Tag Archives: Bear Market

ANOTHER WEEK, ANOTHER 8% MOVE IN ONE DAY

APRIL 6 (EVENING) – Today’s huge rally has increased the odds that this Bear Market rally has a ways to go.  The high end for the rally is in the low 25,000s.  This is beyond what I thought could happen initially.  However, the goal of this first major Bear Market rally is to convince the public that a V-shaped recovery is underway and we are headed back to new all-time highs.  A Bear Market’s goal is to get as many people in to it and then go down to a level where people don’t ever want to own stocks again.

Regarding real estate, since this market lags the stock market by 4-5 quarters it will be awhile before things become more clear.

One property type to add to the high-risk list is movie theaters.  DIsney and others had to quickly learn how to get their new movies to the public without going thru the movie theater distribution routine.  Now that they have done this, will the public be content to go back to the old way of doing things?  Forever, new music has been sold directly to the public and the public then decides if they want to go see the artist in concert.  Why should movies be any different?  Sell movies directly to us and we will decide if we want to go see them in a movie theater, also.  Will movie theaters die a slow death like drive-in movie theaters have?  These properties are certainly attractive to those seeking last mile distribution points.

Reports are that developers are moving forward with projects.  Investors may have called a time-out.  But, developers have not.

Dozens and dozens of national and regional retailers have asked their landlords for rent relief.  This puts landlords in a tough spot as their mortgage payments are obviously due each month.  A domino effect will occur with everyone helping each other.  But, there will be enough hiccups that things won’t go smoothly.

Many businesses will close up for good (one report is 30% of all restaurants in California will be closed permanently…..I would think this would occur nationwide, too).  As a result, some property owners will default on their loans.  This won’t be 2006-2011 all over again.  But, there will be enough carnage for everyone to deal with.

A former head of the SBA predicts 20%-30% of all businesses will fail.  This sounds dire.  However, I also heard that 1/3 of businesses fail every year anyway.  As always, I encourage you to do your own research.  Don’t take anything you hear as gospel – especially if it is coming from the Fake News Media!  The number of conspiracy theories grows by the day.  People (who desperately need to do something better with their lives!) are circulating reports that quote Stanford or Johns Hopkins or other such respected organizations as saying this or that.  Those are made up stories.  Go to Snopes.Com or other places to see if they address any story you think may be fictitious.

An interesting  item of note…..Amazon has their annual Prime Day on July 15th.  An internal memo says they plan on delaying this event.  That is a telling sign.  For Amazon to think that consumers will not be ready to spend, even online (!), by mid-July is extremely negative.  Keep that in mind as we hear cheerful news in May and June.

Depending on how the markets move, I may post Wednesday evening or wait til Friday evening.

Everyone stay safe and well.  Have a blessed Holy Week.

The Mann

ENDING MARCH AND INTO APRIL WE GO

UPDATE APRIL 3 (EVENING) – Thankfully, a calmer week in the books.  Nothing has changed regarding my market forecasts.

I did want to congratulate Morgan Stanley on correctly forecasting the 700,000 job losses that was reported this morning.  That was an extremely difficult forecast to make and to nail it is impressive.

Oil was up 40% in two days.  We will let it play out a bit more to see if a final low is in place or not.

It is becoming apparent that there will be some major changes in our world going forward.  Hopefully, AirBNB and Uber are dead.  Dining in at restaurants might be forever changed, too.  How do we know that someone in the kitchen area doesn’t have the virus?  Plus, the virus can stay around 2-3 weeks after a place has been thoroughly disinfected (per the Diamond Princess experience).

Grocery delivery will finally succeed.  25+ years in to its existence, telecommuting will finally go mainstream.  Executive offices (now called shared worked areas, .e.g. WeWorks) should go back away.  They are simply VIs as I have termed them – Virus Incubators.

Other VIs are apartment complexes (especially mid- to -high rise buildings) and large cities like New York and San Francisco.  The denser the population the higher the rates of crime, disease, and numerous other issues.  If people truly want healthy lifestyles, move to the suburbs or rural areas.

