Tag Archives: stock market

Mann Overboard

INFLATION FORECAST, BANKS & HOUSING

UPDATE – JUNE 20, 2023 – I saw a few items of data today in regard to housing. Here they are. No need to add any commentary.

Construction on new American homes surged 21.7% in May, as homebuilders ramp up building single-family homes to meet strong demand from buyers. Housing starts rose to a 1.63 million annual pace last month from 1.34 million in April.

Builder confidence in the market for newly built single-family homes in June rose five points to 55, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This is the sixth straight month that builder confidence has increased and is the first time that sentiment levels have surpassed the midpoint of 50 since July 2022.

I saw a chart of this index going back to 1985. Every time the index crossed back above 50 it went up to about the 70 level before putting in a major top. The thing is it took about 1-5 years to get to that new top. Slow, but steady it goes. If it follows history, that means we are in for an extended period of positive sentiment by home builders for at least the next few years. As a side note, there is at least a 50/50 chance of the index dipping back below 50 before resuming its upward trend. This would be a great head fake to keep the recession screamers pessimistic.

JUNE 14, 2023 – As forecast, inflation dropped about a full percentage point and will do so again next month.
The 3-month annualized inflation rate is 4.4%. The 6-month annualized inflation rate is also 4.4%. These figures are above the annualized rate (4.0%) and thus indicate the decline in the annual CPI is likely to reverse after next month’s figure is reported.
Based on the data, my prediction for next month’s figure is 3.0%-3.1%. I like the data and am confident the next reading will be in that range.
This will finally be the July 12th figure I forecast over 6 months ago. My original expectation of a sub 2% reading will be wrong. Albeit, 3% is alot closer than those that were predicting 10%+ this year.
As I mentioned last month, it looks like inflation will rebound in the second half of the year to 4%+. There are a few indicators that are pointing towards significant deflation (e.g. diesel prices down 30% yoy). If this occurs, there is a chance inflation can stay around 3%.
BANKS – Regarding banks, week after week goes by without any closures. At this point, we are much closer to my forecast of 0-10 closures than the 176-200 closures forecast by many people. I am lucky to have some incredible bank and credit union clients. Talking with them there has been almost no CRE loans going under. Even in good times, loans fail. So far, nothing significant has occurred. Yet, the world is predicting CRE loan defaults will be the next major shoe to drop. I just don’t see it. I will make a post with some numbers explaining why I don’t see the refi issue resulting in loan defaults.
The Regional Bank Index (KRE) has exploded and is about 7% above the low set the Monday after the SVB/SBNY closings. It is a full 27% (!) above its most recent low. And, you probably saw the headline that the stock market entered Bull Market territory (i.e. up 20%+ from its low) last week. I have been saying this was the case since just after the October lows.
HOUSING – The American Enterprise Institute’s (AEI) Home Price Appreciation (HPA) Index was up 0.7% month-over-month in April. It has been up every month this year. The Homebuilders Stock Index is up an incredible 50% (!)from last year’s lows. Those who forecast a crash in the housing market appear to be way off. As I forecast about a year ago, the housing market would slow way down and possibly go slightly negative (that has occurred in the hottest markets). A year later I am seeing a slightly improving market ahead.
SUMMARY – Sadly, if you have been waiting for the Recession of 2023 to occur (which as I have noted for 9+ months now, it was the Recession of 2022), you have already missed out on the stock market being up 20%, homebuilder stocks up 50%, and those dreaded bank stocks being up say 5%-25% from possible buying points. Even if a recession occurs later in the year (I still do not see two consecutive quarters of GDP being likely), the opportunity to make a large profit on your investments has already occurred. Plus, the stock market predicts the future 6 months out, and it is saying zero chance of a recession.
It seems like a longshot, but the wave theory I follow seems to indicate the possibility of a huge stock market rally directly in front of us. That is my interpretation. Regretfully, my idol who brought this theory to the forefront 44 years ago sees a huge leg down ahead. I hate disagreeing with him. We shall see how it turns out. The stock market has been in a boring trading range for several months now. It seems to be wrestling with the indicators that point up and those that point down at the same time. The future is never easy to predict:) Not even for the smart money.
Til next month.
Shalom,
The Mann

Mann Overboard

40-60 AND BUBBLES

JULY 18, 2022 – As a kid, the first thing I could read was the stock market page in the newspaper. Probably since I was 5 years old I have been analyzing markets.
Early on I recognized a 16-year pattern in the stock market. I lived thru the 1966-1982 sideways (down when adjusted for inflation) market. I noticed that the market went up significantly after WWII into 1966. And looking back, we can see that from 1982 to about 1998 (actually 1999/2000) the market soared again. It hasn’t been quite as clear since then.
However, in looking at bubbles I think a pattern exists. I recall an appraiser friend telling me that you make your ‘big bucks’ in your 40’s. I assume that continues thru your 50’s. That seems very logical. People from 40 years to 60 years old invest in stocks, buy real estate, buy boats and cars, on and on. This is when they have the most amount of money to invest.
So, let’s look back at the generation before the Baby Boomers. This generation was born from 1931 to 1947. Adding 60 years to the first people and 40 years to the last people, yields 1987 to 1991. Exactly when the S&L Crisis peaked and burst.
My fellow Baby Boomers were born from 1948 to 1964. Adding 60 and 40 years, yields 2004-2008. Again, right on target with the great housing bubble.
Generation X ranges from 1965 to 1980. Adding 60 and 40 years, yields 2020-2025. And here we sit in the middle of ‘The Everything Bubble.’ With the top already in place, I assume this means we bottom by 2025.
In the last crisis there was a funny bumper sticker going around – ‘Lord, give me just one more bubble!’ Sure enough, we got another one. So, for those that missed out on this one and are wondering when the next one will occur…..Generation Y (aka Millennials) ranges from 1981 to 1997. Adding 60 and 40 years, yields 2037 to 2041. A ways off for sure. And honestly, I don’t have a clue what will be in a bubble at that time. What is left? Maybe since cryptos came about after the last bubble, the next bubble will be something that has yet to be invented.
If you and I are around and remember this post, let’s have a chat in 2037:) Of course, let’s chat before that so we are invested early on in the bubble item(s).

Shalom,

The Mann