Benjamin Roth: The Great Depression: A Diary It's all here, times change people don't
-the endless govt programs that fail to stimulate the private sector
-the ups and downs of the economy, the veterans pension stimulates just as the housing credit did, until of course the money runs out
-Roth is a attorney in Youngstown Ohio who kept a diary regarding the economy from 1930 until WW II breaks out, he is objective, candid, and forthright which is more than we get from Washington DC now or then
highly recommended
In the last year a the gallon price of diesel has fallen from $4.50 to $2.45.
Last week we noted that J B Hunt was calling the situation a freight recession. Often the obvious is in plain sight, one just needs to observe it. Here is a sample of headlines just this week.
Google Posts 2nd straight Fall in Ad Revenue – MSFT Growth is Muted – GAP Cuts Hundreds oof Corporate Jobs – 3M Sales Slide – UPS Gives Gloomy View (remember the Transport Index leads) – Stocks Aren’t Close to Cheap – Economy Cools – Intel Suffered Its Largest Ever Quarterly Loss
And yes, I know, the DJIA posted its largest gain Thursday since January – a hefty 524 points. The usual suspects were the source of the rally. Every one of the 17 social media and tech stocks on my stockcharts page gained ground. And the averages weight those stocks to more influence the average. Facebook Meta jumped 14% and AMZN added 4.6%. Recall that eight stocks make up half the total capitalization of the SPX.
Here is a big picture view to keep in mind, From 1981 to 2020, interest rates fell. Mortgages fell from 14% to less than 3%. If you were borrowing to finance real estate holding and well your plan was not quite working, every three or four years you could re-finance at a lower rate. That is no longer the case. Mortgage rates in the last two years jumped from 3.5% to 7%. In addition, Covid / work from home, upended the commercial real estate market. Last week we noted Houston has 25% vacancy rate. San Francisco has a 30% vacancy rate.
Here is what that means. California Street in San Francisco is Wall is Street West. Rents run $75 per square foot per year, but then again, the restaurants are fabulous. One 22 story building was valued at $300 M just four years ago. Now with lots of empty space, it may only fetch $60 M, a drop of 80%. This is the same thing that happened as we entered the 1930s Depression.
First Republic Bank shares have dropped from $125 to less than $10 in the wake of the Silicon Valley Bank collapse. These air pocket drops are early warning indicators of a deflation effect amid worries about overall inflation.
Last week we reported crude oil was filling that $4 gap after the Saudis and Russia announced production cuts. The 200 week moving average is $66.81. and price has fallen to $74.76. I am guessing this level holds, summer driving season is around the corner. Exxon Mobil remains strong at $116.
We are entering seasonal weakness for stocks, be cautious.
Corporate Bonds: "The Next Shoe to Drop" "The neckline has been broken over the last few days"
By Elliott Wave International
A "calamity" is likely ahead for corporate bonds, says our head of global research, Murray Gunn.
Some of Murray's analysis involves the head and shoulders, a classic technical chart pattern. In case you're unfamiliar with it, here's an illustration along with an explanation from one of our past publications:
A head-and-shoulders is a reversal pattern that consists of three price extremes. Market technicians refer to [them] as the left shoulder, head, and right shoulder. ...it takes a break of the neckline to confirm a reversal... [and it's] not just a bearish reversal formation. Inverted head-and-shoulders mark bottoms.
With that in mind, here's a chart and commentary which Murray provided for the April Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus financial markets:
The chart ... shows the relative performance of corporate bonds, as proxied by the iShares iBoxx $ Investment Grade Corporate Bond ETF (ticker LQD) versus the iShares 7-10 Year Treasury Bond ETF (ticker IEF). A distinct Head and Shoulders pattern exists where the neckline has been broken over the last few days. The corporate bond market has held in reasonably well over the last year, but we fully expect this sector to be the next shoe to drop.
Don't count on the ratings services to provide timely warnings. In the past, downgraded ratings have sometimes come only after most if not all the damage was done.
Remember Enron? The company still had an "investment grade" rating just four days before it collapsed. Ratings services also missed the 1995 debacle at Barings Bank. Olympia and York of Canada is another historical example: the largest real estate developer in the world at the time had a AA rating on its debt in 1991. Less than a year later, it went bankrupt.
Getting back to the present, Murray Gunn also notes:
When ... corporate loans are re-set this year, there are going to be a few deep breaths being taken, and more than a fair share of tightened sphincters!
And, speaking of chart patterns of financial markets, another way to monitor the bond market is to use Elliott wave analysis.
If you'd like to delve into the details of this method of analysis, read Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here's a quote from the book:
If indeed markets are patterned, and if those patterns have a recognizable geometry, then regardless of the variations allowed, certain price and time relationships are likely to recur. In fact, experience shows that they do.