The changes will be interesting to observe.  Everyone continue to be safe.  Maybe next week will be more interesting regarding the markets.

Godspeed

The Mann

UPDATE APRIL 1 (EVENING) – You know you are becoming immune to the chaos when 1000 point days in the stock market are no longer shocking.   Not much to add this evening.  Stocks might be starting their next significant downturn, but it isn’t a certainty.

One thing to note is that all of the stimulus acts that are being passed are only trying to replenish what has been lost.  There is no pent-up demand.  Wealth and Output have been permanently lost.  It is a misnomer to call these stimulus packages.  No stimulus is going to occur.  The money handout is simply trying to make as many people and companies as whole as possible.

I will say that it is about time that an infrastructure act is being considered.  $2 trillion at this time.  We missed the opportunity to do that in the last crisis.  With an expected 45 million people being unemployed over the next month, it would be good to put people to work to build our versions of the Hoover Dam and TVA and so on.

I won’t bore you as there isn’t much to add to what I have already said.  It is truly tragic that we will start seeing 3000 and 4000 Americans die each day.  Amazing we will likely hit 100,000 deaths by the end of this month.  And we just surpassed 4000 today.

Hopefully, we have learned a lot from this experience.  The sad thing we have learned is that some people are plain stupid and some just don’t care about others.  But, that is nothing new for the human species.  A lot of the virus spreading is due to plain selfishness.

The upside is we have seen how good most people are.  How we help each other out.  It would be great if we continued that after this pandemic is gone.  But, well before Election Day I am sure we will be back to a hateful 50/50 split country again.  Tragic.

I will post Friday evening.  As the markets are starting to calm down (well, to me they are getting boring already), I will likely post less frequently.

I did want to thank everyone that has been sharing information with me.  The more I can absorb the better.

Please stay safe!

The Mann

MARCH 30 (EVENING) – As expected, our essential shelter in place recommendation has been extended thru the whole month of April.  April has been projected to be the month where we finally peak in cases and start to see the curve flatten and rollover, hopefully.

I am confident the shelter in place will be extended to at least May 15th.  Maybe until Memorial Day weekend.

Trump is right when he says people in this country want to live a normal life.  Colds and the flu have never gone away.  We live normal lives with them coming and going thru the population and seasons.  I guess that will be the way with Covid-19, also – when we have a vaccination.  That is supposed to be 12+ months away.

There is a point where we just have to get back to normal and deal with the Covid-19 cases and deaths.  There is no choice.  But, we had to do this Social Distancing in this initial phase so as to avoid the 2,000,000+ deaths that were projected if we did nothing.

Continue to be safe.  And take advantage of the world being on a long time out.  I always wanted things to slow down.  To stop.  Time to stand still so we could relax and smell the roses.  Now is that time. This likely will not happen again in our lifetime.  Take advantage of this.  Reduce your stress, permanently.  Learn that things do not need to be rushed.  Do all of those things you stacked up to do when you finally had some time to do them.  You have that time now!

As for the stock market, today was up a bit.  I still cannot rule out a move above last week’s high of 22,595.  Whether or not that occurs, the expectation of a 25%+ decline remains.  I took advantage of the rally last week to get out of some oil stocks I stupidly got in too early.  We all make mistakes eh:)  But, best to cut your losses than let them ride.

Oil broke below $20 today.  I believe we are seeing the final down wave to what might well be the end of a 120-year combined bull and bear market.  I haven’t followed up on the timing issue mentioned last week.  So, just sitting on the sideline and watching the crash continue.

Gold and silver didn’t do much.  Significant declines are still expected.  That is a bit longer-term view so this isn’t a day-to-day forecast.

Everyone went crazy about the US Dollar being so strong.  So last week, I believe, was one of the worst weeks ever for the USD.  The markets love to get everybody to one side of the ship before sinking them.

So, nothing has changed re my forecasts.  The markets are starting to trade in a bit of a range.  This helps alleviate all of the record oversold readings for technical indicators.  We can’t go straight up to infinite nor straight down to zero.  More Wednesday evening when I post next.

