AUGUST 18, 2023 – The stock market fell through a critical level this week. Thus, I wanted to get my thoughts out there as to what appears to be happening and what we need to keep an eye on. As I continually complain about, you cannot be a broken record and hope you are right eventually. The market clearly tells us in advance what is going to happen.
The Dow 30 peaked on August 1st. It is down just about 4% as of today’s low. That is a minor decline. But, in the Elliott Wave Theory the decline crossed a level that should not have been broken. As such, we have to be alert to a trend change.
What the market has told us so far is that the economy will be fine into the 1st Quarter of 2024. There is basically zero chance of a recession occurring in the last two quarters of 2023. In fact, it is telling us that the news will be great this Winter. That said, if August 1 becomes a significant top, then the market is telling us that a chance of a recession by next Fall may occur. It will be October 2024 before we could have confirmation of two consecutive quarters of negative GDP. That assumes the 1st Quarter 2024 GDP will be positive.
It is just difficult to believe that right before the Presidential Election we will have confirmation of a recession. The incumbent administration does all it can to avoid such from occurring. That is why the first year of a new president is when a recession usually occurs.
The Regional Bank Index has had its largest decline since the bottom in May. It is down 11% from its recent high. The Homebuilders Index is down 6.5% from its recent high. The NASDAQ is down 8% from its recent highs. But, the NASDAQ’s waves are in better shape than the DOW 30. We will see if the indices align or keep diverging.
Treasury Bonds are about to break to new lows. Thus, interest rates are hitting new highs. The 30-year mortgage rate is above 7% again. It has been awhile since I called the top last year to the exact day. These are the highest rates in 21 years.
Ten-year treasuries are at 4.25%. The waves are projecting a move to 4.54%. The current rate is the highest in 12 years.
If the waves play out as expected, rates should go up about another 1/4% and then decline to the 2.5% to 3.3% range over the next year or such. The incumbent administration would certainly like that to happen during an election year! This scenario matches up with the market’s expectation that the Fed Funds Rate will be lowered 2 or 3 times in 2024.
My feeling is rates are finally back to market levels. We have had government-controlled, artificially low interest rates for most of the past 8 or so years. We are finally at a level where rates reflect the risk of underlying assets like bonds and real estate.
The market is at a critical stage. How it plays out will tell us what will happen in the Spring.
In regard to us Baby Boomers, I came across the following stats from Quill Intelligence. About 10,000 Baby Boomers turn 65 every day; seven in ten will need long-term care in their lifetime. The number of Americans over the age of 85 is expected to more than double from 2019 to 2040, from 6.6 million to 14.4 million. An estimated 711,700 caregiver jobs will open up every year from 2021 to 2031.
The good news is us Baby Boomers will remain in charge of the power positions and almost all of the world’s wealth for another 10-20 years. The generation before us earned the title The Greatest Generation. But, the Baby Boomer generation provided the peak for the world that hasn’t been seen since The Roman Empire. Things will decline generation after generation for hundreds of years to come. I do think we have just begun The Dark Ages II.
I guess I should end this cheerful post here.
Shalom,
The Mann
Tag Archives: baby boomers
“WE HAVE AN OVERSUPPLY OF HOUSING” – THE MANN
UPDATED – OCTOBER 26, 2022 – I have added some data regarding the number of vacant housing units in America at the bottom of this post.
OCTOBER 24, 2022 – There, I said it. Made it 100% clear for everyone to understand. I might be the lone voice saying this for the past 5-10+ years. So be it.
Population growth in this country has been slowing for the entire 21st Century. It will continue to slow. NAR, Homebuilders, and the Fake News Media can tell you that we have a housing shortage. That is what they must tell you so they can keep making their money – at the expense of John Q. Public.
Some facts….
There are over 1.7 million housing units under construction. That is almost a 50-year high (yes, 50 years ago we had a much smaller population). More importantly, in the housing crisis 15 years ago, we peaked at only 1.4 million housing units. We have more housing being built today with a much slower growing population.
In the 1970’s, when Baby Boomers were at the age to buy homes in mass, that population segment grew at a 4.5% annual pace. Millennials of the same population segment today are growing at only a 1.2% annual rate! That is almost a 75% reduction in the demand for housing! Adjusting for a 56% increase in population since 1972, this is still a 58% reduction in the demand for housing!!!
I would guess if we didn’t build a single housing unit for 5+ years we would still have vacant houses and apartments all over this country. Instead of building new shoddy manufactured houses, let’s focus on rehabbing the well-built housing of decades ago. Most of this product is in existing built-up areas with infrastructure in place. Take advantage of that.
One day when people start to admit we have had an oversupply of housing for over a decade, please remember The Mann told them so:)
Shalom,
The Mann
ADDED OCTOBER 26, 2022 – I was wondering how many vacant units we have in America. So, some quick research found the following. Sources obviously can vary in their figures.
We have 142 million housing units in America. The number of apartment units is estimated to be 21.3 million. We can assume the remainder are houses – 121.7 million.
National apartment vacancy is reported to be 6%. This indicates 1.3 million vacant units. As of 2020, the home vacancy rate was 9.7%. This indicates 11.8 million vacant units. The sum is 13.1 million vacant housing units in America.
As I noted in the original part of the post above, we could go several years without building a single house or apartment complex and we would still have many millions of vacant units.
One last tidbit of information to consider. I once worked with an economist that assumed every year 1% of existing real estate (housing, office, retail, industrial, etc.) became obsolete and/or was demolished. At 142 million housing units, that would mean 1.4 million units are taken off the market each year. That helps provide some constant need for new housing. Again, this is an assumption. It seems like an awful lot of houses and apartments being abandoned or demolished every year. But, …
That is all I have for now.
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