In this episode, we had the privilege of speaking with Akhil Patel, a globally recognized expert in economic cycles, discusses the 18-year boom-bust pattern and warns that we're approaching the peak of the current cycle in 2026, with a major financial crisis likely in 2027. He analyzes the AI investment bubble, draws parallels to historical manias, and provides practical strategies for businesses and investors to prepare for the downturn.

Episode Summary 

1. Understanding Economic Cycles -  Akhil Patel explains why cycles matter, emphasizing that cyclical patterns appear throughout nature and human behavior, particularly in stock markets and economies. Understanding these rhythms helps predict both prosperity and crisis periods.

2. The 18-Year Cycle Theory - the hypothesis of a regular 18-year boom-bust cycle (sometimes 16-20 years) in Western economies, particularly the US and UK. This pattern, first identified by economist Homer Hoyt in the 1930s through Chicago land sales data, has preceded every major financial crisis over the past 200 years.

3. Land Values Drive Cycles - Land is identified as the key indicator because it's a scarce, monopolistic asset that captures economic surplus. Property prices and speculation patterns serve as the primary mechanism driving both the boom and bust phases, with banking credit amplifying these movements.

4. Current Cycle (2011-2026) - Walking through the present cycle, Akhil identifies 2011-2012 as the starting point following the 2008 crisis. The COVID pandemic compressed what would normally be a 7-year second half into just 2 years of mania (2020-2022), though we're still seeing bubble behavior in AI investments arriving on schedule.

5. AI Investment Bubble Analysis -  The current AI sector exhibits classic bubble characteristics: inflated valuations disconnected from fundamentals, enormous capital investment with questionable returns, and incestuous interconnections between major players (Nvidia, OpenAI, Oracle). Parallels are drawn to the dot-com bubble, 1980s Japan, and 19th-century railway booms.

6. Crisis Timing: 2026-2027 - Akhil predicts the property market will peak in 2026, with a major financial crisis following 6-12 months later in 2027. The trigger location is uncertain but likely in areas with extreme speculation—possibly the Middle East, parts of Asia, or unexpectedly in Germany, rather than the US which remains cautious after 2008.

7. Practical Preparation Strategies - Key recommendations include: avoid leverage, build cash reserves, ensure businesses can survive revenue declines, don't buy based solely on capital gains momentum, and position to acquire assets during the downturn. The advice emphasizes survival first, then opportunistic expansion during recovery.

8. Future Outlook Beyond Crisis - Despite the predicted downturn, Akhil remains optimistic about the next cycle (post-2030), believing AI and blockchain technologies are genuinely transformative once properly applied. The tech sector typically leads recovery, offering significant opportunities for those who survive the crisis with resources intact.

This is the Data Science Conversations podcast with Damien Deighan and Dr. Philipp Diesinger. We feature cutting -edge data science and AI research from the world's leading academic minds and industry practitioners, so you can expand your knowledge and grow your career. This podcast is sponsored by Data Science Talent, the Data Science Recruitment Experts.

Welcome to the Data Science Conversations podcast. My name is Damien Deighn, and I'm

here with my co -host, Philipp Diesinger. How's it going, Philipp?

Good. Thank you,Damien. Great. So today we're doing something quite different to the norm. We are very excited to have Akhil Patel here with us talk about the economic cycle and what the short and long-term implications are for the current boom in the AI and tech sector, given that the Gen AI sector in particular has had a flood of investment in the last two to three years. By way of background, Akhil is a globally recognized expert in international finance and economic and market cycles. He is currently the director of property share market economics, and he's also the principal policy advisor at the European Bank for Reconstruction and Development in Canary Wharf and London. He specializes in making robust, short and long -term market forecasts, including annual stock and commodity market roadmaps, and identifying key market turning points. His work has been widely featured in both business and mainstream media, such as the BBC, Scottish TV and the influential UK Financial Magazine Money Week. Prior to his current roles, he also worked in the UK government in the Civil Service, where he helped to set up the £3 billion international climate fund.