I will drop this after one more mention of it….I don’t recall firefighters and police whining after 9/11.  Those people were proud of the fact that their peers ran straight into those towers to save as many people as possible.  I don’t recall them saying they were like lambs being led to the slaughter.  They were true heroes.  They know every day they go to work could be their last.  They don’t ask for sympathy.

So, I just don’t get it, and am truly disgusted by, the doctors and nurses in New York complaining about everything…we are risking our lives, we are overworked, whine whine.  They are truly ruining the appreciation they would get and deserve.  Maybe they just aren’t as tough as firefighters and police officers.  That isn’t in doubt really.  If you didn’t think you were going to be in many situations where you could become very sick or die by helping others, you shouldn’t have become a healthcare provider.  Thanks to the majority that do their job proudly and don’t whine in hopes of getting pity.

And as to us real estate appraisers arguing that what we do is essential….really?  An appraiser friend in Puerto Rico said they ruled it wasn’t essential.  I agree.  Albeit, I was happy the appraiser came out and appraised my daughter’s farm today so hopefully her closing will still occur in 2 weeks:)  But, truthfully, this isn’t an essential service.  Closings can be pushed back 2-3 months like everything else.

Enjoying life on the 5/3 Farm…..til Wednesday evening….be safe and stay well.

The Mann

THE MARKET ENTERS THE PREDICTED RANGE

UPDATE MARCH 27 (EVENING) – The DOW peaked at 22,595 on Thursday.  That is within 100 points of my target.  I’ll be surprised if my third forecast target in a row is this accurate.  But, if so, I’ll take it.

I will revisit price targets for the upcoming low next week.

The way the waves are looking the following should occur:  The US Dollar will rally to new highs short-term, Gold will fall below $1050-$1250 longer term, Silver will decline below $8 longer term. and stocks will fall 30% from current levels short-term.  How all of that happens I have no idea.  But, that is what I see happening.  I never ask why or how.

The $2+ Trillion stimulus bill was signed today.  And the DOW was down 915 points.  The markets already have priced in all of the stimulus that will be thrown at the country ($6+ Trillion).  They are looking at where we will be this Summer or Fall and they aren’t happy with what they see.  I am guessing they are pricing in the virus coming back in the Fall and Winter.

Regarding Oil, I did get a reply from the experts at Elliott Wave International.  My thoughts that the combination 120-year bull and bear market might well be coming to an end are on target.  Obviously, it is rare to have such an opportunity occur in a our lifetime.  There is an issue regarding the length of this bear market (timewise).  I need to analyze the 120-year move in a bit more detail to see what I can figure out.  I will keep you posted.

I have a gripe about healthcare providers complaining about going to work….about being on the front lines and subject to getting the virus.  Seriously?  Did you think you would take care of sick people and not encounter a contagion?  Geez, too much complaining about having to work nowadays.  Just do the job you chose as a career.  Be proud that you are helping people.  You have a chance to help others and change the course of history.  Stop complaining.

Oh, I do hope GM cans their CEO.  Trying to make a killing off of this crisis is obscene.  Like him or not, Trump is great at not letting anyone screw over our country.  I am glad he invoked the Protection act and I do hope GM doesn’t get a dime for the respirators they will make.  To think we bailed them out last time around….and this is the thanks we get.  I will never buy a GM product.

Til Monday evening…stay safe.

The Mann

UPDATE MARCH 25 (EVENING) – The DOW rallied to 22,020 today.  It has satisfied getting to the range of a top for this counter trend rally.  It then fell almost a 1,000 points in the final 5 minutes due to Bernie Sanders threatening to hold up the bailout legislation.  It cannot be ruled out that the DOW could rally back above 22,020.  But, once a target range is satisfied, I start concentrating on the next wave – which is down to 13,900 to 15,400.

For trivia, this was the best 2-day rally since the 1987 crash.  And I think it was the first consecutive up days in a month.

