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Mann Overboard

STOCK MARKET UPDATE

UPDATE AUGUST 12, 2024 – One of the reasons I have followed the Elliott Wave Theory for 44 years is it has predetermined points where you need to realize a market isn’t going where initially thought and you need to reverse course. Yesterday, the major market indices (except the Russell 2000) crossed lines that said the recent correction was actually part of the ongoing bull market and not the start of a new bear market. This suggests the economy will be strong thru the 1st Quarter of 2025 at a minimum. Right now, I am seeing +2.0%-2.9% estimated for 3rd Quarter GDP. I suspect the 4th Quarter will be equally strong. Too early to see where 1st Quarter 2025 will be. Albeit, I think the market says there will be a bit of a hiccup then.

Gold is at new all-time highs. Silver is struggling, but should go up into the $30’s per ounce. I did take positions in Copper and Natural Gas as they are at lows that over the past 20 years have signal major bottoms. Cryptos have acted well since the downturn 10 days ago. CPI came in at +2.9% today. I will post about that tomorrow. Hope everyone has had a good Summer. – The Mann

AUGUST 2, 2024 – Wow, what a week this was. As everyone should know, I love Bear Markets way more than Bull Markets. It killed me to be all out bullish for the past 2 years. But, I rode the upturn to its fullest I think and sold all my stocks a week ago on Friday July 26th when the Dow was up about 700 points. And this week as 10-Year Treasury Notes and further out went below 4%, I locked in a 4.8% annuity for 3 years. Easier to sleep this weekend and beyond. Albeit, I did leave some play money to play the downside:) Bear markets are quicker and harsher than bull markets. Easy money to be made if the bear market is truly underway. On to some numbers and forecasts. This is going to be VERY LONG as I am going to layout a lot of specific targets for numerous markets. AGAIN NONE OF THIS INVESTMENT ADVICE. Just my hobby of forecasting the future.
One thing that annoys me most about most analysts are they make forecasts and don’t provide a point (aka as a stop-loss) where they say their forecast is wrong and has to be reconsidered. That leaves their followers not knowing what to do when the person they are following has missed a call. I never care when the market crosses a stop-loss point. Yes, it means my analysis was wrong and, if I traded it, I took a loss. But, if you take trades where your expected profit/loss ratio is at least 3-4/1, then the small losses are nothing compared to the large profits.
DOW 30 INDUSTRIALS – The DOW broke below the 39,411 level today that I mentioned would indicate the peak on July 18th was the Bull Market top. The only problem was this was a closing target, not an intraday figure. The DOW closed at 39,737. Also, the wave theory I follow does not clearly show a change in trend. With all other stock indices clearly in a Bear Market, I am going to assume the DOW is, too. If it gets back to 40,061-40,353, I will probably go short with a stop-loss around 41,000. If it is in a Bear Market, it should not see 41,000 again.
NASDAQ – The Bull Market top occurred at 20,691 on July 10. As I predicted a few weeks ago, the DOW has been much stronger than the NASDAQ. There have been several days recently where the DOW was up a few hundred points and the NASDAQ was down a few hundred. First support is around 17,000-17,500. It is very early, but I am thinking the Bear Market might bottom between 10,500 and 13,500. A 35%-49% decline would be moderate for the NASDAQ. In the past, major declines have been over 80%. Right now, it will take a move to a new high to end the Bear Market case. That isn’t ideal. But, sometimes that is all you have. Right now is not an ideal entry point to short the NASDAQ 100 or S&P 500. Although, I think some more carnage lies ahead next week, a rally after that back to anywhere around 19,000 on the NASDAQ 100 would give me a great place to short. I just am not sure it will ever get back to that level. Today’s close was 18,441. A Bear Market doesn’t like to give short-sellers an easy time either:)
RUSSELL 2000 – The Bull Market top actually occurred back in November 2021 at 2,459. The Bear Market rally topped at 2,300 on July 31. Today’s close was 2,109. If I can get a move back to about 2,172 to close a gap on the chart that occurred today, I will go short with a 2,300 stop-loss. My analysis suggests the high end of the Bear Market bottom range is 1,475 with 965 being the bottom end. Two separate wave relationships point to 965. So, I give that most weight. Thus, a short trade initiated at 2,172 would have an expected profit of 697-1,207 points with a stop-loss being at 128 points. That is a 5.5-9.4/1 profit/loss ratio. Those are the kind of trades I like:)

TREASURY BONDS – The rally I have called for continues and accelerated today. The US 30-Year Treasury Bond price closed at just over 125. Around a 4.1% yield. The main target is around 131 or about a 3.5% yield. The high-end price target is about 144 or about a 3.0% yield. I guess if I had to pick a stop-loss point it would be about 120.5.

