MARCH 22, 2024 – The following is from an article by Gabriella Cruz-Martinez of Yahoo Finance on March 21st:
“Sales of previously occupied US homes gained momentum in February as buyers accepted the new normal of higher mortgage rates.
Existing home sales surged 9.5% in February from the month before to an annualized rate of 4.38 million, the National Association of Realtors (NAR) reported Thursday. That was almost 6% higher than a year earlier and marked the largest monthly increase in a year.
Sales picked up last month, even as mortgage rates flirted with 7%.”
My June 15, 2023 post titled “CAN PEOPLE AFFORD 7% MORTGAGE RATES?” appears to have been accurate and played out as I predicted. I will simply show a few quotes here. You can revisit the post if you want to read it in its entirety.
A side note, the S&P HomeBuilders Index is at all-time highs. It is up almost 75% since the October low. Even with the supply of new homes soaring, the market has no worries of a housing bust occurring this year.
Shalom,
The Mann
Excerpts from my June 15, 2023 post:
JUNE 15, 2023 – YES! The simple answer is, of course!
I saw a survey this week where people said they needed mortgage rates to drop to about 4% for them to afford a new house. As my friend The Red-Shoe Economist, KC Conway, would say ‘I call BBQ-Sauce!’
People can afford a 7% mortgage rate. They can afford a 10% mortgage rate! Us old-timers remember when a rate below 10% was a bargain.
By this time next year when the world realizes the day of artificially low interest rates is history and will not return, they will simply adjust to living with 7%-8%+ mortgage rates and supply and demand analyses will work the same as they did before. People adjust. They always have. It’s just easier to complain before facing reality and adjusting the way they do things. Human nature.
Tag Archives: housing
SUPPLY AND DEMAND FOR HOUSING
DECEMBER 27, 2023 – As I posted last February, on a percentage basis, population growth is 75% lower than it was in the 1980’s (Baby Boomers). Last week, I saw a stat showing the demand for houses by Millennials in the prime age group of 25 to 44 years old is over 80% lower than when Baby Boomers were at the same age.
Combine this with the fact that spec activity on the part of homebuilders is 1/3 higher than before 2020 and has only been exceeded by the years 2005 thru 2008!!!!
Please explain to me how we have a housing shortage when we have almost no demand for new houses and an insane number of new houses being built at the same time. Not to mention the 10 million or so vacant houses we have in the country.
You have to hand it to NAR and NAHB on perpetuating the false rhetoric that we need more housing. Need more affordable housing. And so on. I guess we can adapt that old joke to NAR and NAHB as to when you know they are lying…
Here’s to a great 2024 for everyone!
Shalom,
The Mann
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
BEAR MARKET ACTUALLY AVERTED…BARELY
NOVEMBER 25, 2023 – The markets instantly reversed a month ago. Just like they did last October when the Bear Market bottomed.
STOCK MARKET – Although the S&P 500 and NASDAQ went into a Bear Market, the Dow 30 avoided such. Since the October bottom, the Dow is up 9.5% and over 3,000 points. The NASDAQ is up over 15% and the S&P 500 over 11%. NASDAQ is at a new Bull Market high. The Dow and S&P 500 are within 1% of new Bull Market highs.
REGIONAL BANKS – The regional bank index ETF (KRE) is up 18% in the past month. But, still 11% below its Summer peak.
HOUSING – The housing ETF (XHB) is up 19% over the past month and within 3% of its Bull Market high.
Market action since August suggests we will have some economic trouble in the first quarter of 2024 followed by a continuation of the economic expansion that started in the Summer of 2022. 4th Quarter GDP is forecast to be just under +2%.
INTEREST RATES – Bonds also appeared to have bottomed on October 23rd. A strong rally appears ready to have a minor correction. Interest rates should continue to decline for the next 3 to 6 months. The decline will be significant.
Shalom,
The Mann
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
HAPPY 247th TO OUR REPUBLIC
JULY 4 – Hopefully, everyone had a fun and safe 4th of July. As we are half-way through this year, just a few items to mention.
I am seeing the first articles questioning all of those people that have been forecasting a recession. The tide is about to turn on all those who will have to admit they are wrong. People are finally starting to say hey we had the Recession last year. Thanks for joining the small club of us that have been saying this for a year now!
First Quarter GDP was revised upward from 1.3% to 2.0%. Second Quarter GDP forecasts are around 1% (Federal Reserve is projecting 1.3%). That would be an annual rate of 1.5%, which is in line with population growth. I am probably wrong about this, but I have always thought GDP growth should be about the same as population growth. If we look at a chart of the growth rates for both, we will see they have been declining in unison for 30+ years. I seriously doubt the last two quarters of this year will have negative GDP.
