Train Rolling Down the Track
Posted on Sunday, February 21st, 2021
O joy of suffering!
To struggle against great odds! To meet enemies undaunted!
To be entirely alone with them! To find out how much one can stand!
To look strife, torture, prison, popular odium, death, face to face!
To mount the scaffold! To advance to the muzzles of guns! With perfect nonchalance!
To be indeed a God! – Walt Whitman
I went deep last week and if you will indulge me one more time I will once again. One of the people that I have known longest in this world has been undergoing a personal battle and I wanted to honor him here. The above stanza is one of Walt Whitman’s Poems of Joy. I thought that it encapsulates his battle. I am so proud of him, his fighting spirit and what he has accomplished. He knows a life that I do not having fought this battle. He is a better man than I for it and I would say – Well done!
Those of you that are long time readers know that a key economic chart played a huge part in our lives. In 2007 we sold our house in NJ. So many people have asked – “How did you know to sell?” It was a chart of existing home sales that tipped us off that there was trouble brewing in the housing market. The steep ascent of sales broke its upward trend in the spring of 2006. Quite frankly, I thought we were too late selling in the spring of 2007. We got out just in time. New home sales for this January were the most interesting I have seen since 2006. Sales in January 2021 were seen at their highest annualized pace since April 2006! According to the National Association of Realtors, whose data goes back to 1982, there is currently the lowest supply of homes for sale ever! Check out the quote below which may be even more telling as to what is to come.
Activity was slowest on the very low end of the market, with sales of homes priced below $100,000 down 28% year over year, and sales of million-dollar homes up 77%.
This is another direct result of the pandemic – a continued bifurcation of winners and losers. Sales for $1MM+ up 77%!!!
There is a sense in the market that the overheating is beginning. This can go on longer than you think. I thought real estate had peaked in the spring of 2006 but that train rolled down the track for another year. The bifurcation of the economy is going to continue to engender painful spasms. The lower half is going to demand more as has been the custom in post pandemic periods. Inflation is coming.
Israel has been the fastest to vaccinate and their stock market appears to have stalled. The quicker governments get a handle on this virus the sooner the stimulus stops and you know how the market loves it when the government spends money. A few trillion here and a few trillion there and pretty soon you are talking about real money. Bond yields are rising which is okay if a rising economy is the cause. They also need to rise slowly as to not shock markets. Too fast and the market will panic. We are watching LQD as an indicator of the corporate bond market. Below $133 could be trouble. It’s okay. We only see small tremors right now. The path of least resistance is higher with a possible 8-10% drawdown in the near term. Financials and energy have lagged for some time and are now breaking out. Large cap tech could be a problem. The canary in the coalmine could be giants Apple, Tesla and Amazon.
I think we aspire less to foresee the future and more to be a great contingency planner… you can respond very fast to what’s happening because you thought through all the possibilities, – Lloyd Blankfein
A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. – Winston Churchill
To learn more about us and Blackthorn Asset Management LLC visit our website at www.BlackthornAsset.com .
Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.