ECONOMY – I have reiterated many times that economists waste their time trying to forecast the economy when the stock market tells us what is happening 6 months into the future. The market has correctly forecast the strong economy for the past 2 years and already said it will be strong through the end of the year. However, if the market is in a Bear Market, then it is telling us that next January and February will show us an economy in trouble. As I mentioned almost a year ago, a way early indicator was pointing towards a 2025 recession. The market is now pointing that way, too. And the market doesn’t get this wrong. My expectation is that the economists and pundits that have been dead wrong for two years about a recession occurring will start to say no chance of a recession in 2025 because the Federal Reserve starts lowering interest rates in September and interest rates fall significantly as I have forecast. Also, Trueflation is now down below 1.4%. The pundits will be overwhelming you with how great things are as inflation is tamed and mortgage rates are down, blah blah blah. I do hope they will be bullish right as the recession gets underway. As a reminder, when the yield curve (10-year minus 2-year Bonds) gets to +100bp we will be in a recession. It is down to about -20bp. The lowest I have seen in a year or two. We have lots of lead time to get from -20bp to +100bp. Could that lead time be 6-9 months as the market has indicated? Coincidence? 🙂

UNEMPLOYMENT – On July 1st, I posted it will be 4.4%-4.5% by year end. It went up to 4.3% in today’s report. The whole world now knows about the Sahm Rule (I will let you look it up to see what it is.). Supposedly, it was triggered today. I thought it already had been. I think there is a similar rule with a different name measured in a slightly different way. Everyone talks about its 100% perfect record predicting recessions since 1970 or such. What everyone doesn’t know apparently is that the rule has only a 50% accuracy rate when unemployment rates get adjusted after the initial announcement. A flip of the coin is definitely more accurate than economists and weather forecasters! But, it doesn’t help me in my analysis.

GOLD & SILVER – I am getting tired. If you are still reading, I am sure you are, too:) The gold target is still $2500-$2600. Silver looks extremely good with a move to the $34-$40 range likely. I will probably hop on this trade Monday morning.

LASTLY – One last thing came to mind. Over a year ago when the SVB debacle occurred, I posted about buying when no one else wanted to. Everyone predicted 400+ banks to close up and the housing market to crash. Here is what those experts cost you if you didn’t invest in those sectors. Granted no one would be able to buy at the exact low and high. But, the bull moves were as follows – The S&P Regional Index (KRE) bottomed at 34.52 and the recent top was 59.59. A 72% move. Even if you just caught the middle part of the move for a 50% profit remember all of those pundits that told you banks were in trouble. The S&P Homebuilders ETF (XHB) was around 64 at the time of the SVB event. But, the bull move had started a year earlier at 51. The recent top was an ALL-TIME HIGH at 121.23. Over the past 15 months it went up a measly 89%. If you threw in the towel today, you would have made over 70%. Remember to thank all of those people that have been predicting a housing market crash. And seriously folks, look up on YouTube or wherever the videos from around the SVB event forward and find those analysts that were forecasting armageddon – and NEVER EVER listen to them again!!!

I might be back here sooner than later. I live for bear markets. I get very active when they are occurring. This bear doesn’t hibernate:)

Shalom,

The Mann


Mann Overboard

R.I.P. RECESSION PREDICTORS – YOU WERE DEAD WRONG!