Gold backed off its rally quickly.  Oil is starting to get its legs back.

Hopefully, Friday evening the waves will be telling us more.

Regarding real estate, early info is saying that buyers are asking for a 5%+ reduction in price on existing contracts.  That isn’t all buyers.  And that isn’t much at all.  Starter homes continue to sell well.  National Tenant Lease properties are in demand as a flight to safety.  Since these are really corporate bonds, and not real estate, this makes a bit of sense.  Of course, the question is do these buyers know what kind of downgrade the corporate bond rating will get for the tenant in the property they are looking at?  Or are these unsophisticated buyers just looking for anywhere to put their money?

Please share anything you are hearing regarding real estate prices, cap rates, closings falling thru, et al.  Til Friday evening…

The Mann

UPDATE MARCH 24 (EVENING) – I was going to post this regardless of today’s outcome.  But, worth noting today was the largest up day since the depths of 1933.

Most, if not all, analysts never state what could occur that would show their forecast to be wrong.  Flat out, if the DOW rallies above 24,200 my interpretation of the wave theory will be wrong.  Technically, it would just mean the waves were showing something else was happening.  But, to me, I say I am wrong.

I did some analyzing today and thought this rally would terminate around 22,500.  Bob Prechter’s firm put out their analysis this evening and said about 21,200-22,100 should be the top of the range.  The main point is this rally absolutely cannot go above the late February low around 24,200.

Some additional analysis suggests that 15,300-15,400 is really looking good for the final bottom (i.e. for this first ‘A’ wave of a Bear Market….wherever this low occurs, it should be broken down the road after a significant rally occurs).  But, a lower target of 13,900 showed up so I would have to update the ‘final’ bottom range to be 13,900-15,400.

So far, the 27,100 top forecast for Wave 2 of the decline was almost exactly on target.  And the 18,200-18,400 range for a possible appears to be for Wave 3 of this decline.  Both have been right on the money.  I suppose my luck will run out soon:)  Albeit, I usually do excellent in a major downturn, so we shall see.

22,500 for the top of Wave 4 and 13,900-15,400 for the bottom of Wave 5 of ‘a’ are up next.

I need to confirm with Mr. Prechter something I am observing regarding the Oil market.  It is significant, so I hope to get his thoughts on the matter.  Sam Zell said he bought some energy stocks.  If what I see occurring in the Oil market, per the wave theory, is accurate, then we might have an opportunity like that of the stock market in April 1933.  Will keep you posted on this one.

Oh, the $200 Gold rally in two days is due to people suddenly realizing they can’t buy the physical product anywhere.  I use KITCO and they are all but sold out.  However, the wave theory allows for this rally to still be part of the larger decline below $1056.  No change of thought on that forecast because of these two days.

Stay at home.  Be safe.  Enjoy time with your family.

The Mann

MARCH 23 (EVENING) – A fairly calm day in comparison to the past few weeks.  The Dow bottomed below 18,300 today.  It thus, entered the 14,600-18,400 range I forecast when it was around 25,000.

My analysis of the waves is very much in sync with others.  I would say there is a 25% chance of a significant bottom occurring between the 17,000’s and today’s low and a 75% chance of a bottom occurring in the 15,400 range.  This latter figure has significant support as bottoms in 2015 and 2016 occurred around this figure.  With both the waves and chart support suggesting 15,400 as the low, this figures gets greater weight at this time.

It is amazing to hear predictions of -30% to -50% for GDP and up to 30% unemployment.  If these figures occur, we will have blown away The Great Depression and The War of Northern Aggression (aka the Civil War for those north of the Mason Dixon line).

TRIN is at 0.82 is incredibly far from signalling a bottom (1.60+).

VOO is at about -$2.5 Billion for last week.  I would need to see -$10 to -$20 Billion to know the public has thrown in the towel.  Or maybe several weeks of -$10 Billion at a minimum.