Academically, he went to Oxford University, where he obtained a degree in the classics and he holds two master's degrees, one in finance, and another in public policy from the London School of Economics. He is also the author of one of the most influential economics books published in recent years, The Secret Wealth Advantage. Welcome to the podcast, Akhil.

Hi, Damien. Thank you very much for the introduction.

So maybe if we start at the high -level you, Akhil, can you maybe explain to us why it's important that people are paying attention to and have some understanding of cycles?

Well, the world is cyclical. The sun rises in the morning and sets in the evening. We're born and die. Nature has cyclical rhythms. They're everywhere. They're all around us. It's particularly cold and rainy day in London, reminding us that the seasonal pattern is well and truly intact as we move in through autumn into winter. So the world is cyclical. What's really interesting is human beings display cyclical behavior in many areas. And one of the areas that I'm particularly interested in is the stock market. You see stock market cycles quite regularly, both short and long term. And also longer term, you see cycles in the economy. So you get periods of kind of rising prosperity and rising activity and then suddenly periods of falling prosperity, falling activity, and indeed sort of crises. And I think probably a lot of your listeners have, over the last of 10 to 20 years, experienced both the kind of the upside and the downside of all of that. And that's kind of essentially getting a handle of the rhythm of the cycle and what it might mean both where you are currently and what might be coming next.

I think is quite important. And one of the cycles you're particularly interested in is the 18 year cycle. Could you walk us through your hypothesis of that and explain how it works, please?

Yeah. So the hypothesis is, and there's quite a bit of evidence behind it, that there is an actually fairly regular 18 -year cycle. It's sometimes a bit shorter at sort of 16 to 17 years and sometimes a bit longer at 20 years, but it's pretty regular. There is this cycle of boom and bust. And so all of the kind of major financial crises, recessions and so on in the past of 200 years in predominantly Western economies and in particular the US and the UK for which we

have the kind of longest running data and that's partly a function of the fact that they've been the most politically and economically stable countries over that period.

You can see that there is this sort of 20 year pattern which always kind of results in a major financial crisis and recession stroke depression at the end of it. And on the other side of the cycle, you get some relatively lengthy periods of increasing activity, increasing wealth and prosperity, business profits and so on.

So you talked about data. Maybe I'd just give us an overview of what the typical data sources are that you formulate your forecast and analysis from.

And so, you know, you can use the stock market data of home builders, for example, to get a sense of what's going on in the property market, which gives you a sense of what's going on in the broader economy. Eventually, most Western countries of any size are synchronized to the cycle.

Germany as an example, but also Japan, which had a very major boom in the 50s and 60s, had a actually relatively minor crisis in the 1970s when we had a major crisis in Western economies. But kind of very famously, 18 years after that, had a really, really significant crisis in the early 90s. I think the real question as we go forward now is the extent to which China also exhibits the same pattern.

Now, the Chinese economy is a bit different. As I'm sure you're aware, it has sort of capitalistic characteristics, but also has very, very heavy state intervention. But the signs are that, you know, in the Chinese market, property plays a central role.

There's a lot of leverage against property. Decision makers are also kind of reacting to all of those things and potentially it is also synchronized but you know we have to wait i think a little bit to see the actual evidence on that yeah and you have highlighted a couple of times the the importance or the value of land or property values if i understand correctly your argument is that really said land values captured the the surplus of growth right so like they they pull construction, speculation, and so on.

Can you elaborate on that a little bit?

Yeah, so any activity in the economy requires a bit of land because it has to take place somewhere. And people tend to congregate for hopefully fairly obvious reasons in the same

places. So land is essentially a scarce asset. It doesn't get created. It's just exists. It's a kind of a what we say is a gift of nature. Therefore, whoever owns the land has monopoly pricing power. And so while there's a lot of competition in the labour market for people, and there's a lot of competition in the general business, kind of capital investment in other markets, so the competition reduces the surplus that anyone can make and the residual kind of values by the