DECEMBER 15, 2023 – First off, happy birthday to my dear wife.
Back in April and June, I mentioned that the wave theory I follow showed a strong rally ahead. It would require us breaking through the all-time highs by a wide margin. This week the Dow 30 achieved new highs and is above 37,000 for the first time ever. 40k and possibly 44k in 2024 are on the table. They have been for over 6 months.
With the information below it is time to 100% emphatically declare anyone that has forecast a recession for the past 18 months and into 2024 dead wrong. Their analysis is totally in error. Just fess up and admit with hat in hand you have no clue what you were talking about. You will feel better:) On to where the data stands and what it is telling us.
BANKS – To date, we have had two bank closures that I am aware of. One was strange as it was not FDIC-insured. We will be ending the year much closer to my forecast of 0-10 closures than the 176-200 closures forecast by many people. I think we will be able to say the same next December.
As for CRE loan defaults, I have dealt with about 5 bad loans. There has been no consistency as to why the loans went south. I am seeing nothing that indicates a lot of foreclosures nor anything specific to a property type.
Amazingly, the Regional Bank Index (KRE) is up 58% from its yearly low and is back above where it was before the SVB/SBNY closings. Remember, buy when there is blood in the streets. It worked again.
To reiterate, the market is saying that it does not believe there will be a CRE loan debacle for banks. Either not many CRE loans will default and/or banks are well prepared and capitalized to handle the defaults.
HOUSING – Home prices have been up all year and the rate of appreciation is increasing. It isn’t much. That is a good sign as it can be sustained into 2024.
The Homebuilders Stock Index was up over 5% one day this week and is now up an incredible 62% (!)from last year’s lows. On top of that, this is an all-time high.
Those who forecast a crash in the housing market continue to be way off the mark. As I said all along, 7% interest rates are nothing to worry about.
INTEREST RATES – Bonds bottomed on October 23rd. A strong rally has dropped rates by about 100bp already. A minor correction should start soon. Then after the new year, we will continue the decline in interest rates. The target is about 25-125bp lower than we are today.
INFLATION – The December report came in at 3.1%, well below my forecast of 3.6%. The 3-month annualized inflation rate is 0.0%. The 6-month annualized inflation rate is 1.9%. These figures are lower than the annualized rate (3.1%) and thus indicate the annual CPI should drift lower. However, continue reading.
Based on the data, my prediction for next month’s figure is 3.5%-3.6%. The January report should show annual CPI for 2023 to be around 3.5%. Then from the February report on into the Summer, the CPI should crumble towards 2%.
SUMMARY – With the Dow 30, bank, and housing stocks at their highs, the markets are saying all should be well through the first half of 2024. The economy is supposed to be looking good in an Election Year. That looks to be the case again.
I will reprint this statement from a post a few months ago: I put this hidden little sentence out there to refer back to in 12-18 months – The chance of a recession occurring looks to be 4th Quarter 2024 into 2025. The first year of the president cycle often sees an economic downturn. I suspect that a year from now the broken-clock recession mongers will have given up and admitted the economy is strong, et al. Just in time to be wrong again:)
Happy Hannukah, Merry Christmas, and Happy New Year!
Shalom,
The Mann

Mann Overboard

(MIS)LEADING ECONOMIC INDICATOR & MORE

SEPTEMBER 25, 2023 – Most importantly, only 3 months to Christmas:) And I am sure you have seen all of the Christmas stuff in the stores already. Next year it will be out in July. Ridiculous.
Two more recession indicators are wrong this time around. The (Mis)Leading Economic Indicator has declined for 17 straight months. I assume its purpose is to forecast a recession to occur within a few months after several negative readings. It has been wrong for over a year. Maybe this is where the broken record (look it up youngsters) recession mongers get their reasoning for thinking a recession is about to occur. Just fyi, the only other times it had this long of a streak was 1973-1975 and 2007-2009. The two worst recessions since The Great Depression.
The third indicator that has been wrong is M-2 Money Supply. It is more negative than it was in The Great Depression! Yet, no recession. In fact, it is looking like 3rd Quarter GDP may show an acceleration in growth to over 2%. However, I will say that is not a lock as I have seen forecasts from 0.5% to over 5.5% (Fed Atlanta). This quarter will be very unpredictable. But, it should definitely be positive and thus we can officially close the case on there being no recession in 2023.
Let me bring something up for the first time. I think I will be harping on this for the next few years. I believe the reason many prominent indicators are wrong this go around is due to what has happened since the pandemic. Almost all indicators soared to extreme high readings never seen before. And many are falling to record lows. What I am seeing is if you draw a straight line from say 2010 or 2015 through 2023, these indicators are exactly where they should be. i.e. The lows are evening out the highs and overall we are reverting to the mean.
I saw this recently in national retail sales. Adjusted for inflation, retail sales have been flat for the past 18-24 months. However, they increased significantly after the pandemic. If you apply the 2010-2019 compound annual growth rate to 2019 sales, you will be exactly where we are at in 2023. I will discuss more examples and provide more specific information as I encounter graphs showing this occurrence.
FED FUND RATES – The Fed did what it was told to do and held rates the same in September. Also, they went ahead and said what the market has forecast for a long time and that is another rate hike lies ahead. The 100% trend of the Fed following the market continues.
HOUSING – As I noted in a prior blog, the market is signaling weakness in the housing market after forecasting the strength we have seen all year. The homebuilder stock index has declined 10% from its July top. We need to continue to watch this play out. It is telling us we should see weakness next Spring. What will slow the accelerating strength in the housing market? Maybe 8%+ rates on 30-year mortgages? About the only thing I can think of. But, it doesn’t matter. The market just says it will happen. The price trend in the 4th Quarter will tell us if the Spring slowdown is just that or the start of a more significant downturn like we had in the second half of 2022.
REGIONAL BANKS – These stocks have declined a significant 15% from their July highs. Basically, they declined some more after the SVP failure, then soared over 40%, and now down 15% – in the end, they have gone nowhere since the Monday after the SVP failure. What is the market telling us? It definitely says not to expect the 250-400+ bank failures that so many people are predicting. Those people expected such to occur by now, in fact. As far as I know, the number remains at one small bank in Kansas. In regard to CRE loans, banks have been refinancing these all year long at higher interest rates. I haven’t heard of any significant issues. The problems have occurred in the CMBS market – gotta hand it to the supposed smartest lenders and investors in real estate:)
INTEREST RATES – Treasury Bonds have broken below last October’s low. This means interest rates are at new highs for this downturn. As I write this, I see a headline saying they are at the highest level since 2007. However, we are now on the clock to look for a final bottom in this multi-year downturn in prices (increases in yields). That doesn’t mean it will occur next week. I am thinking it is several months away. Maybe around the beginning of the year. Too early to give a reasonable forecast re timing and price (yield). The 4th Quarter price action will get us much closer to predicting when the bottom is in. What should follow will be a strong bond rally back to the range of the Summer 2022 and April 2023 highs (lows in yields). First things first. Let’s have the current downturn play out and get a bottom in place. Bottomline, mortgage rates will not be going down the remainder of the year. And they might head over 8% on the 30-year mortgage.
Well, that was a lot to cover. I will probably post again once we get the October inflation reading.
Til then, Happy Fall.
Shalom,
The Mann