For those interested in Corporate Bonds, I was introduced to an indicator to watch.  First, about 40% of Corporate Bonds graded BBB (lowest investment grade before becoming junk bonds) are expected to be downgraded to junk.    Keep that in mind regarding current ratings.  Remember, rating agencies are almost always BEHIND the curve with their grades.  They will finally lower their ratings once all of the decline has occurred.  They get paid for such hindsight.

Back to bonds….as long as the ETFs are trading at a discount to their NAV (Net Asset Value), the market is saying prices aren’t low enough, yet.  I will follow ticker symbol BND (Vanguard Total Bond Market Index Fund).  It is currently trading at about a 3% discount.

Regarding Corporate Bonds, does anyone have a source that shows what is out there and what their prices are?  Barron’s and the WSJ used to list all of them in their papers.  But, they don’t do that any more:(  If you know of a site that has this info, please share it with me.  Thanks.

We shall see what the next two days bring and I will be back Wednesday evening with an update.

Stay safe.

The Mann

JUST ANOTHER RECORD BAD WEEK

MARCH 20 (EVENING) – I had thought the markets had calmed down and it wasn’t much of a week.  Then I read this was one of the worst weeks since 2008.  I thought last week was.  Or the week before that.

I don’t have much to add to my lengthy post two evenings ago.

New lows should be set next week.  The question is will we have the largest declines to date – which would see more 3000 point down days.  Or will this be a moderate decline.  It is tough to see the DOW taking on another 3000 point down day or two.  But, …..

In trying to fine tune a range for a bottom, nothing has changed the 14,400 to 18,400 figures.  But, 15,500-15,700 is now looking good for a more precise bottom.  As I said initially, I think the low will be towards the bottom of the range.  I just can’t see us having an intermediate term bottom above 17,000.

The subsequent rally should return to the 21,000 area.  I didn’t think much about that, but then I realized that could be a 40%-50% rally.  I guess that isn’t something to sneeze at.

But, first let’s get down to the bottom.

VOO did have -$1.3 Billion this week.  So, it moved to the outflow list.  But, for the week investors poured over $6 Billion into stock ETFs.  This is insanity as the market crashes.  When tens of billions of dollars of funds are being taken out of stock ETFs we will be nearing a bottom.  We have a long way to go.

Remember, no need to be alarmed about the number of China Virus cases soaring for the next 4 weeks.  Experts say the cases should peak out by the end of April.  When optimism kicks in at the cases leveling out and then declining, don’t get carried away.  We are still in a major economic downturn that has only just begun.

For those looking for some perspective re the virus.  Wuhan had its first case on November 17th.  This week no new cases were reported in all of China.  From nothing to nothing in 5 months.  I forget when we had our first case – mid-February?  5 months gets us to July.  But, we got on top of this earlier than China did and the virus doesn’t like temps above 80 degrees and Summer is coming.  So, things are looking real good for the USA to be working on wrapping this virus up in May and June.  Let’s hope, eh.

Regarding real estate….I have heard that renters are leaving apartments to go to rental houses.  Less chance of catching the virus in a freestanding house.  Also, people are recognizing what I have been screaming about for decades – big cities are dense and it is easy for a virus to spread to the masses.  Ask the Big Apple about that!  Suburbs and especially rural areas are where people need to move to.  The jobs will follow.  The decay in our largest cities will accelerate as crime festers, diseases run rampant, homelessness gets out of hand, taxes are too high, traffic is a nightmare, on and on.

Thanks to those that have sent me information to look at.  I have found several new sources I will follow.  I truly appreciate it.

We just got our first known case of the virus in Aiken today.  We shall see how it plays out locally.

Learn to enjoy time at home with the family….like we used to before the internet ruined everything.  Put a dent in those honey-do lists:)  I know I am getting a lot done around the farm.

Stay safe.

My next update will be Monday evening.

Godspeed.

The Mann

DID ANYONE ELSE FORECAST TODAY’S FIRST-EVER 3000 POINT DECLINE

MARCH 16TH (EVENING) – I am curious if anyone has seen anybody else predict that a 3000 point drop in one day would occur asap.  Please email if you saw someone do such, as I like to keep up with such people who know how to forecast well.