lands. Now, you know, you might be an owner of the property in which you're doing your business and so you might not have to pay that over to a landlord, but actually a lot of businesses do. And so you might not necessarily always see it, but the extent to which you are making profits, it tends to get funneled into the land market. That means that it is a very great asset for speculating in for buying land and then holding it and selling it for higher price tomorrow is also underpins the collateral in the banking system so banks can push kind of credit into into the property market that enables people to pay more for land and so on but you know when it comes down it then affects what the banking system can do as well so it has a sort of a dual kind of role in in both the kind of the boom in the bus side of the economy yeah and probably would also play a key role in terms of features or data -driven indicators or so that you would use if you could build you know a cycle dashboard now like what would be the top leading indicators you would put on that dashboard to to spot the kind of the turn of the market is it like land block prices construction Well, yeah, construction activity is one.

I mean, house prices is obviously where you see some of this. I think house prices, so land is a very locational asset. And what you tend to find towards the end of the cycle is that the most kind of speculation is taking place in relatively small towns or in places at the edge of city. So if you've got your eye on what's going on in those markets, you might start to see the beginning of a downturn. Obviously, if banks are pumping a lot of money into the economy, it's actually probably largely going into the property market. And so you can get a sense of whether things are accelerating or declining by following kind of the money supply and sort of derivative indicators of that. I also like to use the stock market, as I mentioned at the beginning, because if you've got home building stocks that are showing a decline while while the broader market is rising, that suggests that those analysts who study the stock price and the earnings of those companies are suggesting that in the future there isn't going to be quite the same level of earnings and therefore that bit the stock price is pushed down. At key points in the cycle, that's suggesting there's a slowdown coming in the property market, which potentially means problems in the broader economy.

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And now we head back to the conversation.

investing and doing business in the US still remember 2008. And the US, I think was at the center of that sort of major boom and then crisis, it's quite likely that the central part would be some other place. I mean, obviously, the US is going to be part of it because it's the world's largest economy still and so on. But maybe the sort of the main kind of trigger point might be elsewhere. And there are a number of areas of the world which have been going really quite crazy over the last few years in terms of construction and speculation. The Middle East springs to mind, but parts of Asia. Japan had a very muted cycle last time, but things have been motoring quite significantly then. Germany didn't have much of a property boom in the 2000s, but my understanding has had a very significant one since the start of the current cycle. So, you know, you might see things start off in a different way towards the end of this cycle. It's quite hard to predict in advance where that might be, but you tend to look for the countries that have experienced the most kind of rapid increase in property prices, the most kind of construction, particularly at this stage, the most optimism and sort of excessive behavior.

That kind of gives you an indication of where things are going most over the top. So essentially what you're saying is the second half of this particular cycle, it normally takes seven years of steady upward to the peak, we saw two years of mania after lockdown, which has kind of not interrupted the cycle, but it's maybe changed.

It's trajectory. I mean, COVID was incredibly disruptive in any number of ways. I think, as I said, you know, the amount of money pumped into the economy and directly into people's bank accounts was relatively unprecedented. You also had this situation where you denied people for several months, normal economic activity. And so when they emerged from COVID with record savings, they really went for it. Also at a time when quite a lot of businesses had shut down and supply chains had been restricted. And so sellers had much greater pricing power and you had demand that was relatively price and sensitive. So we had a burst of inflation and people still kept going on holiday and going out to eat and so on, and a time with less competition. And so that really created an enormous amount of activity. Plus also people had started, you know, putting their money in the stock market and in crypto and other things. That sort of behaviour you would normally expect to be towards the end of the second half the cycle. So in my, it might come on to the book that I've written, but the final two years before the peak tends to be the one with the greatest kind of mania. Maybe this cycle around a variation is that we got most of that really excessive behavior, you know, early on in the second half of the cycle. But I would say, though, given the share price of companies like Nvidia and so on and what's going on in the AI space, we are seeing some pretty manic behavior right on time. So it's not that it's all in the first couple of years, but it appears to be some kind of change or variation for this cycle, which, you know, does happen from time to time.

Moving it on to AI then, what's your view on the AI investment surge of the last few years? And do you think it's, we're in a bubble?