Mann Overboard

STOCK MARKET and BABY BOOMERS

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

Mann Overboard

THE REMAINDER OF 2023 – BANKS & HOUSING

JULY 30, 2023 – This is my 3rd and last post regarding my forecasts for the remainder of 2023. Today’s topics are banks and housing.
BANKS – I have been saying since the SVB/SBNY closings that week after week goes by without any closures. Finally(!), last week we had a bank in Kansas get closed down by the FDIC. Also, PacWest was acquired. At this point, we remain closer to my forecast of 0-10 closures than the 176-200 closures forecast by many people.
As for CRE loan defaults, I have dealt with an office building (100% leased – it appears the borrower went bankrupt for some other reason) and two churches (same loan). We shall see if this picks up.
The Regional Bank Index (KRE) continues to soar and is about 20% above the low set the Monday after the SVB/SBNY closings. It is a full 40%+ (!) above its most recent low. Please let all of them people that told you that banks were going down the tubes what you think of their opinions! They have cost the masses a 20%-40%+ return – in less than 4 months at that!!!
As an aside, the market is saying that it does not believe there will be a CRE loan debacle for banks. Either not many CRE loans will default and/or banks are well prepared and capitalized to handle the defaults.
HOUSING – Let me just present a bunch of stats that clearly shows the strength of the housing market. New home sales increased 28.4% from July 2022 to June 2023. According to the Case-Shiller Index, home prices are within 1% of their June 2022 peak. Redfin reports home prices are up 2.1% from a year ago. The American Enterprise Institute’s (AEI) Home Price Appreciation (HPA) Index was up 0.7% month-over-month in June. It has been up every month this year. Annual appreciation is at 2.9% and projected to increase to 6%-7% by yearend. The Homebuilders Stock Index is up an incredible 60% (!)from last year’s lows. Those who forecast a crash in the housing market continue to be way off the mark.
SUMMARY – With both bank and housing stocks at their highs, the markets are saying both industries will do very well through year end and into early next year. There is no sign yet of a slowdown occurring for either industry. Sadly, all of those economists, market forecasters, and pundits have kept the public from making 20%-60%+ returns in these industries. But, that has been the norm since the world’s largest casino came into existence.
To sum up up the 3 posts:
Inflation will be stubborn and rise slightly over the remainder of the year – probably stay in the 3.5%-4.0% range.
The economy has a near zero chance of going into a recession. Yes, GDP will slow down from the amazing 2.2% rate that occurred in the first half of the year. I will put this hidden little sentence out there to refer back to in 12-18 months – The chance of a recession occurring looks to be 4th Quarter 2024 into 2025. I suspect that a year from now the broken-clock recession mongers will have given up and admitted the economy is strong, et al. Just in time to be wrong again:)
And, per above, banks and housing should be rock solid into the 1st Quarter of 2024.
I will provide updates per usual. But, will revisit the 6-month forecasts (for 1st and 2nd Quarter 2024) around the Holidays. Yes folks, less than 5 months til Christmas:)
Shalom,
The Mann

Mann Overboard

“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.