Lastly, Truflation analyzes 10 million data points (so they say) daily in comparison to the 80,000 data points (again, so they say) analyzed monthly for CPI. Thus, a quicker and more encompassing inflation rate is provided. Truflation is down to about 2% versus 4% for CPI, which will be about 3% in a few weeks when the next report comes out. Again, all of those people that a year ago were forecasting 10%+ inflation this year need to stand up and admit they were wrong.
Oh, the housing stock index I mention from time to time hit 80 this week. Up from a low of 53 last October. That is a nice 50% move the masses missed because the media was talking about the upcoming housing crash. Houses in my market are back to selling above list price and instantaneously, again. As I have posted, 7%+ mortgage rates are not an issue for people buying houses.
For a summary of recent economic data, this is worth checking out:
Strong economic data turns recession fears into recession doubts (yahoo.com)
Happy Birthday America!
Shalom,
The Mann
CAN PEOPLE AFFORD 7% MORTGAGE RATES?
JUNE 15, 2023 – YES! The simple answer is, of course!
I saw a survey this week where people said they needed mortgage rates to drop to about 4% for them to afford a new house. As my friend The Red-Shoe Economist, KC Conway, would say ‘I call BBQ-Sauce!’
People can afford a 7% mortgage rate. They can afford a 10% mortgage rate! Us old-timers remember when a rate below 10% was a bargain.
People buy a mortgage payment. They do not buy a home price. Everyone knows that. So, all people have to do is adjust the price downward (and the mortgage amount is obviously based on the purchase price…for simplicity, I will assume a 100% LTV since people do not put much money down).
Let’s say someone can afford a $2,000/month PITI (for now, assume no escrow). At a 4%, 30-year mortgage, they could buy a $418,922 house. Technically, a higher price if the LTV was less than 100%.
At a 7% mortgage rate, the $2,000/month PITI can buy a $300,615 house. The point is they can still afford a house at a higher interest rate. They just have to adjust the price category they look at. They do the same thing when interest rates go down – they look at houses pricier than they really need. Well, adjust in the other direction when rates go up! Life is so simple.
Also, one major benefit to the above that gets overlooked is it is alot easier to save for a down payment on a $300k house than a $420k house! People have a much easier time of getting into a new house when they adjust their price target downward.
Combine the above with a low inventory and you probably have an explanation for home prices rising every month this year. Demand remains strong. People can afford houses at the new interest rate level.
Lastly, I find the argument that the public cannot afford a house payment at 7% interest weak when they can afford to run up their credit card debt at 18.99%-26.99%+ interest rates!!!!!! Another way to more easily afford a mortgage payment at current rates is to not have credit card debt! Adjust your way of living. It’s that simple.
By this time next year when the world realizes the day of artificially low interest rates is history and will not return, they will simply adjust to living with 7%-8%+ mortgage rates and supply and demand analyses will work the same as they did before. People adjust. They always have. It’s just easier to complain before facing reality and adjusting the way they do things. Human nature.
Shalom,
The Mann
INFLATION FORECAST, BANKS & HOUSING
MAY 11, 2023 – As forecast, inflation didn’t change much last month. But, did fall below 5.0%. Significant declines will occur over the next two months.
The 3-month annualized inflation rate is high at 5.7%. The 6-month annualized inflation rate is 3.6%. These figures bracket the annualized rate (4.9%) and thus indicate the decline in the annual CPI should slow down after the next two months are in.
Based on the data, my prediction for next month’s figure is 4.1%-4.3%. I like the data and am confident the next reading will be in that range.
As for the July 12th forecast, the data now suggests a figure around 3.2%-3.4%. The odds for a figure around 2% are about nil, unless we have full blown deflation show up. Doubtful, but there are signs we may get surprise negative readings in the coming months. I will need to see it to believe it. After bottoming with the July 12th figure, it looks like inflation will rebound in the second half of the year to the 5%-6% range. That said, we will be far below the double-digit rates many people have been forecasting for the past year. However, this will make the Fed consider more rate increases. Something, the market is not pricing in at this time.
A bit of trivia. The annual CPI rate has decreased for 10 straight months. I am certain that streak will extend to 12 months. The only times such a streak occurred was in 1921 and 2012. Neither were around a recession or stock market crash.
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. Pac West seems to be the bank on the hot seat right now. It is one of the ten banks I listed a few months ago.
The Regional Bank Index (KRE) broke down last week and is about 10%-15% below the low set the Monday after the SVB/SBNY closings. This is saying the market expects to see CRE loan losses (I am going to post about this soon) increase the remainder of the year. No surprise in that forecast.