So I don't think it would trigger the crisis, but would be affected by it, of course. Maybe, you know, I understand that, you know, the country is affected by the Euro crisis last time Ireland and Spain and so on, have had another very significant property boom, it might start there. Maybe the left field suggests would be somewhere in Germany. So I think the German government was sort of quite pleased at how it handled the last crisis because it hadn't had much of a property boom, didn't need to bail out the banks in the same way that the US government did and the British government did. Maybe people there are less kind of aware of the consequences of some of these things related to the property market. I think that would be quite interesting. But, you know, on the other hand, things are quite flat in Germany, as I understand, given sort of the effects of decline in manufacturing and, you know, the Ukraine war and so on. So usually tend to find that the triggers are where there's been the most rampant speculation. And you wouldn't say that's necessarily the case in Europe and in Germany in places like that. So I'd say the Middle East is probably more of a likely bet.

In terms of looking at previous bubbles, do you see parallels between the current AI investment bubble and maybe the dot -com boom and bust? Or are the differences?

So I think there's a parallel there as well.

Yeah, I think it's going to be super interesting because back at the dot -com era, AOL were the big kings. They were huge. They were the dominant player because the internet ran on dial -up modems, if you remember them. And then the switch to broadband came really quickly and AOL became history. So I think Let's see if Open AI turned out to be the AOL of this bubble. Let's see.

But I think the parallel you're talking about in relation to all of the interconnectedness is a really good one. Because in the last couple of weeks, we've seen this crazy high -value deal between Oracle and Open AI, where Open AI is supposed to buy an outrageous number of chips and infrastructure from Oracle and of course Oracle's share price goes through the roof and OpenAIA cannot ever afford to fulfill that contract. So I think those things are clearly happening.

So if you were to get your crystal ball out, Akhil, and pin down maybe a more precise period. When do you think is the likely six to nine month period, if we can be that precise, that the next crash will occur?

What does peak mean?

Yeah, top of the property market the top of the land market, so you don't get any further appreciation in, well, the residential land market, but we don't measure residential land. So it would be residential prices will stop going up. They may not go down initially much either. It might kind of go sideways for a bit of time. And, you know, there's some argument to say that we're kind of starting that period now. I just think that we'll get a bit more before the peak, but that's kind of my opinion. Often the data is a bit lagging. You know, you see what's going on until like two or three months after the event. And so I'm talking about that rather than the stock market. The stock market tends to peak after the top of the real estate market.

So how could this play?

Do you think we could see like the US or the UK or some major Western company have a sovereign debt default at the end of this?

Maybe central banks have been buying up, it seems, a lot of gold, diversifying their reserves. American rivals, particularly the BRICS countries, have been looking to create a new kind of financial system that's not so much dollar -based, maybe commodity -based, maybe maybe the bigger role for the Chinese currency or a basket of currencies. And so the kind of the way that the crisis will play out is going to be different. And that might involve Western countries having less of a haven kind of role, partly because they're so indebted and partly because there are alternatives.

And so that, I think, will create quite significant levels of panic if it looks like potentially there might be default. I mean, these countries can't actually default unless they have very significant foreign obligations. So, i .e., they've borrowed in currencies that are not their own. If it's their own currency, you know, they can just print as much as they need to to make good on their obligations. Of course, there are consequences to that, but that, you know, they'll never be a technical default.

Okay. Talking of safe havens, there's a definite belief in the tech sector that Bitcoin is the new gold. Given this crash is coming, how do you see Bitcoin? Because that also appears to be the other part of the tech sector where there's a bubble, right? So how do you see

that thing out?

