mindset, to ride out market volatility along the way. It now feels like an age-old formula, one that your parents and even your grandparents used and handed down to you. And it has worked supremely well. Anyone owning a property or a stock portfolio has seen this in action over the past 14 years.

This in fact is the cycle in action, making something out of nothing. It also ensures that we have a repeating cycle of boom and bust.

You do whatever it takes to grab a slice of the economic rent for yourself, through your property or through the property of the companies you own shares in.

“Economic rent” is a term used to describe the windfall gain that arises from assets generating a return over and above what a competitive rate of return would provide. It relies on scarcity or monopoly. It’s why to this day property investment is the single best vehicle to achieve this for the majority.

And what really magnifies the effect is if you can borrow most of the purchase price in the first place. And what do you know, our major banks are more than happy to oblige.

Now, I am sure that most of you will have taken advantage of the above method of wealth creation.

The problem? It isn’t a strategy that will work for our children.

You know them, they are the full-time working cohort, some even with earned degrees, currently living with us at home because the old ways just aren’t accessible for them.

And it is not because they are lazy or they won’t ever grow up. They have instead been given one of the worst hands in generations to work with.

Because windfall returns and capital appreciation goes too high for wages to keep up. More of your monthly income goes towards rents, and saving enough for a deposit becomes very difficult.

Do they want to put their money to work hard for them just like you have, and your parents and grandparents before you – YES!

The desire is there; it’s just the tools available are not the same.

So, what is happening instead? Houses and a stock market portfolio have been replaced with meme coins, cryptos, NFTs, Polymarket, and sports betting.

And the reason it all looks rational to them is because it’s simply the only path now left.

If you want to know why then I suggest you start with the house. Since 2019 the typical US home price is up more than 34 percent, to about $430,000 (USD). Rent is up almost 18 percent in that same time.

A record one in three adults under the age of 35 – about 25 million people – still live with their parents. They live at home because the math doesn’t work. The first rung of the property ladder got priced into the sky, while their wages did not.

And so, buying a starter home is largely now beyond them.

As for the stock market, well this one stings for you too. Amongst all the hype and excitement behind the recent listing of SpaceX, not to mention a plethora of other soon-to-be-listed AI companies, lies a stark truth.

The real winners of the stock markets are the insiders, those who got in years ago and are now using retail investors as their way to cash out into their riches.

And while we are on the subject, here’s a sobering fact for those who have just worked hard for four-plus years to get their degree. Your entry-level jobs that all graduates start their careers with – are going to AI instead.

Most businesses appear to have agreed that there is now no need for graduate positions to be advertised. Yet another rung taken away from our children.

So, what is left?

To my mind, there are two options left. The first one is, to borrow a baseball metaphor, to swing as hard as possible for the fences.

Shortcut the slow steady accumulation of wealth and instead bet for it to come much more quickly. The lottery ticket, the crypto or meme coin, the options call. And the more leverage you can add, the better.

In a single day this spring, traders ran $2.6 trillion through call options on the S&P 500, a record and almost the size of the entire crypto market! Here, you’re hoping the math works for you and not against you. Risk a little, and if you’re right you make 20, 50, a hundred times your money.

If it goes against you, the bet is worthless instantly and you end up with zero.

The thing is, for the last 5 years or so, this bet has worked enough to keep people interested. What was called “the everything bubble” meant that many bets on tech stocks rising were winning ones. Its success has created a generation of speculators or bettors.

The second option, it appears, is one of belief. You believe, with absolute credulity, what certain individuals are selling to you.

Here, our children seemingly don’t care what the numbers say behind the scenes, because they can’t read them anyway.

American financial literacy just hit its lowest score in the decade the main index has existed. Older adults got 47 percent of basic money questions right. Gen Z got 38 percent, and about one in three of them lands in the very bottom bracket.

So, our kids place their faith in the Musk’s of this world. They will never bet against the man. Never drive anything other than a Tesla. Never sell any of the SpaceX shares they’ve just brought off the insiders.

Which is where this comes full circle because it’s the same people who just printed our first trillionaire. What we have now in markets is the first-ever stock with a cult following. And, no, you don’t need to be young yourself to be part of it.

The belief economy isn’t limited by age. It has instead its very own accounting rules. Like a giant shell game, all the behemoth tech companies now own stakes in each other. The rising value of those stakes are now allowed to be reported as earnings. A story of the future lifts the valuations.

The valuations get booked as profits, and these companies get to sell their story to you as profitable. How can you fail, when you have belief? And our kids likely believe that the old ways you and I tried to push onto them for the slow road to wealth precluded them from all this.

So now, with the gates wide open, the punchbowl full and the house still buying the drinks, our children seemed very happy to walk through them.

It’s just they aren’t the first to do so. They are some of the very last to do it. And the music is just about to end.

This is a serious issue. Look at the declining birth rates in the western world, the declining households being built and maintained for decades. It’s all related.

And so, in those same bedrooms at home, our children keep flipping that coin; heads you win the bet, tails you continue to believe. The sad part is they don’t even realise they don’t own the coin they are flipping.

We live in a world that taught a whole generation to bet and believe. What do we do about it?

We give ourselves a third option.

Not to bet or believe even. But to build.

Build your knowledge. Knowledge that can show just how the economy really works, that lays bare the tremendous advantage those that study the land market gain at the expense of those ignorant of it.

And be aware that these things can be timed, so you know when to be in and when to be out of markets. This is what a membership to the Boom Bust Bulletin (BBB) can provide.

Through weekly and monthly videos and newsletters, the BBB will guide you through everything you need to know about the 18.6-year real estate cycle, why it repeats, and teach you why the world is the way it is today and how you can turn it to your advantage.

I mentioned economic rent earlier. It’s a hard concept to grasp but once you do it will explain so much of what goes on around you.

The chase for economic rent has distorted our world. There are times—like now—when this pursuit manifests in the worst possible way: in rampant speculation and leverage.

This leads, in time, to economic and financial collapse.

But there is a flip side too. A time where it is safe to enter markets and have 14 years of expansion ahead of you to really build a foundation for wealth for you and your family.

If you survive the coming collapse, it will set you up for life.

Sign up now.