Not sure anyone got my "unlimited supply" reference from the other day.
It was of course a 1970s UK punk rock reference (they always are...), nicked from the Sex Pistols' triumphant, valedictory raspberry EMI, defiantly addressed to the record company of the same name.
Could be wrong on this, but if the bit of my brain that stores punk rock historical facts serves correctly the original version of the single was pressed in limited edition vinyl by EMI records.
However, the sneering song was then later released on the album anyway (hence, "unlimited supply") after EMI had dumped the band following its infamously lewd behaviour on the Today Show with Bill Grundy (somewhat unjustly, Grundy himself was suspended by Thames Television!).
After a wild Pistols frenzy which started in 1976 and saw everything they touched quickly selling out, the band fell apart and had broken up by as early as the beginning of 1978.
If all that happened today, some wag would doubtless christen it a punk rock bubble!
Lots of bandwidth gets taken up these days with discussing what is or what isn't a bubble. Who cares, though, really, as long as you are making money?
I recall a conversation with my business partner in London some years ago about whether the London property market was possibly forming into a bubble or not. I think our conclusion was something like, well, quite possibly yes it was, but were we really going to sit back and not participate in it? Pfft!
A financial 'bubble' can be quite a nebulous concept at the best of times, as underlying fundamentals ebb and flow over time, and the terminology is rarely used with much consistency.
For example, the "commodities price bubble" in iron ore and coal Australia, formed on the back of Chinese urbanisation, is now generally recognised as having been a bubble.
Yet the once-in-150-year surge in mining investment is nearly always referred to as the "mining boom" - not a bubble - even though investment has collapsed over the last four years and billions of dollars worth of capital expenditure would ultimately prove to be malinvestment.
Incidentally, I made lots of money from the mining investment boom, but didn't time my exits all that well, and ended up giving a fairly painful share of the profits back. Them's the breaks - it can kind of go with the territory.
High rise bubble
China's urbanisation has triggered a series of echo-booms in Australia, the most urgent of which right now is the high rise apartment boom. Or should that be bubble?
Well, let's put it this way: Australia is the sixth largest country in the world at around 7.7 million square kilometres. And contrary to popular opinion, Australia does not have a high urban population density, with our cities being comparatively spread out.
Who, therefore, really wants to live in a 60 square metre apartment on the 20th storey of a tower block in Australia?
Some people, perhaps, and probably more so over time due to Asian immigration. But not that many right now. It's probably a bubble of sorts.
For obvious reasons I can't name any individual stocks here, but off-hand I can think of at least half a dozen different ways that you can potentially make money from this trend on the short side, if you have good market timing and money management skills (think developers, materials companies, mortgage insurers, banks, financiers, household goods retailers, real estate agencies, and so on).
Ratios shifting (from Rotten to Vicious)
While new apartments were selling like proverbial Sex Pistols singles through the mania of 2015, unfortunately the outlook for the supply pipeline is now starting to turn from Rotten to Vicious.
And it's becoming apparent that the new apartment sector is ultimately destined for a shellacking.
That said, even if the construction industry operates at full capacity it will be basically impossible for the line to plumb the depths seen in 2004 unless population growth drops considerably (this can happen if the right circumstances prevail - in 2004 annual population growth in NSW fell to just 30,000. Today it's more like 105,000!).
You can clearly see the impact in the chart above.
But higher prices and potential profits are a powerful motivator that will overcome NIMBYism every time until viable new apartment projects are magically discovered and then approved.
On this point, some people will say 'I told you so', and that's fair enough. Some of them have been getting the market wrong for nearly a decade now, so I guess they're overdue a win.
That is to say, Melbourne generally has delivered supply more freely than Sydney, in part because it can sprawl more easily at its city fringes.
In short, Melbourne is the population growth king, which could prove to be the market's saviour.
There are some other factors which make this cycle unlike any that have preceded it, including record high rise apartment construction, and huge demand for new dwellings from mainland China. Many of these apartments are very small, and many arguably may remain empty.
These factors could mean that the dwellings constructed may each provide shelter for fewer persons on average than we have seen through cycles past.
It's only when demand for housing falls away that the true picture is revealed - and this is when I believe the weakest sectors of the market will at last be exposed. This is what last happened in Sydney from around 2004.