Mortgage Land Prosperity

Kondratieff Winter Survival Guide

Now that the winter is upon us, how can we best navigate this most challenging cycle phase of the Kondratieff Wave? This section is dedicated to providing guidelines and insight for that very purpose.

First and foremost, we must not allow fear to permeate our condition or our decisions because obsessing about our woes prevents us from making the most objective decisions for our prosperity. It’s no fun either. And the central theme of the Kondratieff Wave theory is that the destruction phase is most beneficial by providing the means for the renewal of prosperity that follows. It purges much needed excesses from the system that allow more creative progress to unfold that creates more prosperity for us all. Because historical evidence supports this, we should embrace it rather than fear it. Ideally, I would prefer the harshest, swiftest kick in the rear possible so we can begin anew with a better foundation sooner. Until then, we must adapt to the reality of prevailing market conditions so we can preserve our wealth and prepare for the Kondratieff Spring around the corner. So let’s now examine these conditions to help define where we are in this winter cycle so we can better manage our financial affairs.

We have entered the period of the cycle marked by a deflationary asset bust and slowing global GDP growth. Paper assets, including tangible assets such as homes and land, had appreciated for decades and were due to reverse course. However debt levels had risen over the past few decades to all-time highs and drove asset prices even much higher than they would have under previous cycles. Home prices in the US rose every year since the end of the Depression in the mid 1940’s through 2006, over 60 years, and thus still may slide further until an equilibrium is found. The debt wave that just recently peaked was fueled in great part by new financial alchemy of structured finance products that compounded the leverage even more. Clearly, the great de-leveraging of assets will continue into the foreseeable future and thus it is prudent to avoid making any investments of securities tied to the credit process until this de-leveraging has run its course and the global banking system is on more solid ground.

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