The market has fallen by a staggering 5.2% and the All Ords sits at 3,778 points this morning.

…So far, a 15% drop in 7 days… 25% since April!

But – as bad as the news is, we have seen it all before, right?

What’s currently going on only happened a couple of years ago.

Same scenario, the great recession of 2009 is back.

So what is likely to happen going forward? Look, nobody really knows… But here’s a few certainties.

We’re going to see the RBA seriously look at interest rates and act when they meet again to maybe drop rates by 0.5%.

In the next 6-12 months, my prediction is that the rates will fall to our 50-year low and hit 3% (that happened in the early part of 2009)… The cash rate at the moment is 4.75%.

There will be a flight to cash, gold, silver and despite the carnage, commodities.

There will also be a flight back to real estate.

I wouldn’t be entering into any new deals at the moment, I would be conserving cash and waiting for things to play out over the next 3-6 months.

Forget about fixed-rate loans. Forget about picking the bottom of the market.

…But I know from first-hand, traders have made a small fortune in the last couple of trading sessions.

The great uncertainty at the moment will have everybody worried, especially real estate vendors trying to sell their properties right now.

You’ll see a lot of crazy offers being accepted, simply because nobody is sure what might happen next. But that will be a mistake from their point of view, because I think interest rate cuts and the uncertainty of the equity markets will see real estate prices start to improve.

However, the top end of the market will be smashed… If you want to buy a cheap $10 million property – now is the time to sharpen the axe. You might pick it up for $5 or $6 million.

The bottom end of the market, the one that you should be interested in should stabilise and start looking cheap in a couple of months time. Don’t expect price drops, it’ll be cheap because there are likely to be increases.

You know, in times like this, rather than put your head in the sand and just forget about it… Getting educated in strategies that are perfect for this uncertain climate is what it’s all about.

Remember, future profits will be made today. If you sit on the sidelines and trace no action, especially with regards to your education, you’ll kick yourself in 12 months time for sure.

Signed with Success,

Jon Giaan
Knowledge Source

P.S. Hey! Personally, I’ve got several million invested in the market. And, probably lost a couple of hundred thousand in the last day or two. So I’m not totally real estate biased… But in the last GFC, I made a killing in the real estate market. I expect to do so again.

P.P.S. Bad news, yes. But a screaming buying opportunity for certain equities. But hey, not just yet… Let’s see what happens over the next couple of days.

With the Australian dollar at a significant cycle-high, the talk is on how cheap consumer goods are going to be in the next 12 months. Also, the fact that it’s a great time for Australians to travel overseas for a holiday.

So this is the time to buy electronic goods and travel to your heart’s content.

Zero talk about how to make money with the high Aussie dollar. The smart money knows what to do, but that’s always a small percentage of the population.

With the dollar so high and going even higher, what is attractive right now is purchasing overseas assets.

Now I’m not just talking about real estate, overseas equity markets such as the US are incredibly cheap right now too.

I’m investing and researching several global opportunities. The US real estate market is an obvious one to me. It’s depressed, has been for the last 24 months and only recently showing signs of life on the upside.

It’s tough over there, really, really tough.

But you know what?

Thats exactly the environment that an investor wants. It’s called, “blood on the streets.”

Sure, it’s not good for the average family, but we must remember that investing is about numbers – not emotion.

But don’t despair. While I say things are “depressed” and major indicators such as unemployment numbers would suggest that in the States, there are signs of a heartbeat on the upside.

Now this is an outlook going forward and perhaps a leading indicator that you’ll never find coming out of any major media outlet, but my view is that we’re in the early stages of a significant global recovery which will catapult Australia and its equity markets forward in a big way.

To get a handle on just how good the global economy outlook at the moment is, here is some interesting information.

Amex, that’s right, the credit card company generated a 70% increase in profits in the third quarter. The reason why this is important is that the US consumer has started spending again despite the backdrop of high unemployment.

Card holders are spending more and there are fewer late payments.

World-wide transactions were up 14% and the US was just as strong.

There is no recession anymore in the US for those that have jobs, and as confidence grows, employment grows, the US folks who love spending will surge back and ignite a strong global resurgence.

So once this happens, and you see the Dow Jones consistently going up, regardless of what the opinions are of who follows who in the market, you’ll see the Australian equity market/stocks rally strongly as well.

We could be seeing right now the lows of our stock market going forward in the next 6-12 months.

The rising tide that is currently building is going to float all boats. There is a significant wall of money on the sidelines, especially in the US that will be looking very soon to enter back into the market and get out of bonds which are yielding next to nothing in return.

So what does that mean for Australia?

Here’s what I’m doing… Investing heavily into the stock market as well as the real estate market here. I’m not concerned about interest rates, I don’t believe we’ll get any rate hikes until 2011.

With the Aussie dollar as high as it is, the RBA would be concerned about the impact on our export markets if rates go up as well.

I’m also partnering with some astute real estate specialists in America to purchase a truck load of assets there. On top of that, I’m looking for a European vacation home somewhere in the Mediterranean.

Now of course, everything I say here is my opinion. Whatever your circumstances are, you have to consider them different to mine.