HOUSING – The American Enterprise Institute’s (AEI) Home Price Appreciation (HPA) Index was up 1.4% month-over-month in March. I believe it has been up every month this year. NAR reported that home prices increased in 70% of metro areas in the First Quarter of 2023. The Homebuilders Stock Index is up a full 40% 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.
Til next month.
Shalom,
The Mann
HOUSING AND AN ITEM OF TRIVIA
APRIL 19, 2023 – Let’s get the trivia out of the way. India has surpassed China in population. I didn’t know it was even close. Sort of reminds me of the day about 30 years ago when WalMart surpassed Sears and KMart (you youngsters are asking what is Sears and KMart 🙂 ) on the same day to become the #1 retailer. As for the housing market…
Freddie Mac said the 30-year mortgage rate declined for the 5th straight week – now at 6.27%. It is like pulling teeth to get it below 6%. But, regardless, it has been lower ever since the day I called the high last year.
According to the American Enterprise Institute (AEI), home prices increased for the 3rd straight month. This follows monthly declines from July to December 2022. As I have noted many times, the market predicts the future 6 months out. As an aside, I heard an analyst today say the market does not predict the future. It is people like him that I need so I can have someone on the other side of my trades:)
So, in regard to housing, the market peaked in December 2021. Thus, it said the housing market should peak in June 2022. If you read my posts last June, you will see I was screaming that a top was occurring by the very minute.
After a 40% decline, the same indicator bottomed in June 2022. Thus, predicting a bottom for housing in December 2022. Is it coincidence that the AEI home price index bottomed in December and has gone up for 3 straight months? Sure, let’s call it coincidence:) As an aside, the same indicator is up 35% from its low.
This is a great lesson on how the market takes advantage of the public. At the end of 2021, the smart money cashed out and enjoyed a 40% decline in housing stock prices. All along, the public was hearing every day how strong the housing market was. Then, for the 2nd half of last year while the public was hearing how the housing market was crumbling due to rising interest rates, the smart money made 35% on housing stocks rising. It is such an easy game to play. As long as the public always follows the news…and it will.
So, remember, this Fall the news will change from being negative on housing to being positive. Suddenly, the public will have found a way to sell their houses that had a 4% mortgage rate and buy a house at a 7% mortgage rate. Remember, the market predicted that news today – 6 months before you hear it from the pundits. Also, this is not the first time in history that people owned homes with mortgages at x% and years later had to sell and buy a home at a mortgage rate of X+3%. People adjust. Just buy a lower price home! Everyone acts like this is the end of the world having mortgage rates 3% higher. It isn’t. The sun continues to come up in the East every day.
As I mentioned last year, the decline in housing prices would be less than expected because of a lack of inventory. According to Redfin, the number of listings has declined at a double-digit rate for 8 straight months! Geez, are there any homes for sale anywhere! According to the NAHB, 1/3 of homes for sale are new construction. The norm is 10%. Do you think the market knew that would be the case when they started buying housing stocks last June? Yes, of course.
I said last year the public and pundits would be baffled by home prices not declining much, if at all, while the average mortgage payment was up 50%. Logically, home prices need to decline 33% to keep the mortgage payment the same. That has not and will not happen.
All of the above is explained by Socionomics (not the same as socioeconomics). Thankfully, I started following Robert Prechter 43 years ago and watched him develop the Theory of Socionomics. No matter how much is published on the subject, the public just will never learn to do the opposite of what they have been doing for thousands of years. I am sure you can find Mr. Prechter’s books on the subject on Amazon, eBay, etc. If you want to change the way you look at everything, look into this subject.
Lastly, I want to mention an interesting conflict in indicators that will play out this year with one side or the other being wrong. The stock market bottomed last October (so 6 months later is right now and I saw a survey that said the public is the most pessimistic about the future that they have ever been….of course, if you follow the stock market you knew that would be the case 6 months in advance!). It is up about 20% from its lows. It continues to say no recession this year and, in fact, the economy should improve. Now, the opposite is occurring with the tightening credit market. Virtually ever recession has been preceded by banks tightening credit. This indicator is screaming for a 100% certain recession in the second half of this year. So, either the smart money is wrong or this indicator will fail this time. Something has to give. I bet on socionomics and the smart money (aka stock market). Which side are you betting on?
