Category Archives: Mann Overboard

After a 2-year hiatus, the Mann Overboard blog is back. This blog will cover anything and everything that comes to mind. There will be market forecasts. Suggestions regarding interesting web sites, books, or topics I think readers should check out. My continual diatribe on the real estate appraisal industry and all of its wrongs. My support for a new real property valuation profession, adopting Mortgage Lending Value in America, creating Real Property Risk Ratings in America, and introducing readers to the concept of Socionomics. Other topics will surely arise.

Feedback will be limited to approved site visitors. This is not to limit disagreement – different ideas are needed for us to advance any concept we discuss. I just want to keep the content professional. Replies whining about old subjects like AMCs and what banks have done to the industry and such don’t get us anywhere. And simpl

INFLATION UPDATE

JULY 12, 2024 – The June report came in at 3.0%, below the consensus estimate of 3.4%. I didn’t expect quite so low. But, was not surprised. The 3-month annualized inflation rate is 2.4%. The 6-month annualized inflation rate is 4.9%. These figures bracket the annualized rate (3.0%) and thus indicate the annual CPI should remain in this area for awhile. The data is predicting a reading between 3.0% and 3.2% next month. I think 2.8%-2.9% is likely.
The market is expecting one rate reduction from the Fed – maybe in September or December. There is a very slim, but increasing, chance of a rate reduction at the upcoming July meeting. I have also seen a forecast of up to 8 reductions by next Summer. That seems extreme to me. But, if the unemployment rate goes up to 4.4%-4.5% and the CPI can stay below 3%, then the Fed may well make a 25bp reduction at every meeting once they start with the first one.
Shalom,
The Mann
P.S. For those that read to the end….One indicator I have seen shows Bitcoin at $240,000 next Summer. As I always, say, we shall see.

P.P.S. Two questions for you to research now that you will have to answer in the future. Are you an Accelerationalist or Deccelerationalist? And will you remain an entirely organic human (non-augmented) or have a machine imbedded into your brain to become a silicon-based superintelligent being (augmented)? If you will take the time to research these, you will thank me 5-10 years from now. Books to look into include The Singularity is Nearer and Homo Deus.

HOUSING MATH DOESN’T ADD UP

UPDATE JULY 17, 2024 – So far, no objections to what I wrote below. I wanted to add some data. According to Zillow, inventory is higher than last year in 48 out of the 50 Major Metropolitan areas. It rose last month in 45 of the 50 markets. If we are so short on housing, why aren’t all of the houses for sale bought instantly? How can the inventory possibly increase? And, no, it is not because of high (not really high, around where they should be) mortgage rates. Simply put, the forever housing shortage rant is a hoax. False information. Propaganda.

JULY 1, 2024 – Here is your chance to email me why NAR and the NAHB may be even remotely right about our housing shortage and why I am wrong. I researched the intraweb, as my step-daughter jokingly refers to it, and found that NAR has said we have a shortage of 4.5 to 5.5 million housing units. Their logic is the annual number of houses built since the Year 2000 has been below what was needed. To paraphrase Henry Ford, that is bunk.
Let’s look at some facts and some math. First, the demand for houses by 18-55 years olds today is about 25% (!) of what it was when Baby Boomers were the same age. Second, annual population growth has declined significantly from around 2% at the start of this century to 0.53% last year. I have seen as high as 0.7% in the past few years.
Yes, total population has obviously increased over time. But, it is not double or triple what it was 20 or 40 years ago. Demand for housing is about 1/3 to 1/4th of what it used to be. So, you cannot continue to forecast based on 1980s or 1990s rates. As I note in other posts, annual GDP of +3% or +4% has been replaced with a good-excellent range of +1% to +2%. Everything is slowing down and will continue to slow down for decades ahead.
To the math….As of today, the intraweb says we have 341,814,420 people. Let’s say last year’s growth rate was low and the 0.7% rates before that were high. We will use 0.6%. (I note that CoStar uses +0.5% annually for the next 5 years.)
That means this year’s population growth is about 2,050,000 people. Average household size was 2.53 people in 2020. It too has been declining for decades. Let’s assume it is down to 2.40 today. The math says we need about 850,000 new housing units for the upcoming years.
Laughingly, NAR says we need 1.8 million new housing units and since only 1.4 million are being built we will add to our shortage. In fact, based on real math, we will have an oversupply of 550,000 housing units brought onto the market this year alone!!!! Every report I see shows apartment vacancy rates are way up from 3 years ago (about doubled in past 3 years nationwide!) and new homebuilders have a crisis of oversupply. NO ONE but NAR suggests we are not building enough housing units.
So, here’s the riddle to me. If we are short millions of housing units, wouldn’t vacancy rates for SFRs and apartment properties decline each year? If we aren’t building enough units, wouldn’t vacancy go down? Wouldn’t we see people lined up to get into the next apartment or SFR unit that becomes available?
According to CoStar, the USA had 927,018 vacant apartment units in 2021. As of today, we have 1,544,497 vacant apartment units. Over 600,000 apartment units have become vacant in a period where NAR screams that every year we are increasing our shortage by hundreds of thousands of units. Where is the logic? This doesn’t even include our 10 million vacant SFRs! (BTW, this count does NOT include second/vacation homes.)
I have contended for years that if we didn’t build a single housing unit nationwide for 5-10 years we still would not absorb all of our vacant units.
I look forward to your thoughts. The one I will say that doesn’t work for me is the vacant units are not where the people want to be. Some may be. But, most of the new supply for decades has been in the Sun Belt where the greatest demand has been. And people can live anywhere and move anywhere (especially since 2020). A few units might be old and badly located. But, old product is removed from the stockpile annually.
I will leave this one at that. Depending on feedback, I might follow up with another post on the subject.
Shalom,
The Mann
GeorgeRMann@Aol.com