For those new to my blog, there are two additional posts on this topic that will catch you up on how things have been playing out.

Please feel free to pass my website along to others.  Although the short-term future is bleak, having a clue of what is coming helps alleviate the fear of the unknown.

Like The Great Depression II, this downturn has been easy to forecast.  Hopefully, it will stay that way.

I mentioned that 14,600 to 18,400 is looking like a likely range for a bottom of some type – not sure, yet, if it will be an interim or final bottom.  Interim seems more likely.  With more information every day the market plays out, this range can be narrowed.

After today, I would narrow this range to 15,400 to 18,400.  Also, there is a low-percentage chance of an interim bottom occurring in the 17,800-18,200 range.  If a bottom occurs in that range, the rally will reveal if that is an interim bottom or just a temporary stop on the way down to an interim bottom.  The odds are higher the market will decline thru 18,000 towards an interim bottom a few thousand points lower.

I would not be surprised if we get down to 18,000 tomorrow.  The markets are moving that fast.  By the way, the volatility of the last 3 days last occurred in 1929.

The decline in Oil is just ahead of the stock market.  I haven’t tried to come up with specific targets in this market.  But, I am thinking an interim bottom is forming in the $25-$30 range.  This should be followed by a rally to $40 and then a decline back to a major low in the $25-$30 range again.

I still think it is too early to buy stocks.  Especially when we are still in the midst of a Wave 3 (various degrees for those who follow wave theory) and Wave 3 is the most severe wave.

A side note…for the first time in history T-Bill rates briefly went negative today.  Simply amazing the number of people worldwide willing to pay sovereign governments interest.

More of a note to myself, if Gold is truly in the last wave of a major Bear Market, then the target range is $829 to $928 an ounce.

Stay safe.  Remember President Kennedy’s great quote:

Ask not what your country can do for you — ask what you can do for your country.

All 320 million of us are in this virus fight together.  Do your part and this will be over sooner than later.

Godspeed.

The Mann

 

REAL ESTATE AND STOCK MARKET THOUGHTS

UPDATE – Evening of Sunday March 15th – Poor Caesar died on this date.  He would have fully related to our current times as we are living out The Fall of The Roman Empire II.

Like a good little boy doing as he is told, the Fed lowered interest rates all the way to 0%.  I thought they might do it in a few steps, but this time they did exactly as the market told them.

And like a few weeks ago, DOW futures are down over a 1000 points.  I have always said it is easier to predict events in a downturn than in a bubble.  Bubbles extend higher and longer than anyone expects.  The masses in panic mode is the same crisis after crisis after crisis.

And to another wild week we head in to….

The Mann

UPDATE – Saturday March 14th – Carl Icahn has essentially created The Big Short II.  You might need to cut and paste this URL:

https://www.cnbc.com/2020/03/13/icahn-reveals-his-biggest-short-position-amid-market-turmoil-commercial-real-estate.html

I would like to know what Sam Zell thinks.  He is the greatest real estate investor of the past 30 years.  If anyone sees anything from him, please pass along to me.

If Icahn is correct (he is a billionaire, so he has obviously been successful, but I know firsthand of some large losses he has incurred over the years….so he isn’t a perfect indicator of things to come), I would be out of CRE.  Financial institutions take note.  Investors take note.  Of course, there will be pockets that don’t do as bad as the overall market.  And if you know your local market better than anyone, then you might be able to find true bargains sooner than later.  There will likely be the normal OREO market for deals, also.

A side note regarding stocks.  You will hear a lot of pundits saying stocks are better priced than they were (no duh!).  That some bargains are out there, even if we are not at a bottom.

To be clear, we have NOT had stock bargains since the August 1982 bottom.  I might concede NASDAQ stocks after the Dot.Com Bubble burst might have hit bargain levels.  But, neither real estate nor stocks went down to bargain levels in The Great Depression II.  Look at the Schiller Price Index and you will see that home prices only got down to fair value.  And that is what I am trying to get to re stocks….this initial decline is simply wiping out excess over valuation bubble prices (enough adjectives :) ).  No way are stocks at bargain levels (individual exceptions might exist….e.g. some oil stocks look darn cheap).  Stocks likely aren’t even down to fair value, yet.

