Roll forward to 1991 and Forbes Magazine reported in an interesting article on car sales that the Mitsubishi Eclipse was easily outselling Chrysler's Laser in the US, the Japanese Eclipse averaging more than 100 sales per dealership as compared to a disappointing dozen or so for the American Laser.
I studied history in my undergrad days, with a particular focus on economic history. Unlike most young lads, I was never all that interested in wars or people blowing each other up, but I always wanted to know about the Industrial Revolution, how people survived in the Great Depression, how World War I reparations resulted in hyperinflation in Germany, and how economics brought about the conditions for World War II.
-I've lived in one of the world's wealthiest nations (yep, that's us - Australia) and one of the poorest, recovering from a modern genocide. I know people who earn 7 figure salaries and people who labour in a tropical climate for a few dollars a week. Since we have food and clean running water, the things that people in Australia complain about are, in the main, trivialities. We're lucky;
As noted, these views may not be right, but, my experiences have made them a part of my reality.How does this impact my views on investing?
-You need to protect yourself from inflation. Hold assets that are inflation hedges;
-Don't only rely on your job for financial security;
-I worry about people putting too much faith in one company or a handful of companies. History shows they can and do go under. Diversify into index funds or LICs, at least until you are a very experienced investor;
-Similarly, company pension schemes can blow up, and new defined benefit pension schemes are almost non-existent these days. You need a better financial plan than relying on the state pension and compulsory superannuation contributions;
-Property in regional areas and cities that are reliant on one or two industries can be devastated by recessions. I've seen this first hand in Britain since through several recessions.
It's no coincidence that our company has offices in London and Sydney, and that's also where I choose to invest in property.
Britain was heavily impacted by the financial crisis, and house prices fell from peak to trough by 14% (or 17% depending on your source).
But, as I noted at the time, prices in London and Sydney were never going to collapse. I explained the reasons in more detail in this blog here. Put simply, in large, mature cities, the ratio of new housing to existing stock is tiny, and:
"Land is a factor of production and the demand for it is derived from the demand for housing. Changes in house prices may have consequences for land prices, but it does not follow that changes in land prices will necessarily have consequences for house prices."
Developers are not charities - they are price-takers not price-makers - and when property markets stall, unless developers are otherwise so incentivised, new developments dry up.
London and the south-east of England now has a chronic housing shortage which will take more than a decade to be addressed. Sydney never really had that much of a downturn so construction levels are presently strong.
These are all part of the reasons that property markets cycle. Sentiment ebbs and flows, but stick to the right suburbs of the major capital cities and you tend to do well over time.