Category Archives: Forecast

Thoughts from Barry Habib, Housing and Mortgage expert, from this year‘s 2022 Mauldin SIC Investor Conference…

For those of you with a memory like an elephant, congratulations, you may recall that we have delightfully attended the Mauldin Strategic Investor Conference (SIC) virtually during lockdown for the past two years. As a side note, a conference that we had never attended before due to the duration and the timing … very near tax time!

Good news, once again this year the conference was virtual and we are happy to attend.

While there were 40+ speakers, more to come on others, we found the following expert and presentation very interesting, if not somewhat controversial.

Barry Habib, Mortgage and Residential Housing Expert

You may recognize Barry as he is a regular speaker on many of the financial channels among other and was a presenter at this year’s SIC conference.

Cutting to the chase, Barry expects a recession later this year or early 2023 and as such expects mortgage rates in particular to drop precipitously from their current 5 1/2% rate along with all rates of other asset types.

These expectations, (forecasts), are certainly more economic and financial market related, as such we will make note as predictions and check back sometimes next year.

Now, to Barry’s wheelhouse, what we are all interested in, the expectation of housing appreciation or depreciation!

Understanding that Barry comes from a residential and mortgage background, so let’s be transparent that there may be some innate biases, but his expectations are for mid to low single-digit housing appreciation for this year 2022.

This flies in the face of many forecasters due to the aforementioned slow down or R- word recession and more importantly the heightened interest rates of Mortgages currently.

In Barry’s defense, lack of supply and his expectations of a sharp reversal in mortgage rates will lend itself to this continued growth.

Heck if housing prices hold their values we would consider Barry’s prediction a win.

There will certainly be pockets of strength and weakness across the country…

We will be watching as it’s very easy to monitor and will let you know!

Barry …thanks very much for a fantastic presentation and for the information duly noted…

Have a Great “Housing Analysis and Forecast” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Capital Markets Pre-Empt Interest Rate Hikes … Amazing Correlation of 2 Year Treasury Bond and Fed Funds Rate …

FOMC (Federal Open Market Committee) members use the very short term Federal Funds Rate (think interest on your checking account) to help throttle the economy. When it is too hot they raise rates. In Paul Volcker’s case to almost 20% way back in the hyper inflation days. When the Economy is struggling they lower rates, as of late to zero, both post Great Financial Recession and the most recent Virus induced mini-recession.

There is an interesting predictor or front runner of the FOMC interest rate movement, sparred by the very short term fixed income traders, specifically the 2 year Treasury bond.

Markets Pre-Empt FOMC Rates

The chart below is of the Two Year Treasury (Red Line) and the afore mentioned FOMC Fed Funds Discount rate (Blue Line) –

The correlation is so strong it is almost hard to even see there are two lines….

Zooming into a shorter time frame of just 5 years, not only can we see the difference, but in looking over to the right, the markets are predicting multiple rate hikes in short order, at this time!

Will see if this holds, but as mentioned in our post earlier this week here, Economic number and the markets are expecting rate hikes!

Have a Great “FOMC Rate Correlation” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Updated Comments on CPI (Consumer Price Index) aka Inflation … Is it Still Accelerating or Not?

Last week the FOMC (Federal Open Market Committee) led by chair Jerome Powell at a regularly scheduled meeting and post meeting Video Interview, aggressively commented that they are going to wind down the monthly purchase of fixed instruments and plan on raising short term interest rates to thwart the inflationary pressures, mainly the backward looking CPI (Consumer Price Index) readings reported by the BLS (Bureau of Labor Statics) …. On a side note, ever notice how darn many acronyms are used in Economics….OK digressing…

We can debate the source of the inflationary pressures, supply chain, wages, oil or other matters…

On that note, here is the link to the BLS weighting of the CPI, it is a measly 320 lines long…. complicated to say the least…

But there are possible signs of a slowing already…

Certainly cannot see it in the year over year data below….

But the monthly change in CPI looks a little different…

Not making a call, just an observation… We will be watching!

