2023 was probably the worst year in history for the mortgage industry – and we’re all happy to see it go, as the total losses were well into the billions.

    It was worse than 1981 even (when the Fed Funds Rate hit 20%) because of all the over-capacity (and excess competition) left over from the COVID boom.

    In light of that, I thought I’d illuminate a few reasons for enormous optimism in 2024!

    1. The Detroit Pistons Have Lost 28 Games In A Row (NBA Record)! OK…this is only “good news” if you have a team member who grew up in Detroit and you like to make fun of him. Interestingly, per this post on X, if you bet $100 on Detroit losing when the streak started and rolled over your winnings each time, you’d now have $510,000.
    2. Inflation Is Waning. Whether it is from falling demand, supply chains opening up, energy prices falling, or the money supply shrinking, inflation is clearly ebbing – and that always means lower rates!
    3. “The Trend Is Our Friend.” This is a phrase Barry Habib repeats often, especially lately when he points out how mortgage rates have fallen almost 1.5% since October. His charts further illuminate how they bounce up and down but remain within certain resistance bands, implying that the trend is clearly further downward.
    4. Velocity Of Money Is At Depression-Era Levels. The velocity of money refers to how many times a dollar turns over (gets spent over and over) in a given period of time. Too high of a number sparks inflation (see 1970s), and too low of a number means depression (see 1930s). Today’s very low number should scare the sh*t out of everyone, per this post on X. But it is very good news for interest rates, as it implies that inflation will not return no matter how much money the Fed “prints,” as most of that money is getting “hoarded” by the wealthy and not spent or invested.
    5. Wall Street’s Predicting 6 Rate Cuts In 2024! “Official” projections are only three rate cuts, but many betters with skin in the game are predicting six or more cuts! They clearly see something the Fed does not.
    6. Gross Domestic Income (GDI) Down. GDI fell year over year – and, per Jeff Snider, that means we’re in a recession now. Again, this is bad for everyone but the mortgage and real estate industries, as it simply portends even lower rates.
    7. Better Mortgage Stock Price Is Way Up. Better Mortgage is an “evil competitor” of ours that specializes in refinances. Their stock price was under 50 cents a few months ago, and…a bunch of us at JVM piled in, expecting them to come back when rates fall. The stock hit 90 cents per share today, implying that we are not the only ones expecting a comeback.
    8. M2 Is Negative. Per this and many other posts on X, when our total supply of money in circulation moves into negative growth territory, we fall into horrible recessions or depressions – and see DEFLATION. This is again horrible for the world at large, but very good for rates.
    9. Housing Is Amazingly Resilient! Barry Habib recently reminded his subscribers that home prices will likely see an average of about 7% appreciation for 2023. This is amazing in light of how high rates climbed – and something nobody would have expected.
    10. AI and Free Energy Will Wipe Out Government Debt, Inflation, And Shortages – And Spur Economic Growth Like We’ve Never Seen. These are longer-term reasons for optimism, but they are probably the biggest reasons of all to be optimistic. Artificial Intelligence will likely foster productivity gains that slice production, service and transportation costs to a fraction of what they are now – keeping inflation way down and creating an abundance of goods and services. This is something we’ve seen in the past with electricity, light bulbs, petroleum production, internal combustion engines, personal computers, and the internet, but AI could dwarf them all. In addition, with advances in solar, nuclear, geothermal and other forms of energy production, many analysts are predicting that energy will be close to “free” at some point in the future. And given that energy costs correlate to wealth more than almost anything else, this too will foster a boom like we’ve never seen.

    HAPPY NEW YEAR from all of us at JVM Lending!

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