Conversation with Tim Moffatt: Practically Applying the 18.6 Year Cycle to Investing

TL;DR

Phil Anderson and Akhil Patel sit down with Tim Moffatt (Managing Director, Oakleigh Investment Management) to discuss how the 18.6 Strategic Investment Portfolio applies the real estate cycle in practice. Capital preservation is the center of the circle; the fund is already shifting defensive (running cash, cutting non-performers like Commonwealth Bank and Wesfarmers). Akhil warns that passive/index fund dominance — now ~80% of inflows vs 20% active (inverted from 20 years ago) — creates a herd-exit risk at cycle top: “everyone is selling those same assets at the same time simultaneously.” The conversation walks through a live Mex Pete trade (silver, ~100%+ gain), the problem of when to sell breakouts, and how new-highs lists reveal sector rotation ahead of the crowd. Phil closes with the observation that Trump’s noise is the “perfect foil” — distracting everyone from the cycle completing.

Key Points

Capital Preservation as the Foundation

• Akhil: “Capital, the way we’ve tried to manage money is the center of the circle is capital preservation at the end of the day. It’s the primary and the most important piece of the puzzle.”
• The fund is already running more conservatively than 12 months ago — building cash, trimming positions, exiting non-performers.
• The four-phase cycle framework drives allocation: fully invested in growth phases (primary + secondary expansion), more conservative in mid-cycle, full capital preservation mode at cycle end.
• Akhil’s key stress point: “making sure that as we get to the pointing end of this cycle, we are not just going with where the crowd’s going, which is being fully invested and gung-ho and aggressive, euphoric, right at the most critical, dangerous time.”

Passive Investing Herd Risk — A Systemic Threat

• Index fund dominance has flipped: 20 years ago 80% active, now ~80% passive. “A million, $100 million goes in one day, it’s all just has to go into those big companies.”
• Australian super funds are mandated to hug the index — performance testing rules mean funds that underperform their category for two consecutive years must close to redemption. “Everyone’s going to own the same things at the same time.”
• Akhil: “When the momentum turns and money’s coming out, everyone is selling those same assets at the same time simultaneously.” Drawdowns are getting “faster and faster” — symptomatic of passive herd behavior.
• Phil: “I don’t think anyone knows what it’s like in a proper downturn how it’s gonna behave.”

Mex Pete in Practice — The Silver Trade

• Silver ETF breakout identified via Mex Pete process: consistent higher lows, resistance at ~$22.48 (Australian physical silver ETF). Position added on breakout, became largest holding in the portfolio over ~6 months.
• Position gained ~100%+ in a couple of months. The team debated whether to sell, buy more, or hold.
• Trimming strategy: took money out incrementally starting early October 2025, again at end of year, and again at time of recording. Not a perfect science — position doubled again after first trim.
• Key tension: “when assets start going parabolic, the trend is usually getting close to some sort of reversion” vs. holding winners as long as possible.

Mex Pete as Cycle Diagnostic

• New-highs lists reveal sector rotation before the crowd notices: “you get a pretty good feel for the clear trend… sectors are becoming apparent.”
• Late 2024: commodity names dominated new-highs lists — gold stocks, silver — confirming the commodity-supercycle thesis for the second half.
• Phil draws the line to Gann: “you can see how Gann, his ability developed into becoming an expert tape reader, a market reader.” Mex Pete is the modern equivalent.
• In trending markets (second half of cycle), only a handful of stocks deliver the majority of gains — Mex Pete identifies which ones.

Portfolio Management — Cutting Non-Performers

• Exited Commonwealth Bank and Wesfarmers (held since inception, led out of 2020 low) — “they basically turned trend while the market’s kept going up.”
• Worst trade: Ridle (agriculture services) — went down moderately, capital redeployed. Northern Star: entered, bad news broke the stock down, exited, then it bounced strongly. But cutting them was “playing by our rules.”
• Phil’s insight on worst trades: sometimes the worst trade isn’t a loss — it’s selling a winner too early and watching it keep going. “Getting rid of non-performers reduces the stress of not missing out when things do really go upwards.”