It is our practice to try to determine in advance where the next move will likely take the market. One advantage of setting a target is that it gives a sort of backdrop against which to monitor the market's actual path. This way, you are alerted quickly when something is wrong and can shift your interpretation to a more appropriate one if the market does not do what you expect. The second advantage of choosing a target well in advance is that it prepares you psychologically for buying when others are selling out in despair, and selling when others are buying confidently in a euphoric environment.
If you'd like to read the entire online version of Elliott Wave Principle: Key to Market Behavior, you may do so for free once you become a member of Club EWI, the world's largest Elliott wave educational community. A Club EWI membership is also free.
This article was syndicated by Elliott Wave International and was originally published under the headline Corporate Bonds: "The Next Shoe to Drop". EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
Crude oil is filling the $4 gap which resulted from the Saudi Russian cut back announcement a couple of weeks back, I think this area will provide support
BOnd yields bottomed in early 2020. Four waves are complete with rates soaring from one to 4.5 and orreccting to 3.5%.
the correction is five months long and the MAs on the daily chart are converging.
TBF advances as bond prices fall and it looks like both the price and yield bond charts.
we should probably enter orders under the current market price to begin accumulating for the next fifth wave up in yields.
I still like Nustar NS and its 10% dividend. The Saudis and Russians are taking advantage of Biden's war on energy and have cut production to raise oil prices over $80.
PMO is bottoming and price is above all the weekly MAs. Again a buy with price under the existing market would be a good idea. I do think the overall stock market is on borrowed time with seven or eight stocks comprising half the S & P value. But the energy sector looks good here.
Transportation investors are taking a negative view of the economy and I think will be proved right.
Mahmood Noorani, CEO at Quant Insight
Charles Dow’s original theory of stock movement considered Industrial companies who make things and Transport companies who ship them. One index needs to confirm the other up or down to provide clues on market direction.
The 20 Transport stocks have dropped 6.9% since February. Three of them constitute what we might call the bad news bears and are down 8.5%. Our bear market contention is alive and well.
Å Norfolk Southern train derailed in Palestine Ohio in February. The literal train wreck dumped hazardous chemicals which caught fire. Norfolk pledges to spend whatever is required to restore Palestine.
American Airlines lowered earnings expectations for the first quarter. Delta reported a first quarter loss.
J B Hunt reports lower than expected revenue. It expects what it terms a ‘freight recession.’
The seasonal high in stocks is or was due April 20 yesterday. This typically happens after tax filing. The indicators seem aligned for lower stock prices.
And a recession is well underway in commercial real estate. Houston, Tx has an office vacancy rate of 25%. San Antonio is about 16%. Despite this, Graham Weston is planning multiple new downtown properties in San Antonio. This is a repeat of a similar boon in 1928-29 which resulted in canceling what would have been a large Tower Life complex. I attended a CFO roundtable yesterday. The topic however was not accounting. Rather it was how to balance work from home with hey once in a while we need you in the office. The thinking seemed to be that work from home is now a permanent fixture of the job market. In that case, commercial real estate will undergo the same travails as retail footage former shopping malls, what to do with all the empty space?
That original Tower Life building will attempt a re-model into residences. But that is expensive. Yet another headline is a slowing home mortgage market given higher interest rates. That is not encouraging for residential conversions.
The price of lead leads the Consumer Price Index. Lead prices re up, expect another round of inflation.
This column went bullish on crude oil prices a few weeks back. A four dollar jump left a gap in the West Texas Intermediate chart. That gap is being filled this week with prices at $77.71 below the recent $80+ level. Our expectation is that the $75 level will provide support. Recall both Saudi and Russia are cutting production while Team Biden continues it war on anything carbon.
THis is not exactly a head and shoulders but the market has been moving sideways all year or since November. The moving averages see upper arrow look like they
are converging usually a prelude to a trend change. PMO looks to be rolling over. April 20 should be a seasonal high for stocks which usually peak after tax day, after May go away.
So let's look for lower volume and a possible trend change to the downside.
Bonds
Bond prices have a sideways look during most of the same time period. It would make sense for rates to increase as stocks top. å WSJ article suggests
brokers are seeing lower overall balances s clients move into sfer Treasureis. ånd here as well looks like MAs are converging.
Oil not shown is at 78 filling some of that four dollar gap from a week ago.
Financial Advisors Take Heat for Market Losses (Will Anger Intensify?) Was 2022 an aberration for the 60/40 allocation?
By Elliott Wave International
Many financial advisors steer clients who are willing to take some risk toward a 60% stocks / 40% bonds portfolio.
Alas, investors who followed that strategy in 2022 saw the value of their portfolios decrease substantially.