MID-YEAR UPDATE

JULY 3, 2024 – I forgot two items in post below. The next wave up should take gold to $2500-$2600 ounce and the next wave up should take Bitcoin well above $100,000. And most importantly, Happy 248th Birthday to the USA!

JULY 1, 2024 – As you get older, the years fly by quicker and quicker:) Here’s an update on a few items.
STOCK MARKET – The Dow has now put in two lows in the 37,500-39,000 that I had forecast for being a bottom. I think it will put in a third low around 38,500 before the Summer is over. Then we should see a strong rally to the final Bull Market top of 43,000+.
BONDS – Treasury Bonds are at a critical junction. I don’t like those because what it says is we may go up or we may go down. Anyone can say that lol. I am sticking with the bullish case and expect a turn up at any moment literally with interest rates declining for several months. Even if the weakness occurs, it just delays the up move in prices and thus downturn in interest rates.
UNEMPLOYMENT RATE – Simply put, I expect it to be 4.4%-4.5% by yearend.
RECESSION – Today is the 2nd anniversary of a very strong economic expansion. As I noted all along, it was missed by the vast majority of economists and pundits. Also remember, until the 2030’s when we see +100% annual GDP, we will not see annual rates of 3%+ anymore. Annual growth over 1% is good and over 2% is exceptional and cannot be sustained for long. As with interest rates, people need to adjust to the new normal. Is a recession finally the horizon. Yes, finally! I mentioned last year that a longer-term indicator was suggesting a recession might occur in 2025. First years of a presidential cycle are usually the weakest. Also, if the stock market does top out this Fall and turns down significantly, then it will be signally for a recession at the end of Spring into the Summer of 2025. As I mentioned awhile back, when the economists and pundits give up on a recession, then we know one is right around the corner:) Numerous articles like the following have come out this year:
https://www.reuters.com/markets/us/yield-curve-disinversion-is-recession-signal-watch-2024-06-04/
Although some argue this indicator has not been wrong since World War II, it was wrong in 1966. What is significant about that? That was the year the Dow first broke 1,000 and was at all-time highs. Similar to today.
In the above article and others, people start grasping at straws and say well maybe it isn’t wrong, yet. In the past recessions have started 13-22 months or whatever after the inversion occurs (fyi it was July 2022 when it occurred this time around). We are now passing 24 months and with a near zero chance of a recession occurring this year, we will be at 30+ months. Time to just admit this, and another dozen indicators I have mentioned in past blogs, indicator is simply wrong. Come on, admit it:)
Enjoy your Summer and an interesting Fall. Only 126 days til the 2024 Presidential Election. But, sadly, only 1,587 days til the 2028 Presidential Election and we know the campaigning begins after the 2024 election is settled (which no longer is the day or night of the election itself).
Shalom,
The Mann

INFLATION UPDATE

JUNE 14, 2024 – Well, the May report is in, and it clocked a 3.3% inflation rate, just a hair below my forecast of 3.4%-3.6% and the consensus estimate of 3.4%. Meanwhile, the 3-month annualized inflation rate is holding steady at 5.0%, and the 6-month rate is at 4.6%. These numbers are higher than the annualized rate of 3.3%, signaling that we’re likely to see the annual CPI stick around these levels or even climb a bit higher for the foreseeable future. Next month’s reading is predicted to land between 3.3% and 3.4%, but I’m betting it’ll come in a tad lower.

