Tag Archives: KRE

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

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

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