This isn’t to say that The Great Depression II  won’t repeat itself and real estate and stocks bottom out at fair value.  Just remember, we are not at true bargain levels until (Bloomberg now owns it) BusinessWeek or Barron’s run the infamous August 13, 1979 headline ‘The Death of Equities.’  Will we get that low is tough to determine at this time.

The Mann

UPDATE – Evening of March 13, 2020 – Yesterday we approached nearly 3000 points down at one point.  As forecast, the 2000 point move was surpassed.  Today saw the largest point gain ever – almost 2000 points.  Every day this week saw over a 5% move.  Volatility (VIX) is at levels last seen in October/November 2008.  That was 5-6 months before the March 2009 bottom.

A range for the Bear Market bottom is starting to come into focus.  Albeit, it is really early to narrow the range.  Based on past crashes, a bottom should occur in the 14,600 to 18,400 range.  Analyzing the waves that are unfolding a low below 17,500 is probable.  I think the lower area of the range is most likely.  Again, it is VERY early, so I am sure I will refine this forecast as the waves unfold.

The waves are at the point where next week could see the worst of the decline to date.  That is hard to believe after all we have seen.  But, if it unfolds as expected, we might well be in the range noted above by this time next week.

A few side notes about a few myths that the masses assume to be true.  I am a gold bug, but gold is not a safe haven (nor is Bitcoin….I think it got down to $4000 this week).   Gold dropped about $175 in the past few days.  Although, it is challenging for me to see how it will happen, the long-term forecast for gold is $700 to $1050.  As always, we shall see.

The other myth is bonds being a safe haven.  On the day the Fed lowered rates 50bp, the market was down over 1000 points.  In declines this past week, everything was being sold.  Cash was king.  BTW, the markets are telling the Fed to lower rates up to 100bp.  I doubt they will go that far.  But, as the Fed follows and never leads, it will do as it is told.  Note, rates are nearing 0% so this catalyst for a rebound is about to be eliminated from the Fed’s toolbox.  Assuming the World doesn’t implode in this downturn, in the next crash following the next bubble the Fed will use its last tool – pumping trillions in to the marketplace.

More on Monday evening.  I am trying to update my forecasts Monday, Wednesday, and Friday evenings.  At least until things finally calm down.

Everyone be safe.  Follow the instructions from the CDC.  As they say, this too shall pass.

Godspeed

The Mann

March 11, 2020 – I will start a new post to make it easier for readers.  For those  who are seeing this post for the first time, I have a post on this blog that started with the significant decline that started a few weeks ago.  You can read thru it to get caught up on things.

Another week of up and down 1000+ point days.  For the few who watch volatility (aka VIX for true followers of the markets), this period was sure to occur.  Late last year we had gone thru one of the longest periods with the market not moving more than 1% in a day.  I think it was over 100 days.  Absurd calm as the stock market went straight up into a blow off top.  Welcome back to reality traders.

The only observations I have at this point is that this current decline should definitely go below 22,100 with 19,100 being a nice target.  But, that might be too high based on my next observation.

Not what many people want to hear (only those who are on the sidelines or short will like it).  The waves are lined up for what we call 3 of 3 – this is the point of major acceleration in the direction of the larger move.  The 2000 point down day we recently saw will be dwarfed.

Trading is halted when the market (S&P 500 specifically) falls 7% in a day.   The next halt is at 20% I believe.  We may not quite make it to that second circuit breaker.  But, I will be sure to turn on the TV and watch that amazing site, if it occurs.

I have been asked about real estate.  Before I guestimate a forecast, let me mention that so far this Winter 34 million (!!!!!!!) Americans have got the flu.  Can you imagine how many work hours have been lost.  How much income lost.  What if we tried to stop the flu for a Winter?  Instead of a little beer virus.  It is likely more people die every day in car accidents than will die from the beer virus.  Imagine if we eliminated all driving for a month.  We would save thousands of lives.  Perspective people.  But, the Fake News Media has no perspective.