Remember my prediction from last month about the Fed’s December statement? They had high hopes of lowering interest rates three times in 2024, which seemed pretty optimistic. The market was more cautious, expecting just one reduction, maybe in September or December. Following the market’s lead, the Fed has now revised their statement, hinting at just one rate cut before the year wraps up.

Here’s my take: although the Fed publicly aims for a 2% CPI target, it sure seems like they’re content with it hovering in the 3.0-3.5% range. Intentional? You bet.

Shalom,
The Mann

THE EUROPEAN UNION BASICALLY ADOPTS MLV

JUNE 7, 2024 – The following comes from The European Valuer Journal:
The ‘Banking Package’ included a revision of the Capital
Requirements Regulation (CRR) which introduced a new
concept of ‘property value’ founded on ‘prudently conserv
ative valuation criteria’ that valuers will have to accommo
date alongside market value. Soon to be on the EU statute
books, it will come into effect on 01.01.2025 the same day
as EVS 2025. The Blue Book will contain a Guidance Note
with an interpretation of the new CRR concepts that the
European Valuation Standards Board issued – and that this
Journal liberally commented and publicised – shortly after
it became clear that the relevant provision had achieved
political consensus and wouldn’t change.
The other CRR game changer was Parliament and
Council’s ECB-inspired rejection of the Commission’s
attempt to extend banks’ freedom to use stand-alone,
valuer-free AVMs to revaluation and even to valuation
at origination. This extraordinary event will have conse
quences. Reiteration by the highest European authorities
of the central role of the qualified independent valuer
in ensuring the safety and stability of financial and real
estate markets will command a revision of the European
Banking Authority Guidelines on loan origination and moni
toring that confined mortgage valuers to a ‘desktop’ role so
poorly defined that banks could interpret it as little more
than an exercise in rubberstamping AVM ‘value proposals’
==================================
Mortgage Lending Value (a 120+ year old German valuation concept) was introduced in the USA about 15 years ago. It has not gained traction as Americans like Market Price and the bubbles it produces. MLV basically eliminates the ups and downs of property value and provides a stable number to loan against. The EU has now adopted the ‘prudently conservative valuation criteria.’ This is essentially MLV. But, other countries didn’t want to simply adopt a German concept. Maybe a decade or two from now this will become part of Basel and American lenders (and appraisers) will be forced to use this value instead of Market Value (Price).
It is also interesting that the EU basically killed the idea of AVMs.
Shalom,
The Mann

INFLATION UPDATE

MAY 16, 2024 – The March report came in at 3.4%, at low end of my forecast of 3.4%-3.6% and below the consensus estimate of 3.5%. The 3-month annualized inflation rate is 6.7%. The 6-month annualized inflation rate is 3.8%. These figures are above the annualized rate (3.4%) and thus indicate the annual CPI should remain in this area or higher for awhile. The data is predicting a reading between 3.4% and 3.6% next month. I think this reasonable.
The Fed’s December statement that they expect to lower interest rates 3 times in 2024 looks to be inaccurate. The market is expecting one reduction – maybe in September or December.
It appears to me that although the Fed states their CPI target is 2% they are actually keeping it in 3.0-3.5% range on purpose.
Shalom,
The Mann

PS For those who read to the end, a tidbit of amazing information. By the Year 2100, the largest Age Group in the European Union will be 85 years and older. It won’t even be close. The second largest Age Group (55-59yo) will be about 60% the size. If you wonder why the world is going to robotics (Amazon has more robots than human employees now), it is because we simply won’t have enough human workers. The working age population worldwide is projected to decline beginning around 2050.