In November, The Elliott Wave Theorist, a monthly publication which provides analysis of major financial and cultural trends, said:
Our long term bearish stance on stocks and bonds for 2022 is certainly panning out. In mid-October, [this] headline and chart, from Bank of America, made the rounds in the media:
The bond market was a big contributor to investors' losses. The September 2020 issue of EWT depicted a 78-year cycle in 10-year U.S. Treasury note yields and concluded that after 39 years of rise and 39 years of fall, interest rates had just registered a historic bottom.
Since then, as you know, interest rates have risen substantially, which means bond prices have fallen.
Even today, many clients of financial advisors are still fuming (Marketwatch, April 4):
Investors are mad as hell at advisers ... With the S&P 500 down 18% in 2022 and bonds off, too, investor sentiment toward full-service investment firms dropped significantly from last year
Yet, there are some who suggest the 60/40 allocation is still worth considering, along with perhaps a few tweaks (Forbes, March 9):
The 60/40 Portfolio Is Not Dead; It's Just Not Well-Balanced
As I write, the 60/40 strategy has performed better so far in 2023, but the remainder of the year is another matter.
Elliott wave analysis can be useful in helping you get a handle on what the remainder of 2023 holds for stocks and bonds.
If you'd like to learn how the Elliott wave method can help you analyze financial markets, read Frost & Prechter's Wall Street best seller, Elliott Wave Principle: Key to Market Behavior. Here's a quote from the book:
In markets, progress ultimately takes the form of five waves of a specific structure. Three of these waves, which are labeled 1, 3 and 5, actually effect the directional movement. They are separated by two countertrend interruptions, which are labeled 2 and 4. The two interruptions are apparently a requisite for overall directional movement to occur.
[R.N.] Elliott noted three consistent aspects of the five-wave form. They are: Wave 2 never moves beyond the start of wave 1; wave 3 is never the shortest wave; wave 4 never enters the price territory of wave 1.
... Elliott did not specifically say that there is only one overriding form, the "five-wave" pattern, but that is undeniably the case. At any time, the market may be identified as being somewhere in the basic five-wave pattern at the largest degree of trend. Because the five-wave pattern is the overriding form of market progress, all other patterns are subsumed by it.
Here's some good news: You can read the entire online version of Elliott Wave Principle: Key to Market Behavior for free once you become a member of Club EWI, the world's largest Elliott wave educational community (approximately 500,000 worldwide members).
A Club EWI membership is also free and allows for complimentary access to a wealth of Elliott wave resources (videos and articles) on investing and trading.
This article was syndicated by Elliott Wave International and was originally published under the headline Financial Advisors Take Heat for Market Losses (Will Anger Intensify?). EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
Harris County home to Houston has 25% vacancy in office space. work from home is not helping expiring leases.
16% vacancy in San Antonio, the iconic Tower Life building competed in 1929 is half empty, an expensive re do is planned to convert to residences, good luck
OPEC says the market is undersupplied by half a million barrels per day , so they cut supply another mbd. Why did they do this?
.Helge Martinsen analyst at DNB markets
That’s an easy one Helge, because OPEC wants the price higher. I turned bullish on oil prices in the March 31 column at $74. I suggested crude needed to break above $83 to really turn its trend up. Today Friday it is $82.780, close enough. I just paid $3.39 at the pump for 87 octane gasoline so the entire complex is moving up. On the chart crude oil is has corrected from the $120-125 high last June to about half that at $65. It gapped up on the OPEC news and as predicted does not have to fill that gap. I suspect the market returns to at least $100 if not the old high around $120.
Team Biden’s war on oil is the root cause here for higher prices. Producers are wary of even more penalties and regulations. No wonder Exxon is buying Pioneer rather than drilling for more oil in the Permian Basin.
Nustar NS has moved over $16 and is correcting a bit below $16.
Stock Market
I mentioned that eight stocks are driving gains in not only the NASD 100 but in the S & P 500 as well. This means the other 492 stocks are simply meandering around. Stocks topped From November 2021 to January 2022. A year later the market bottomed in October 2022 a typical seasonal low. We are now six-seven months out from that low or half the time span. The market is on borrowed time and slipping again today.
Other evidence of a market top (rebound) is the dividend yield. Yields are high at market bottoms, usually offering 6% or more. Today the SPX overall yield is 1.66% annually, a mullti-decade low.
The rebound in stocks has renewed the appetite for risk adding another acronym to the lexicon. ODTE are zero day to expiry options. The enemy of any option trade is time decay, the option is worth less as the expiration date draws near. Yet options expiring today now account for 42% of the total up from 22% a year ago. This is risk on steroids.