Til next time…
Shalom,
The Mann
AN EVERYTHING UPDATE :)
UPDATE – MARCH 23, 2023 – A few items to update regarding the post below and other recent posts. I had heard that 1/3 of bank deposits are uninsured. I just saw a chart from the FDIC that says about 1/2, or about $9 Trillion (!), in deposits are uninsured. No banking system could withstand even 20% of that amount being withdrawn. Money continues to leave banks as consumers can get 4%+ in money market funds and T-Bills versus 0.5% in banks. With the inverted yield curve, banks are unable to pay 4%-5% on deposits in line with the Fed Fund Rates.
Here is a list of banks with the most unrealized losses in relation to their total equity capital. Remember, the Fed is letting banks get funding on their underwater bonds at full par value. So, this doesn’t necessarily mean a run on deposits at these banks will make them go under. But, they are on thin ice. Customers Bancorp, Inc., First Republic Bank (been in the news for a week), Sany Spring Bancorp, Inc., New York Community Bancorp, Inc., First Foundation, Inc., Ally Financial, Inc. (by far the worst ratio….and like CACC, in the auto loan business), Dime Community Bancshares Inc., Pacific Premier Bancorp Inc., Prosperity Bancshares Inc., and Columbia Financial, Inc. The late-SVB was in this group, too.
The more I understand what the Fed has done, it appears this is what I would call IQE1 – Indirect Quantitative Easing 1. Leave it to us Baby Boomers and our invention of creative financing to now come up with an Indirect QE:) Gotta love us:) In the end, it will probably be referred to as QE4. See my next post as to a term you will want to watch for to know when the Fed has gone all in on the real QE4.
As an aside, the Regional Bank ETF hit a new low by a few pennies today. The market is still sorting out which banks to sell and which to buy.
Also, I mention in the original post below that the market is telling the Fed to lower rates 150bps in 2024. I heard today that has been moved up and the market wants the Fed to pivot in 3-4 months and start lowering rates. No pressure on Powell, eh!
MARCH 21, 2023 – As the 1st Quarter comes to an end, this seems like a good time to update my thoughts on forecasts on many items. So, here goes. No particular order.
BANKS – As this has been the hot topic for the last 10 days. It seems like everyone is predicting hundreds of bank failures to come. The Texas Ratio shows 200 banks at risk. Folks we have entered QE4. I think the last QE was QE3. Correct me if I am wrong. If Vegas gave me good odds, I would bet no more American banks would fail this year. Yes, you heard me right. As there might be some small banks that are in marginal shape, I am thinking a better bet is less than 5 or so banks will fail. I am thinking total assets of banks that might fail will be under $50 Billion. Maybe much lower. There are 10 banks with relatively high CRE ratios. But, their reserves are likely high enough to handle upcoming CRE losses. And the Fed thru QE4 already shored up the weakness in their Balance Sheets. I learned from QE1 thru QE3 that the Fed isn’t going to allow our markets to suffer for too long. As the saying goes, buy when there is blood in the streets. That occurred on Monday March 13th. The S&P Regional Bank ETF I mentioned bottomed that day at 41.92. It has been higher since and closed today at 46.07. Up 10%. No, you wouldn’t have bought at the bottom tick. But, you probably would have bought very close to it as it was such an obvious moment in time. I have been wrong before. But, I can see that panic bottom not being violated and the ETF continuing higher this year. The entire world is anti-regional banks. That is when you should be pro-regional banks.
INFLATION – Geez this will get extremely long if I write as much as I did about banks:) I still see a July 12th annual reading of 3% or lower. 2% is still likely. I will throw out something you likely have not heard from anyone. There is a slim chance of a NEGATIVE inflation (aka deflation) reading at yearend or, more likely, in 2024. That isn’t a prediction I would lay too much money on. But, if you gave me the same odds that FDU had of beating Purdue in The Big Dance, I would put some money down.
FED FUNDS RATE – Everyone is asking this week what will the Fed do at the upcoming meeting. It is truly a 50/50 chance they will not make a change or raise the rate 25bp. In the end, there is minimal difference. The difference is more psychological. My guess is they make no change and defer such to April. The market was telling them they had 50bp more to go. Now it is 25bp. Let’s wait a month and see what the market says after things have calmed down. A surprising item I saw was the market is telling the Fed to DROP rates 150bp in 2024. Although the market forecast last year’s rate increases early in the year, I think it is a bit early to put much weight into the 2024 message. Also, remember, the average time between the first rate decrease and the last rate increase is 4.5 months. Since, we will likely have the last increase in March-May, it would be difficult to have a decrease by yearend. Again, give me FDU odds, and I would take a chance on a decrease in November or December.