BULLISH ON WHEAT

MAY 15, 2024 – I haven’t been paying attention to my March 22nd forecast for a Bull Market in Wheat. On that date the December 2024 futures was about $6 after bottoming a few weeks earlier at $5.65. The futures closed today at $7.11 after peaking at $7.29 a few days ago. If I were trading the futures, I would be ecstatic and would probably grab some profit.
But, just forecasting here and the forecast was for a significant increase in price over the next 12 months….now 10 months.
I expect Wheat prices to increase significantly over the next 12 months. I will revisit this at yearend to see how things turn out.
As an aside, no need to rush out and store up on bread:)
Shalom,
The Mann

STOCK MARKET AND INTEREST RATES

MAY 15, 2024 – It has only been ten days since I posted an update about stocks and bonds. But, when things change, you need to note it. It looks like the recent correction ended in my target range and the final leg of this Bull Market is underway. We are dealing with TARGET 1 from my January 8th post which stated the following:
TARGET 1 – The current rally peaks out around 40,522. This is followed by a decline to the 37,008-38,350 range. Then a final rally to the 42,872-45,640 range with possible targets within the range being 44,214 and 44,298.
Obviously, it would be best to round the numbers and use general ranges. Based on the above, I would say the current rally should take us above 40,000 and up to 42,000 at the high end. A small decline should end in the 37,000 to 39,000 range. And the last big move in this Bull Market should end between 43,000 and 47,000.
===================================
In late March, the DOW peaked at about 40,300. Since then, a data correction has been made and the top is listed at just under 40,000. I haven’t seen that happen before. Regardless, the top was close enough to the Target 1 projection of 40,522. The subsequent correction was a short 5 weeks (ended April 17th) and bottomed in the 37,000 to 38,500 range at precisely 37,612.
As noted in the January 8th forecast above, the final target range is in the 43,000 to 45,500 range. It is crazy to be precise (albeit the past 5 months have been spot on), but I really am liking 44,000 to 44,300 for a final top. As this final leg plays out, a more precise target can be made.
Remember, a Bull Market climbs a wall of worries. And for 18+ months it has fed on the world predicting a recession. Regardless of where we go from here, ALL of those economists and pundits have been 100% wrong. The case is closed on them.
INTEREST RATES – As noted ten days ago, it appears the bond decline ended on April 25th. Bonds have rallied strongly since then. Albeit, the first wave of the 5-wave move has probably ended and a small decline should start immediately. A much larger rally lies ahead – which means interest rates will resume their decline at that time.
I will post updates as the stock and bond rallies unfold.
Shalom,
The Mann
P.S. If I told you that sometime in the 2030’s we may have +100% annual GDP growth, what would you say?

RECESSION PREDICTORS THAT HAVE FAILED

UPDATE MAY 12, 2024 – Per below, I started this long list last December. With 1st Quarter GDP growth being +1.6%, we have now had 7 straight quarters of very strong economic expansion. All of the indicators and the one I am about to add have been way off base. As has been most economists.
The McKelvey Rule has (should say HAD) a PERFECT record of predicting recessions going back to 1970! That includes 7 recessions. As of October 2023, it says we are now in the 8th recession. The rule says that when the real-time 3-month moving average of the unemployment rate moves 0.3% above the lowest monthly reading in the past 12 months we are in a recession. It doesn’t actually forecast a recession. It says we are already in a recession. With 4th Quarter 2023 GDP growth at + 3.3% and 1st Quarter 2024 GDP growth at +1.6%, this indicator is now officially 7 of 8. Instead of admitting the rule is wrong this time, I have seen economists argue that a recession may have actually started last October. Never let facts get in the way of your opinion:)

UPDATE JANUARY 11, 2024 – The latest Bloomberg survey of economists shows 50% of them expect a recession this year. Based on the stock market being at all-time highs, it is saying there is zero chance of a recession in the next 6 months. I won’t use 0% in my forecasts. But, as part of my goal to provide precise measurable forecasts, I will say there is a 1% chance of a recession (Two consecutive negative GDP quarters) occurring in the first half of 2024. As the odds of the 2nd Quarter being negative are low, I place a chance of a recession starting by the end of the 3rd Quarter (would require negative GDP in 2nd and 3rd Quarters) at 5%. I just as well place a percentage on a recession occurring in 2024 as a whole. My estimate is that is only about 10% at this time. There is no doubt GDP growth in 2024 will be lower than 2023. But, that does not mean we will have a recession. We have had very strong economic growth for 6 quarters since the early 2022 recession ended. I will update these percentages as new information warrants such.