I mean, I had that thought for quite some time. I've been a bit surprised by the price action of Bitcoin in the last sort of few weeks given what's happened to gold gold has surged up towards four thousand five hundred dollars silver above fifty dollars for the first time ever and bitcoin is really not it's had to move up it's had to move down it's it's been it's been slightly strange if that were the kind of thesis that it's going to also be part of the mix it's maybe a bit early to conclude either way on that but i'm not sure that the the thesis is as sound as I thought it was earlier this year. But I'm prepared to wait and delay my judgment on that. I think the reality is, though, that when you get to the end of a cycle, when you have a crisis, people have to park their money somewhere. You know, above a certain level, you can't keep it in the bank. And you might wonder if deposit insurance is even going to work. So where do you put it? And, you know, some of these pretty tech companies are sitting on enormous amounts of cash. the US dollar too much and the US government. Maybe that's where things end up for no other reason that it's tried and trusted and is of a size that people can use. But there's also the gold market. Bitcoin indeed might be one of those markets. And

then the rest is, you know, you'd have to sort of look at, you might have to keep your money in different types of property or, you know, parts of the stock market. Maybe, you know, Invidia and so on will actually increase in value because of that. It's quite hard to say we're coming out of a cycle with the kind of international financial arrangements quite different to where they were when we started the cycle.

They take 20, I think it was 20 or 25 % they took off all of their customers, the banks in Cyprus, to stay afloat. And of course, many of their business customers went bankrupt.

Can you see any, do you think bail -ins are possible?

I think they are possible. I think they're more likely in countries where, you know, they can't have access to their currency and they need a way of bailing out those institutions. And I think I'm looking in particular at Eurozone countries where, you know, the ability of the government to acquire euros in a crisis is contingent on a lot of things and it usually depended on decisions made in Brussels or in Luxembourg. Sorry, not in Luxembourg, where is the ECB based, wherever that's based. So I think it's not universally going to be the case. I think many banks so many governments have given themselves the option, but I would be very surprised if it's a widespread thing. But using the adage of never let a good crisis go to waste, I think they will use these crises to advance other kinds of policies like digital currencies and things of that nature or more widespread use of stable coins in the US. That, I think, will change the dynamic of bailouts and stimulus and so on. And I think we've kind of had a taste of this already if those of you who were in the UK during COVID might remember the help out to eat out. You basically were given money on a time -limited basis to use in a certain sector of the economy that was particularly badly affected by COVID, i .e., the hospitality industry. you could do that in a much more widespread. if that didn't take place because that would be directly stimulating the most negatively affected parts of an economy during a crisis. The problem is that it gets caught up in politics and other things and people may want to save and maybe you might be contingent on you having a clean social media platform and so on. I don't want to get too far down that route, but the technology is there for that to happen or potentially close to being there for that to happen. And I think Like, bond market and so on, it sort of, it will depend. I think it's not a given that it'll be at zero. Inflation will certainly drop in a crisis unless there's an enormous amount of stimulus going in, which and going into areas which generate inflation. But otherwise, you tend to expect disinflation and deflation and that's when interest rates drop. So we'll see that. The comfort that I would draw, maybe not so much that i think example, as the collection of tech stocks in the US tends to start moving upwards first as you get to the recovery phase of the cycle. And that is symbolic of the fact that there's a lot of capital and investment in ideas flowing through the tech sector. So if you're involved in that space, I think it can be quite exciting times because there are a lot of opportunities, there's space to set you know, investment capital looking for a home and so on for good ideas. And so the recovery takes place first in that sort of area. And, you know, let's face it, we're only scratching the surface of the potential of some of these technologies to make things better. So while I think we are in a bubble, I think there's a lot of over and man investment in the AI space. Fundamentally, the technology is totally game changing when we find the rights of applications and it gets to the right sort of quality and so on. And similarly, a lot of the crypto coins, I think, are just kind of a load of rubbish. The technology is also game changing in terms of revolutionizing payments and the way that people contract with each other and the speed at which this can happen and so on. Having a secure way of transmitting information quickly, wherever you want and so on. I mean, it's going to fundamentally reshape the economy. And so the productivity gains that we will see in the next 10 to 20 years, I think are going to be absolutely enormous and gives me a lot of optimism for kind of the next cycle in the future. So, you know, the key thing with all of these things is to be able to survive during the downturn. And if you can do that and, you know, still have the ability to invest or to make decisions not based upon the fact that, you know, out of necessity, but out of opportunity, I think you can be in a really good position for the beginning of the next cycle. And that, you know, tends to be the really best time to be investing and expanding and so on. So what do you recommend then people do now as we're entering this final stage 12 to 18 months before the crash well it obviously depends on you know their circumstances and what they're doing and so on i mean i think i'll only say one or two things of a generic nature the first is if you are invested in things like crypto and the stock market i mean please make sure you're not over leveraged you know maybe don't commit more money into those things maybe build up a reserve, make sure that you're, you know, you're not buying things on the basis of the capital gain just because it rose 20 % last week. It's going to, you know, you're doing so on the basis that will rise 20 % next week. Stick more to fundamental values. And then the other the main thing is we're potentially at a time of relatively difficult conditions. and you need to be able to kind of assess your businesses, your investments and your borrowings. And under different scenarios, like, you know, you decline in revenue of X percent and so on, you can survive. So you have the ability to reduce your costs. You have the ability to continue servicing your lending, your debt. And just be sure that for a few years, you won't be forced to sell something that you don't want to because you definitely don't want to be selling during a crisis because you won't get a good price and you'll be forced to sell your best stuff which you really don't want to do so I think those are the kind of two main pieces of advice that I tell people now you have to apply that during circumstances as a business owner or investor or you know employee or whatever it is you're doing what would be your fundamental advice to business leaders or to founders even maybe even in the tech space.