THE BIG SHORT 2 – As I posted last August, this cycle’s ‘big short’ was auto loans. As of Yearend 2022, $20 Billion of Generation Z and Millennials auto loans are over 90 days past due. They need to watch a classic cult movie of the early 1980’s – Repo Man. They can probably stream it:) Digressing, my uncle was a repo man. I went out one night in Fort Lauderdale with him getting cars. Scariest night of my life. Back to now….Also, for 20% of Generation Z, over 20% of their after-tax income goes to a car payment!!!! Insanity. Of course, I am sure it is like their college loans and a gun was put to their head and they were forced to take on this debt;) SCOTUS will be listening to a case in 2024 about Biden wanting to forgive auto loan debt. Have some ethics. Have some morals. Pay your debt even if it takes the rest of your life!!! The one stock I mentioned was Credit Acceptance Corporation (CACC). Its all-time high was 703.27. Its bottom to date was at the beginning of year at 358.00. That is a 49% decline. At today’s close of 415, it is down 41%. That is far in excess of the DOW being down 12% from its all-time high. Not a bad call for those who actually played The Big Short 2.
BITCOIN – There is a current setup that is similar to two times in the past that took Bitcoin up over 60x and then over 20x. As assets soar in price, it becomes more difficult to have the same huge percentage increases. So, if this setup plays out, then maybe a 5x-10x move over the next 1-3 years is possible. From the recent major low around $16,000, that would be $80,000-$160,000. This will take some time to play out.
STOCKS & BONDS – It seems like everyone is looking for a recession this year. Everyone is expecting the stock market to fall apart. As I have posted on here many times, 2022 was the recession. In 2022, the global loss for stocks and bonds was about $36.5 Trillion (!!!). In comparison, the maximum loss in 2008 was about $23.5 Trillion and in 2020 was about $24.0 Trillion. What more do people want? A CRASH 50% larger than what occurred in 2008 isn’t enough? Since I seem to be in the mood to put out crazy forecasts, let’s not stop here. By yearend, I can see the DOW above 38,000 and the S&P 500 in the 4800-4900 range. 40k in ’24 has a nice ring to it. I would be interested if you see anyone else forecasting the DOW above 38k or S&P 500 above 4800. Those who know me know I have been a bear my entire life. I have always lived for downturns. For me to be this bullish, is beyond amazing to even me. A question I always want to ask analysts is what would it take for you to say your forecast is wrong. In this case, that would be the DOW breaking below last October’s lows at 28,660. If that occurs, the above is out the door.
OIL – I honestly haven’t looked at a chart since I sold all my oil and gas (aka pro-plant stocks) holdings the day oil hit $137 per barrel. This was about a week into the Russia/Ukraine dustup. The opposite of buy when there is blood in the streets is sell when everyone wants to buy something. That was the day of the high and oil has recently traded as low as $70. Almost a 50% decline. Do you remember a year ago when everyone said we were in for a major shortage of oil and prices would go even higher? What are those people saying now? This is the first time in my life I have not owned oil and gas stocks. It is getting tempting after a 50% decline. I may check into the charts and see what is up. If I do, I will post my thoughts here. In the interim, please boycott EVs and buy only gas vehicles and devices and help the plants around the world flourish and feed its 8 billion people. I always tell people that whether it is bonds or corn or cattle or oil it is us futures traders that dictate what the price is and what consumers will pay. It is not supply and demand. It is not government actions. Commodity traders are the ones in control.
HOUSING – I am exhausted writing the above. I will cover housing in the near future. There are mixed signals. But, in general, I am feeling my expectation of unexpected market strength is playing out perfectly. NAR’s price index just declined on a year-over-year basis for the first time since 2012. However, AEI’s HPA saw a recent monthly increase. Also, Pending Home Sales are up 9.3% in the two months thru January. That is the dead of winter and home sales are up almost double digits. Remember, a year ago, the housing market was super strong. So, this isn’t working off of low numbers. Looking at a chart since 2001, when Pending Home Sales turn up they don’t usually turn back down. My prediction re mortgage rates has come very close to occurring. We have not been below 6% yet. This decline is getting long in the tooth and I am watching the charts to see when the bottom is in place and we turn back up. Although the rates have been down ever since I predicted such, it is looking like a move below 6% might not happen. Still a chance though.
You’re tired. I am tired. I hope you find the above of interest. Even eye-opening. Forecasts obviously do not come true 100% of the time. Keep that in mind. I certainly do:) I am disappointed with even a single incorrect forecast. I give it my best to be right as much as possible and to admit when I am wrong. I rarely see the pundits come out and say I was dead wrong. They should be forced to do such.
Always glad to hear from you. Please email me with any thoughts you have. Any charts or data you see that I might be interested in. I am at GeorgeRMann@Aol.Com.
Shalom,
The Mann