DECEMBER 19, 2023 – With so many recession indicators being wrong over the past 2 years, I thought it would be good to compile a list. Although they have failed, this doesn’t mean that in 20 years we won’t look back and say this indicator has predicted 4 of the last 5 recessions. But, for now, these indicators have simply been wrong. I will continue to update this list as I encounter such (erroneous) indicators. Many of these I have never followed or heard of. But, as I am made aware of them predicting a recession that hasn’t, and isn’t, going to occur, I will add them to this list.
1. The (Mis)Leading Economic Indicator turned negative in early 2022 and been consistently forecasting a recession for over 18+ months.
2. M-2 Money Supply is the most negative it has been since The Great Depression.
3. Inverted Yield Curve – The yield curve turned negative in July 2022. It forecasts a recession 11-13 months from that event – which was June to August 2023. This indicator had been a perfect 8-for-8 since WWII. Make that 8 out of 9 now.
4. Empire State Manufacturing Backlogs – The last two readings have been -23.2% and -24%. The only two times this has occurred was in 2001 and The Great Recession. It is doubtful the current decline will coincide with a recession.

5. The University of Michigan’s Consumer Sentiment Index has been below 75 for 29 consecutive months. That has surpassed the prior record from February 2008 to May 2010.

6. The National Association of Credit Management’s (NACM) Credit Manager’s Index (CMI) registered 54.6 and 54.2 in the 3rd and 4th Quarters of 2023, respectively. It did not fall below 55 during the 2010’s expansion and the last time it fell below 55 for two consecutive quarters was in 2008 (this excludes the spike low in the pandemic).

7. The American Institute of Architects Architecture Billings Index (ABI) has dropped to 44.8. Previous drops below 45 signaled a recession in 2001’s first quarter and 2008’s first quarter. HOWEVER, Architects have a lead time of 9-12 months on commercial building activity. Thus, this indicator might be signaling a recession at the very end of 2024 and into 2025 – which I have mentioned in prior posts as a possibility. Especially, since that occurs after the Presidential Election. So, I might move this indicator from this list to the small list of indicators that are still accurate in predicting recessions. But, I wanted to place it here in the interim so you could be aware of what it is saying.

8. Wholesale Sales excluding Autos and Oil turned negative (-2.8% YOY) in 2023. Besides the Pandemic, this indicator coincided with recessions in 2001 and 2007-2009. It also was negative in 2015-2016, which was termed an industrial recession.

9. Banks Reporting Stronger Demand for C&I Loans bottomed at around -60% at the end of the recessions in 2001 and 2007-2009. It bottomed at -54.5% in the 2nd Quarter of 2023 (one year after the recession I say occurred in the first half of 2022). At any rate, no recession occurred in 2023 and one is highly unlikely in 2024. The index has rebounded to -23.7% in the First Quarter of 2024. Still weak. But, improving.

STOCK MARKET AND INTEREST RATES

MAY 5, 2024 – It’s been awhile since I posted about stocks and bonds. It takes time for the waves to play out. Back on January 8th I posted the following:
There are two target options so I will simply label them 1 and 2. They are both bullish so I am not saying the market may go up, but it may go down:) Just saying that there are a few ways it can play out statistically. So here goes the impossible….
TARGET 1 – The current rally peaks out around 40,522. This is followed by a decline to the 37,008-38,350 range. Then a final rally to the 42,872-45,640 range with possible targets within the range being 44,214 and 44,298.
TARGET 2 – The current rally peaks out around 41,906. This is followed by a decline to the 38,392-39,734 range. Then a final rally to the 44,256-47,819 range with possible targets within the range being 44,256 and 45,598.
Obviously, it would be best to round the numbers and use general ranges. Based on the above, I would say the current rally should take us above 40,000 and up to 42,000 at the high end. A small decline should end in the 37,000 to 39,000 range. And the last big move in this Bull Market should end between 43,000 and 47,000.
===================================
In late March, the DOW peaked at about 40,300. Since then, a data correction has been made and the top is listed at just under 40,000. I haven’t seen that happen before. Regardless, the top was close enough to the Target 1 projection of 40,522. The subsequent correction has been underway for 5 weeks and we are right in the 37,000 to 38,500 range.
As I have noted in the past, as the waves unfold I can update the targets. I would say the low end of the range needs to be lowered to 36,000. I do not think the low for this correction is in place, yet.
INTEREST RATES – There is a good chance the bond decline finally ended on April 25th. This was a 4-month decline. From here bonds should rally at least through the Summer and interest rates should decline at least 100bp.
I will post a stock update when I believe this correction has ended.
Shalom,
The Mann