Rates Fall Again

    Rates fell sharply again today as inflation news was very good (PPI fell sharply), retail sales were down, and a key manufacturing index (Empire) was frighteningly weak.

    This is all playing out exactly as Jeff Snider has been predicting, and it is proving him correct once again – making his series of tweets last night even more ominous.

    Further pushing rates down are continued concerns about a banking crisis, but this time it is more focused on Europe, where Credit Suisse is facing enormous problems.

    Bear Stearns Collapse Started Exactly 15 Years Ago

    Almost exactly 15 years ago, on March 14, 2008, the mighty investment bank, Bear Stearns, faced imminent collapse – and the Fed arranged a huge bailout/sale.

    I won’t go into the details, but you can read all about it here.

    Government officials and many financial pundits breathed a sigh of relief after the sale and explained that Bear Stearns was largely a one-off.

    BUT, as everyone knows, problems continued to surface until Lehman Brothers went belly up the following September, after which all hell broke loose (literally).

    I bring all this up because Jeff Snider did yesterday in a series of tweets that I highly recommend reading – here.

    Snider draws numerous frightening parallels between March of 2008 and March of 2023, including disinflation, collateral crises, massive hedging, plummeting short-term bond yields, inverted yield curves, and much more.

    He is implying that we could well be on the verge of another major financial crisis – and his implication is scary because he has been correct so often so far.

    What makes this more frightening is the fact that BlackRock’s CEO Larry Fink expressed similar concerns in the Financial Times today.

    So yes, based on ALL of the data and parallels that Mr. Snider shared, I too think we are on the verge of a major economic slowdown – if not a crisis – and it will bring rates down sharply this year (a harbinger of which we saw today).

    But, Unlike 2008, Housing Prices Will Go Up

    A repeat of a financial crisis does NOT mean we will see a repeat of a housing crash – for the reasons I have set out too many times to count.

    I will repeat a few of them nonetheless: (1) we were building almost twice as many homes going into the 2008 recession; (2) demographic demand (homebuyers in their early 30s) hit an all-time low in 2008; (3) there were over 4 million listings prior to the 2008 crisis compared to about 700,000 now; (4) we faced an onslaught of foreclosures in 2008 because of ridiculously lax lending standards; and (5) The number of new households created every year for the last ten years has vastly exceeded the number of new homes built (by several hundred thousand each year).

    Barry Habib, in fact, reminded us again today that home prices will likely GO UP this year due to inventory constraints and buyers returning to the market in droves when rates fall.

    Housing Appreciated 26% In 1946!

    Barry also reminded us that housing appreciated 26% in 1946 – so naturally everyone expected the market to correct – only to see housing prices continue to go up and up… and up.

    He was drawing a parallel to the 19% increase we saw in 2021 and how everyone expects a correction again because that appreciation number was so large.

    But … see 1946. Home prices were up 21% more in 1947, up 2% in 1948, flat in 1949, and up 4% in 1950…

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