{"id":37516,"date":"2013-04-13T02:10:50","date_gmt":"2013-04-13T06:10:50","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=37516"},"modified":"2013-04-12T15:11:35","modified_gmt":"2013-04-12T19:11:35","slug":"this-tsunami-of-cash-will-send-us-real-estate-prices-into-a-hyper-bubble","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/04\/13\/this-tsunami-of-cash-will-send-us-real-estate-prices-into-a-hyper-bubble\/","title":{"rendered":"This Tsunami of Cash Will Send US Real Estate Prices Into a “Hyper-bubble”"},"content":{"rendered":"

By Justice Litle<\/strong><\/p>\n

In the movie Havana<\/em>, Robert Redford tells Lena Olin, “A
\nbutterfly can flutter its wings over a flower in China and cause a
\nhurricane in the Caribbean.”<\/p>\n

The butterfly effect describes a finding of chaos theory known as
\n“sensitive dependence on initial conditions.” Even a minute change in
\ninputs (the butterfly’s wings in China) can trigger massive effects on
\nthe other side of the globe (a hurricane in the Caribbean).<\/p>\n

It is as true in the world of finance as it is in the world of
\nweather… especially when the butterfly in question is Godzilla-sized.<\/p>\n

The new Japanese prime minister, Shinzo Abe, and Japan’s new central bank<\/a>
\nchief, Haruhiko Kuroda, have taken “quantitative easing” (aka debt
\nmonetization) to a level never seen before. Call it “Godzilla-sized.”<\/p>\n

Relative to the size of its economy, the Bank of Japan<\/a>‘s stimulus will be three times the size of that of the Fed.<\/p>\n

And that is where the butterfly effect comes in…<\/p>\n

Imagine the following scenario:<\/p>\n

You have been saving and adding to
\nyour nest egg for many decades. It is all you have for your retirement.
\nYour prime minister comes on television and basically says, “We are
\ngoing to print currency until we get a 2% inflation rate — no matter
\nwhat.” <\/em><\/p>\n

You have no idea what the outcome of
\nthis massive experiment will be. You understand, through some basic
\nresearch, only that it is the biggest monetary gamble in the history of
\nthe world. It is a gamble with your<\/span> retirement funds, which could potentially lose half of their value (or more) over the next two years. <\/em><\/p>\n

You also know that, if your
\ngovernment screws up this “experiment,” runaway inflation could wreak
\nhavoc on your country. Your food and energy costs alone, for example,
\ncould triple or quadruple (as you are essentially an island nation with
\nno natural resources). <\/em><\/p>\n

This is not hypothetical. The Japanese prime minister has already
\nannounced his crazy plan and hired a crazy central banker to carry it
\nout. What would you<\/span><\/em> do if you were in this situation?<\/p>\n

One thing you might do is seek out assets denominated in a stronger currency<\/a>… assets that function as inflation hedges… assets such as real estate.<\/p>\n

Property booms in Miami, New York City, Las Vegas… and even
\nHouston… are being driven not just by easy monetary policy and Wall
\nStreet private equity capital, but also by foreign investors sending
\ntheir capital to the US.<\/p>\n

When, say, a wealthy Brazilian decides to buy a block of Florida
\ncondos as a diversification of assets, he can do it only by exchanging
\nthe Brazilian currency for dollars. These exchanges occur on such a
\nmassive scale they have kept the dollar more stable than many
\nexpected…<\/p>\n

Also, the US remains a military and agrarian superpower. This
\ncombination of military might and food stability makes US Treasury bonds
\nattractive to foreign capital as a safe haven. (The political and
\nmilitary positioning of the US is a valuable intangible asset, not
\nunlike the value of the Coca-Cola brand.)<\/p>\n

Japanese savers are already rushing to escape a doomed currency. That
\nmeans their investment dollars will flood US markets — fueling a US
\nreal estate hyper-bubble<\/a>.<\/p>\n

To play this setup, you could buy shares in the iShares FTSE NAREIT Resi Plus Capp (NYSE:REZ<\/a>)<\/strong>, which tracks the performance of the US residential real estate equity market.<\/p>\n

This isn’t quite a pure play on the residential real estate sector.
\n(There are some health care and personal storage REITs in there too.)
\nBut you get exposure to plenty of apartment complex REITs, such as
\nEquity Residential, AvalonBay, Essex Property, Camden Property Trust,
\nUDR and BRE Properties.<\/p>\n

Or you simply avail of ultra-low interest rates, buy a second home and rent it out.<\/p>\n

Both are great ways to prepare for the Godzilla-sized flood of cash out of Japan and into the US real estate market.<\/p>\n

Carpe Divitiae,<\/p>\n

Justice<\/p>\n

\n
\n

Disclaimer<\/span><\/span><\/span><\/h3>\n
\n

Article brought to you by Inside Investing Daily. Republish
\nwithout charge. Required: Author attribution, links back to original
\ncontent or www.insideinvestingdaily.com<\/a>. Any investment contains risk. Please see our disclaimer<\/a>.<\/em><\/p>\n

 <\/p>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

By Justice Litle In the movie Havana, Robert Redford tells Lena Olin, “A butterfly can flutter its wings over a flower in China and cause a hurricane in the Caribbean.” The butterfly effect describes a finding of chaos theory known as “sensitive dependence on initial conditions.” Even a minute change in inputs (the butterfly’s wings … <\/p>\n

Continue reading “This Tsunami of Cash Will Send US Real Estate Prices Into a “Hyper-bubble””<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-37516","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/37516","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=37516"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/37516\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=37516"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=37516"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=37516"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}