So I’m not rushing out to buy a 3D plasma screen or shopping till my heart’s content on the internet… The moral of the story is focus on investing right now like you’ve never focused before because there are amazing times for us Aussies in the corner of the world that we live in for the next 3-5 years.

Signed with Success,

Jon Giaan
Knowledge Source

P.S. What are you doing right now investment wise? Or, am I completely off the rails, foolhardy and got it totally wrong? Remember, I don’t just say stuff – I actually invest thousands, even millions in my opinion. Have a say below, love to hear your opinion…

I certainly am.

Reading all the headlines, you’d think we’re on the cusp of a property crash and diving into another global crisis via a double-dip recession. Run for the hills!!

Add an election to the mix and you’ve got a recipe for massive procrastination.

So what can we make of it all?

Let’s see if I can help…

I think the Reserve Bank of Australia went way over the top with its interest rate hikes. We went from a 3% cash rate to 4.5% in just 6 months.

This was a massive 50% increase and the most aggressive in the western world.

So why did Glen go so hard?

He had eyes only for the property market and the only way he could stop it was by using interest rates as his evil weapon against his perceived property boom.

He’s thinking was… Slow down the property boom and we’ve got a chance at improving the housing affordability of everyday Australians.

Since his crusade 6 months ago, he succeeded in putting a pause on property prices, but only after 6 months of solid real estate gains in most markets.

…and this week, we receive evidence that is he has also killed affordability with the following headline, “New Home-Starts Fall a Further 5.2% in June”

Some uneducated investors see those type of headlines and think we’ve got a serious problem.

Here’s what I think…

The down-turn in new home sales is by and large the product of the end of the government stimulus for first home buyers and the increase of interest rates, which has led to the following problems…

The lack of available land… Chronic lack of development finance leading to a lack of development activity… Council planning regulations taking far too long to release projects… Infrastructure delays in new development areas.

All of this will mean one thing.

That the housing shortage will continue to increase and prices will continue to push upwards… and the people most disadvantaged from this are the ones that the RBA boss, Glen Stevens is trying to help… those who are trying to buy their first home.

So all the shenanigans going on right now will push the expanding population into the rental market.

What does that mean?

Rents will significantly go up in the next 12-24 months.

Great if you’re a property investor, not much good if you’re a tenant.

So what I’m saying here is that there will be no property crash – full stop.

What we’ll see over the next several years is single-digit growth across many markets and if you’re smart and savvy within certain markets, you’ll be able to achieve much better than that.

You see, when most of the stats are quoted, they’re typically an average of all markets. So if we see 6% growth on average, it would not be unusual to have certain areas within property that have grown by 25%…

On the flip-side, some areas may fall by 10%.

That’s why I think you need to stay on top of your game, stay invested in areas that are likely to grow faster than others.

…research, research, research…

On another subject, and that is clearance rates, I often have a lot of fun with this sort of data… But here’s something you probably don’t know.

The clearance rates that the average investor seems to hang off every Monday morning reports only 20% of property transaction nationally.

That’s right, just 20%.

So does it really mean anything?

N.O.

Here’s something else that you need to know – all it really shows is people selling and buying.

12 months ago, we might have had a clearance rate of 55% with 400 properties on the market. In the current climate, we’ve got clearance rates of 67% with 900 properties on the market.

All this stuff is just noise to fill up newspapers and get your attention.

The macro picture (long term) is still so strong for property in this country that you’ll kick yourself if you sit on the fence again.

Interestingly, I was listening to professor Keen the other day and he is still ranting and raving about the 40% drop in real estate. The guy doesn’t give up.

He said that his initial prediction of a 40% drop was over a 10-15 year period… Not 2 years after the GFC hit. He was misquoted.

He also said that the fall would be from peak to trough.

What that means is, let’s say real estate has gone up 30% in the last 3 years since his prediction and it falls down by 30%, then Mr. Keen is right… Because real estate has fallen overall by 30% and it’s created a new peak and trough. (Economists are never wrong – they’ll find a way).

Confused, aren’t you?

It’s just more shenanigans by economists who are perhaps too close to the data for their own good.

My last point for today… What about a double-dip recession?

Here’s all I have to say about that…

It seems to me that everybody has almost guaranteed themselves that this is going to happen. From my experience, when the mainstream press and the man in the street are talking about a double-dip recession, then it’s likely not to happen and in fact go the other way.

Now of course in Australia, we never went into recession. And considering that I don’t think the global economies are going to go into a double-dip recession – I think it puts us in a good position going forward.

Just think contrarian (always go the opposite direction of the herd – most people are generally wrong).

They’re my thoughts.

Probably needs to be said, I failed high school, never did economics, wasn’t very good with maths, have absolutely no financial planning background – so everything I say here is basically my opinion based on my results (8-figure real estate portfolio, 7-figure stock market portfolio, 8-figure business).

…so please, before investing see a certified financial planner or follow the smart money.

That’s all for today.

Signed with Success,

Jon Giaan
Knowledge Source

P.S. So what do you think? Jump on your soapbox and let the rest of the Knowledge Source people hear your views below.