Towards the end of every decade, a new bubble seems to emerge in the financial markets. It normally starts out plausibly, and gets a head of steam, before running to ridiculous levels – and then running some more, before crashing back to earth.

In late September 1969, a small exploration company called Poseidon NL made a promising nickel discovery in WA, causing their shares to run from $0.80 to $280.00 in just a few months. This sparked a boom across the mining sector and amongst small explorers in particular. By February, the stock had peaked, eventually falling back to a few cents per share, taking a raft of junior explorers with it. Fortunes were made and lost on the back of often spurious or highly exaggerated claims. A parliamentary enquiry was established to find out what went wrong and to ensure the hard lessons were learned.

Nonetheless, by the late 1970s, the markets were at it again. This time, it was the energy stocks and junior gold stocks. Again, we saw spectacular gains and, after early 1980, spectacular losses. And nothing learned.

By 1987, the entrepreneurs were in full flight. Alan Bond, John Spalvins, Bruce Judge et al used smoke and mirrors to produce huge gains for shareholders – and then lost the lot. A different time, a different story, but the same end result. And so it was with the tech boom in the late 1990s – another great story, leading to insane prices, PEs of around 100 being paid on the back of frothy growth expectations. And, in time, disaster.

We may not have to wait too much longer for this decade’s instalment.

Try this on for size – the US REIT market now trades on a PE of 31, but unlike the tech stocks, they grow earnings in the long-term at only 2% to 3% per annum. And now the private equity players are getting involved, no doubt intending to on-sell the assets at even higher prices down the track… and there may well be enough bunnies around for them to get away with it.

Of course, global property isn’t just about the US. It’s really about all the fabulous opportunities in the emerging REIT markets around the world, markets where exciting floats and the opportunity for re-ratings abound. Markets like Hong Kong, where new floats use a little financial engineering to boost yields and make sure they do well in the early days. Little tricks like borrowing arrangements that have very low interest rates in the first few years, where fund managers don’t charge fees for the early years, or where vendor shareholders forego their rights to distributions for the first few years. Or, if new listings don’t appeal, you can always buy into existing property securities in Hong Kong at yields of 2.2% – or, for that matter, UK property securities at yields of 1.7% or even Japanese securities at yields of under 1%. You can really see those yields being re-rated down a long way, can’t you?

A world of real estate opportunities?

Its nuts and you can clearly see its nuts.

Tim Farrelly is principal of farrelly's, the Australasian financial services industry's first dedicated asset allocation research house.