When they build a new hotel – SELL

I live in the Margaret River region of Western Australia which I have learnt can be a barometer for Australia’s commodity cycle and currently it tells me that this industry is not in a “boom”.

If that’s the case, this is OK as I’d prefer to initiate an investment before an advance occurs and not in the midst of such a frenzy.

There are many houses for sale in my part of the world, which is a beneficiary of Perth’s mining centric prosperity, disposable incomes and financial windfalls.

In fact, Perth metro is also seeing an increasing supply of houses for sale, although I can’t comment on whether it’s a function of  listings due to the seasonal selling period, old stock that has been on the market for longer than normal or new listings due to financial stress.

Don’t get me wrong – My anecdotal experiences are telling me that Western Australia’s commodity economy is growing nicely.

Nicely is just fine. We should be pleased with “nicely”. Remember that all booms, end up going “BOOM”.

Commodity prices and their underlying equities will ebb and flow (prices don’t go up in a straight line) through a revival of this supply and demand story, although it would be nice(ly) if the media omitted the greedy and fearful emotions that the words booms and busts invoke.

Whether a boom, fever, mania, frenzy, stampede or bubble develops I’ll keep you posted on the property barometer that we have “down south”, however I think I may have found another indicator for investors to watch.

I recently stayed in a couple Perth CBD hotels. They both had quite a tired appearance, offered ordinary service and not much change was left from A$400 per night.

Soon after my visit, a friend had stayed in a Perth hotel and had made similar observations. That week, he asked folks the following question, “When was the last time that a major hotel was built or even renovated in Perth?”

A: 1987 (when Perth hosted the America’s Cup defence)

So, when you hear that a new hotel is being built in Perth (or even renovated), perhaps commodities may be establishing a peak in its current cycle.

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