America is Back!
My entire AB economic model last year which was written on April 7th, 2020 and retired on December 9th, 2020 needed the 10-year yield to get to 1% in 2020. We got to 0.99%, close enough.
The Economic Model can be found here:
However, the real goal, which I thought couldn’t be the case last year, is to start a range between 1.33% -1.60%. This is going to take some time and work. The high-level forecast for yields in 2021 was 1.94%
We just had an intraday hit on the 10-year yield at 1.60%, which bonds got a good bid on and rallied back to 1.48%. Even myself, the biggest bearish bond person in 2021, because the economy is coming back, can easily admit short-term bonds are extremely sold off.
For now, keep an eye out on this range 1.33% -1.60%. The stock market is very overdue for a correction, and that can rally bonds and send yields lower. However, hopefully, this was a real live wake-up call that whatever is left of the American bears since April 2020, if you haven’t gotten the memo, this country and its people left you and your depression thesis behind.
Especially you stock traders who talk a lot of smack, but I know you were long the entire time. Some of you are just professional troll people; I want you to know that not everyone retires at a beach if they know where stocks are going. They retire in their homes in Irvine, with sweats and socks and no shoes.
You don’t have to be an Anti-Central Bank Conspiracy Inflationary American Bear 24/7
You can make money in stocks and sound somewhat sane about economics. Or they got to you at such a young age that you can’t change in life or in the afterlife. Leave that darkness behind, join your country in the greatest comeback nobody saw. Or don’t, it’s all up to you.
My returns. We are almost at the point where Covid19 sent the 10-year yield toward 0.32% that Monday, March 9th.
Remember Mother economics; she is a serial killer; she will leave you clues when the economy is coming back. The entire AB economic model was designed to give people real data lines to work with because I was convinced 100% that everyone would miss this recovery. They did, and there is no going back on this ever in history.
Example: The St. Louis Financial Stress Index, one of the most disrespected data lines in the world, told you early on we were going to be ok. Zero is normal stress. Currently at –0.8002 . Always keep an eye on this, not for the report that comes up each week but for the components.
Remember be the detective not the troll!
Take a deep breath; that bond market action the last few days has been wild, especially today! In time things will calm down.
Pending home sales today, up 13% year over year!
From the NAR: https://www.nar.realtor/newsroom/pending-home-sales-retreat-2-8-in-january-but-climb-from-last-year
- Nationally, pending home sales decreased 2.8% in January from the prior month.
- Pending home sales were 13% higher from one year ago with all regions showing sales gains.
- The Pending Home Sales Index hit 122.8, an all-time high for January.
As most of you know a lot of my work since the summer of 2020 has been talking about how housing data will moderate. Covid19 has created a lot distortion in the data and existing home sales and pending home sales will moderate from their parabolic rise they had. Even though we have seen some moderation in the data it’s still too high in my view.
A good rule of thumb for 2021 is that if Existing home sales monthly sales print doesn’t fall toward 6,200,000 and lower, then housing demand is better than even I thought for 2021. We have a massive gap between monthly home sales and were 2020 home sales ended, which was 5,640,000.
My recent take on the new home sales report on HousingWire:
Next week on HousingWire I will write an article showing my thesis on why we are going to see negative year over year data on purchase applications in the 2nd half of 2021. Don’t forget, the 2021 HousingWire Housing Summit is next week.
Have a good weekend everyone, soon we will all walk the earth freely again.
Logan Mohtashami is a Lead Analyst for Housing Wire, financial writer, and blogger covering the U.S. economy with a specialization in the housing market. Logan Mohtashami, now retired, was a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1987.