Real Estate is a bit difficult to project at this early stage.  Obviously, real estate markets fall long after the stock market has declined.  That is simply due to real estate moving much slower.

We know for sure that the hotel industry is getting hit hard now and likely will be thru the Summer.  People won’t want to travel anywhere for awhile.  Retail properties will be hurting for awhile, too.

I am no fan of Amazon, but they are in the best position – you can order anything and have it delivered and with oil prices down delivery costs for Amazon and WalMart and such are cheap.

I imagine we will see many bankruptcies in the energy industry.  So, lenders with loans to such entities will sustain significant losses.  Individual hotels may not default, but they should be watched closely as those with high leverage may be in trouble.

I would think apartments, industrial, and office properties would be least affected.  Obviously, companies in troubled industries that are tenants in these property types might vacate.  Especially if they declare bankruptcy.

I am thinking land acquisition, and all acquisition really, will slow down significantly.  Essentially, those real estate investors that use money from their stock market profits to buy properties are gone.  With a 20% loss they are frozen in their tracks. Even if they are up 40% for the past year or such, they are still hurting.

Like a major Election (yep 2020 has one of those), everyone will want to stand by and see how this just labelled pandemic plays out.   The problem is even if it goes away like SARS or MERS or Legionnaire’s Disease (going way back, eh folks) that won’t occur til this Summer and then people will put things on hold for the Election.  2020 is snake-bitten.

For those of us that were wondering what would take the blame of being the black swan this time around, we now what it is.  But, remember the markets are not telling us about their concerns today.  They are telling us about their concerns around Labor Day.

People may fear the beer virus.  Personally, I cannot even imagine what the real bad news is going to be this Summer/Fall!

So, for real estate, I would not be buying much.  Industrial may continue its strength as even more goods will be shipped to consumers.  Apartments depend on demographics, so the beer virus is not a significant issue.  Vacant land will likely just sit until the next upturn comes along.  Office could get hurt if bankruptcies occur that result in unemployment going up.

I have defended Retail all along because even if 12% of sales are online, 88% of sales are local brick and mortar.  Plus, online sales are just today’s version of catalogs in the past (which also had goods shipped by mail).  But, restaurants and lifestyle centers/malls likely will have fewer customers as people stay away from crowds.  It will likely depend on the tenant as we still have to get many items at retail stores and in person.

Lastly, another thought that came to mind….is this the nail in the coffin for globalization?  Globalization was on its way out over the past 4 years.  But, this certainly made every country focus internally.  Keep their people at home.  Support their local businesses.  Keep outsiders away.  It’s early, we shall see how it plays out.  Of course, I fully suspect the Fake News Media will associate the global downturn with this move to nationalism and say hey that shows globalization is better.  Certainly not the case, but the FNM promotes lies, not truths.  Just now President Trump has banned al travel from Europe to the USA for 30 days.  Wow.  Hunker down folks and buy American:)

I hope my thoughts help you think things out.  Like anyone, I am not 100% right in my forecasts.  So, think things thru yourself.  Situations vary for a million reasons.  So, know your situation.  Just don’t listen to the pundits on the business channels or radio or wherever.  Think for yourself.

I will just say, those who know me, know I live for major downturns.  2005-2011 was a dream and very easy to forecast all the way thru it.  I am not as confident about this downturn, but will do my best to nail most of my forecasts this time around, too.

You can email me at GeorgeRMann@Aol.Com.   Always interested in your thoughts, ideas, comments, questions, et al.

Remember, don’t panic.  The only way to succeed in investing is to do the opposite of the masses which Buy High and Sell Low – you need to Buy Low and Sell High.  Buying low is one of the toughest things to do on Earth.  The entire world will be negative.  Your stomach will be full of butterflies.  You will have major doubts.  But, you can smile and know that is the time to buy:)

Godspeed.

The Mann