Back on 6 April I told you iron ore was shaping up to be a surprise runner. Lo and behold! Iron ore has gone over US$180 a tonne.
It’s astonishing how much revenue and profit this is going to drive through the stocks producing and selling the stuff right now.
Don’t forget the headline iron ore price is in US dollars. In Aussie dollar terms the high-grade material is well over AU$200.
This might run longer than anyone is currently thinking or pricing in. The steel market in China is absolutely booming.
That’s not all…
The latest news from the Australian Financial Review says that Brazil’s Vale — Australia’s big competitor in the world of iron ore — underwhelmed expectations with its latest quarterly result.
Now put yourselves in the shoes of the West Australian premier. His main commodity is flying! No doubt he’ll find all sorts of ways to spend the resource rents.
This just makes me even more bullish on West Australian real estate than I already was.
Government spending isn’t the only thing. All these iron ore profits and wages are likely to drive a huge boom in real estate over there.
The Crypto Market
We can think along similar lines when it comes to the crypto market. One thing traditional property analysis doesn’t account for yet is the rise of this asset class.
There are two angles to this line of thinking. One is simply the profits from crypto appreciation showing up in increased buying power for locations in demand.
I can say this with certainty. A friend of mine loaded up on Bitcoin [BTC] at the recent bottom in 2019. He’s now looking for a house — and will be paying cash.
But there’s more to crypto than bitcoin. Some of the ‘alt’ coins have been roaring this year — I’m talking gains in the thousands of percent.
Some of them have outperformed bitcoin…and you know how well that has done.
These profits will show up in Lamborghinis and trophy properties the more they continue. And why wouldn’t the monetary madness continue?
All over the world the mantra is the same: life at zero interest rates is driving people to alternative assets.
Considering there is little point leaving your money in the bank, people won’t leave it there. They will chase capital gains and income wherever they can find it.
A tidal wave of money could continue to flow into crypto for this reason alone. But there’s much more to all this than that.
The crypto market is currently developing an alternative financial system that includes the infrastructure of the traditional system such as futures, derivatives and exchanges.
This infrastructure is the very thing that needs to be in place before institutional money can come in. They need these tools because of their portfolio structures and risk parameters.
Oh my goodness what a crypto craze we’re likely to see over the next five years.
And as far as real estate goes, we also have the prospect of ‘fractionalised’ property looming.
This is where you’ll be able to buy small parcels of real estate in the same way as you can with companies on the share market.
Such an idea will be very attractive to those who can’t, or aren’t comfortable, leveraging themselves to the hilt to get into Australia’s property market.
The one thing we can say about crypto is that experience in this new market counts. When I want to know what’s happening, I turn to my colleague Ryan Dinse.
He’s been trading this market for years now. I remember writing back in 2019 that Ryan bought his newborn son a bitcoin for $7,000.
His son nearly has $80,000 worth of BTC and he’s only two years old.
Thanks Dad!
It takes a bit foresight to pull off something like that. But it shows you what’s possible in the crypto market.
Some say crypto is too wild to participate. I say it’s becoming too big to ignore. Make sure you follow what’s happening here by going to this link to hear the latest from Ryan on what’s happening. Is the latest drop in bitcoin a buy? Go here to find out.
Regards,
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Callum Newman,
Editor, The Daily Reckoning Australia
PS: Australian real estate expert, Catherine Cashmore, reveals why she thinks we could see the biggest property boom of our lifetimes — over the next five years. Click here to learn more.
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