In the tech space, and during a downturn. Yeah, approaching one, yeah. Approaching a

So as we head to the close, Akhil, could you give us a brief snapshot of your book and what's interesting about that?

Yeah, okay. It's called The Secret Wealth Advantage, how you can profit from the economy's hidden cycle. And essentially, I have structured it as a journey through the cycle. So I take the reader through each stage of the cycle. I use a different episode from history to outline how that stage of the cycle plays out what you need to look out for in the current moment when you get to that point in the cycle and then also ideas as an investor or a business owner of making investment decisions. I also explain why the cycle happens.

So we talked earlier about kind of the role of land and land taking the gains of, you know, progress and development. I explain why people don't see the cycle, typically how money, banking and so on fit in, why, you know, investment managers tend not to kind of understand how to navigate the cycle and how to kind of stay safe in terms of avoiding getting caught up in a little fraudulent activity that tends to be around at the peak of the cycle. So it's both explanatory and kind of predictive and gives hopefully people a clear idea of how the cycle plays out and how you can take advantage of it.

Great. And how can people learn more about your work at property, share market, economics, your company?

Yeah, so if any of this is of interest to people, I think the simplest thing is just to go to our home page, which is www.propertysharemarketeconomics.com and sign up to our free newsletter. So it's completely free, just entry your email address. There's also on our homepage access to some of our archive material. So you can see what we wrote and said on podcasts in the past, some of the market calls that we've made. And yeah, I think that's probably the easiest thing to do.

Great. And I would just finish by saying, obviously, I'm biased. I've been subscribed to Akhil's work from his very first newsletter. But what obviously that has given me is watching and make these predictions and then in real time they become true. And what's unique about Akhil, in preparation for this podcast, he sent us two articles that were published.market reach all -time highs, and that's exactly what happened. And you don't get too many economic forecasters that do that. They make a prediction. It's wrong, eight times out of 10, and then they never refer back to the predictions that they made previously. So I think his stuff is stellar. Please go and sign up for his free newsletter. So that concludes today's episode. Akhil, thank you so much for joining us today. It's been an absolute pleasure talking to you.

Thank you so much for having me. I've really enjoyed it.

And thank you also to my co -host, Philipp.

And of course, to you for listening. Before we leave you, just quickly mention our industry publication, the data and AI magazine. It's free. It's packed full of insight into what's happening in the world of enterprise data and AI. And you can get that free copy at data science talent .co .uk forward slash media.

And of course, you can check out our other episodes of the podcast at datascienceconversations .com. We look forward to having you with us in the next show.

Thank you for listening.