The s & P has gained an average of .3% following any down day this year. That is a record going back to 1927. Yet no index has recorded a new high.
Seasonally the market tends to top around tax day, Aprill15 and we are there now. Watch Meta, Apple, Netflix, Google, MSFT, Nvidia, and Tesla. Once the selling resumes the party is over and the strong Wave down of this bear market will resume. This could easily begin by May. A sharp decline in stocks this far ahead of the 2024 election will certainly alter the odds for the current high in the polls players
Port San Antonio on Thursday unveiled plans for a futuristic wing-shaped office tower aimed at attracting new tenants and solidifying its status as the region’s largest technology center.
“This is a building that looks like nothing else on the planet and the final is going to look even cooler than this,” said Jim Perschbach, the Port’s president and CEO. “We want it to be shorthand, not just for the Port, but for San Antonio.”
On Thursday, Perschbach told the board the tower could be from 12 to 15 stories and include at least 300,000 square feet of space for current and new tenants.
“Right now, we have the very enviable position of having more demand than we have space for,” he said. “We also wanted to continue to drive the real and perceived value of this campus.”
Pointing to renderings of the tower, he said it will serve as a symbol of the tech and science work being pursued at the Port, which now has more than 80 tenants and 17,000 employees. He said the goal is to replace the former Air Force base’s infrastructure, all “painted creech brown,” with new buildings that are more reflective of its current workforce.
In an interview before the board meeting, Perschbach said the pre-development phase will determine the exact size and cost for what will become the first office tower in Southwest San Antonio.
“It will be in all likelihood, on a per-square-foot basis, the most expensive building in San Antonio, on par with some of the nicest buildings being built in big cities across the country,” he said. “We don’t have a problem pushing toward what will be some of the highest rents in San Antonio, because we want to attract people who are willing to compensate people at a level commensurate with those rents.”
Perschbach acknowledged there is a possibility the Port’s board could decide the tower isn’t feasible during the pre-development phase.
“I would be shocked if that happens,” he added, describing how the board of directors would vote again after the pre-development period on whether to proceed.
Perschbach declined to identify potential tenants other than DeLorean. The original iteration of the Port’s plans included providing a space for the reborn automaker, which is establishing its new headquarters in San Antonio. Beyond DeLorean, he noted that “some of the usual suspects” in the aviation and technology industries could be at home in the tower, along with consulting, financial and law firms.
The project is “running a little bit behind,” Perschbach said. Still, he hopes to build the tower “as quickly as possible” so it could become operational by 2025.
“What I want is for this tower to be known around the world,” he said. “I’d love to see it just kind of organically go out when people think of the symbols of San Antonio. You’ve got the Missions, you’ve got the downtown skyline, you’ve got the Alamodome, you’ve got this tower.”
The Port is also looking to build a research complex focusing on aerospace technologies that includes a simulated lunar terrain and a “vertiport” for passenger and cargo electric vertical takeoff and landing vehicles — a futuristic cross between fixed-wing aircraft and helicopters.
Perschbach said he expects the vertiport to be built near his office on the North Side of the Port campus and the research complex to be adjacent to the massive high-tech concert and esports venue known as Boeing Center at Tech Port. The projects are on different timetables and require input from research groups and the Federal Aviation Administration, he said.
The Port is pursuing the three new projects after opening the $70 million, 130-square-foot Boeing Center at Tech Port.
In January, after hosting musicians, gaming competitions, robotics events and cybersecurity and military networking conferences, the Port changed the original name of the Tech Port Center + Arena to reflect its commitment to Boeing Co. It’s one of the Port’s oldest tenants, has the largest staff on campus and remains a top employer in San Antonio.
Perschbach said he believes expansion brings more opportunities for the Port, which has built and leased more than 700,000 square feet of new facilities and rejuvenated more than 6 million square feet of renewed and expanded spaces since 2017. In that same time frame, tenants have added more than 7,000 jobs to the campus — which has become the largest tech employer in San Antonio, he said.
The sprawling campus is now home to fast-growing San Antonio companies such as Plus One Robotics and Knight Aerospace, Boeing, defense contractor Northrop Grumman, Accenture Federal Services and the U.S. Air Force.
In 2021, DeLorean received more than $1 million from the city of San Antonio and Bexar County in exchange for establishing its global headquarters at the Port. The agreements called for it to hire 450 workers and invest $18.5 million there over four years.
Perschbach said the Port is poised to become a more vital part of San Antonio’s economy as it continues to attract some of the world’s largest aerospace firms onto campus.
“We don’t like bragging on ourselves, but that doesn’t get you very far in the world where people want to go where there’s something exciting,” he said. “For us to capture and retain the talent, we have to show that our people are every bit the equal to everybody else.”