Late-Cycle Signals

• Starbucks earnings up 4% globally, stores always queued — Phil uses this as a sentiment indicator.
• Flights full, unemployment low, commodities up — “all pretty typical things you would expect to be seeing right now.”
• But behind it: margin lending debt, ATCF leverage, mortgage leverage, private credit “extremely huge” with issues starting to surface. “Behind it all is vulnerability.”
• Akhil: “the economy’s being drained of all of its reserves and savings… people have spent it. There’s been a free-spending mentality that came out of COVID, but it can’t constantly go on forever.”
• Phil on Trump as cycle foil: “Trump is the perfect foil to allow everybody to not even see the cycle, to not even understand what land price is expected to do after this year. They won’t see it.”

Notable Quotes

“Capital, the way we’ve tried to manage money is the center of the circle is capital preservation at the end of the day.” — Akhil Patel

“When the momentum turns and money’s coming out, everyone is selling those same assets at the same time simultaneously.” — Akhil Patel, on passive investing herd risk

“Trump is the perfect foil to allow everybody to take to not even see the cycle, to not even understand what land price is expected to do after this year.” — Phil Anderson

“The genius of Gann is that a lot of the information wasn’t readily available in his day and he put it together.” — Akhil Patel

“We’re already running the portfolio more conservatively now than, say, 12 months ago.” — Akhil Patel

Watchlist Changes

None directly — this is a conversation/interview, not a Gann market update email. However, the discussion confirms:

• Silver position in Oakleigh 18.6 fund (held, being trimmed incrementally)
• Exited: Commonwealth Bank, Wesfarmers, Ridle, Northern Star (Oakleigh fund specific)
• Commodity/precious metals confirmed as the dominant sector in new-highs lists

Emma’s Analysis

This conversation is a rare window into how the 18.6-year cycle framework is applied institutionally — not just as theory, but as a live portfolio management process. Three themes stand out for cross-referencing:

1. Passive investing as a cycle amplifier. Akhil’s warning about index fund herd behavior connects directly to bubble-amplifiers and market-breadth-divergence. The flip from 80% active to 80% passive in 20 years means the next cycle downturn will be the first test of passive-dominant markets under real stress. The Australian super fund performance-testing rules create a structural forced-seller cascade: funds that must hug the index to survive will all sell simultaneously when momentum breaks. This is untested territory — Phil notes “I don’t think anyone knows what it’s like in a proper downturn how it’s gonna behave.” This reinforces winners-curse-phase dynamics: the very mechanisms that amplified the upcycle (passive inflows) will amplify the downcycle.

2. Mex Pete as cycle diagnostic, not just stock picker. The conversation elevates Mex Pete beyond a breakout scanner — it’s a sector-rotation lens that reveals where money is flowing through the economy. When commodity names dominated new-highs lists in late 2024, it confirmed the commodity-supercycle thesis for the second half. This connects to mex-pete-trading-style and sector-rotation: the new-highs list is a real-time map of which phase the cycle is in, weeks before earnings or economic data confirm it. Gann’s “tape reading” was the 1920s version; Mex Pete is the 2020s equivalent.

3. Capital preservation shifting from theory to action. The fund is already cutting positions (CBA, Wesfarmers — stocks that led the 2020 low), running cash, and trimming winners. This is the institutional fingerprint of winners-curse-phase preparation: the gap between “knowing the cycle will turn” and “acting on it” is closing. The silver trade debate (sell vs. hold vs. buy more) captures the emotional difficulty of late-cycle position management perfectly. Phil’s comment that Trump is the “perfect foil” echoes the 18-6-year-real-estate-cycle thesis: the noisier the political environment, the more invisible the cycle becomes to the crowd — which is exactly what allows it to complete.

Cross-references: 18-6-year-real-estate-cycle, mex-pete-trading-style, mex-pete-model-portfolio, winners-curse-phase, commodity-supercycle, sector-rotation, bubble-amplifiers, market-breadth-divergence, private-credit, gann-time-counts, financial-timetable

[Source: PSE, 2026-02-19 — Akhil Patel / Phil Anderson conversation with Tim Moffatt]