Have a Great “CPI Updated” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

CPI (Consumer Price Index) Prints 6.8% Year over Year Increase, Quick Analysis on Likely Peak … Friday

About three hours ago, the BLS (Bureau of Labor Statistics) released their November 2021 report on CPI (Consumer Price Index) one of the broadest measures of Inflation…

If you have noticed your grocery basket smaller and more expensive, this is why….

This report has a ton of factors in it, as can be seen at the top of the chart from the BLS report, below….

The year over year print was 6.8% increase!

A very large portion of the CPI is Energy…

Have you noticed a LOWER bill to fill your tank lately?

The BLS report is lagging, below is a current Oil price, which is over 10% LOWER currently… hence the cheaper refills…

Very likely peak in CPI as measured by the BLS, next month which will be released in early January, we will take a peak and keep you updated…

Ok, another slightly heavy Friday, BUT the FOMC is watching this very closely and making decisions based on this increase, which may be peaking/lagging already…. Let’s stay tuned!

Have a Great “Friday CPI Analysis” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Candid Comments and Background Discussions with Legendary Real Estate and Business Creator Sam Zell … From the Grant Williams Podcast Series

As the professional podcast interviews for investors continue (this new found form of listening to long form personal visits) a most recent interview of famed investor Sam Zell hit the airwaves.  Sam is candid, entertaining, humble, some what self deprecating and very interesting as he outlines his successes, failures and a few good ideas we could all add to our persona. This from the fantastic Grant Williams Podcast series.

On a personal note, after receiving permission from Grant to produce this and his statement to share with his vast network, the pressure is on for a good post… hope it lives up to the standard!

Hope you Enjoy reviewing as much as the creating of this post.

Sam Zell, Candid, Open, Background.. Take Aways’

A first question right out of the gate:

Do you see echo’s to 2007 and/or bubbles? 

Yes, some inflation and not sure if it is transitory, but not necessarily bubbles. Tons of pressure on wages and do not know where workers have gone, but they are not there.

Zell on dealing with labor inflation…

Able to do lesser staffing without customers complaining. Expectations of service and services are going down.

Recent conversations about supply chain issues…

“A year ago, people would tear their hair out, but today an acceptance!”

Inflation thoughts…

“Inflation is an event and mindset!” So far only an event and has not turned into a mindset…. Yet.

Ask for a big enough price increase so you do not have to go back and ask again (specific to hospitals he owns, but good for all types of businesses.)

Background, childhood and education …

Immigrants son, born three – four months after coming to this country. Family fled Poland. “My Dad felt the streets of USA were paved with gold, due to opportunity!”

Tough family that was told to study and work hard. Sam not a great student.

First job, bought a Playboy for 50 cents in the city and sold it for $3 to his friends back in the burbs…. Starting his own import export with maintaining margins.

While Students in school, offered to let Sam and a friend stay for free if they would manage the building. Soon were managing a dozen of buildings while completing Law School.

Had 43 interviews and 43 rejections post law school graduation.

Finally accepted and offer, and four days later went to his boss

“This is not a good use of my time!” and his boss allowed him to go, but also asked to invest with him as Zell went back to real estate.

Zell on Business and his success and failures …

Self Confidence was very helpful in accomplishing his goals.

Businesses have changed every 3-5 years as no matter how good idea is, someone will copy.

Always very cautious towards risk and understanding things.

“Competition is great, for you … me, I want a monopoly or at least and oligopoly.” Too much competition is bad.

Example of We-Works… Zell watched from the 1970’s and all went bankrupt because at some point over supply kills the model.

In order to be the best, keep ideas simplistic and being scared, and willingness to let a great deal go by. Many times being wrong, but that is ok.

“Give me a guy with motivation and average IQ and I will turn him into a successful business leader!”

Build a better mouse trap and more will come to it, not true, everything is sold as an idea.

Staying Power is the name of the game… No surprises!

Given the high valuations of today, have you changed the way you do business?  More cautious and conservative.

How do you narrow your deal opportunities?  Do not see or do any deal that Zell does not understand. Does not want to run a business, but have had to over his career.

If you cannot tell me everything I need to know in two sentences, it’s too complicated.

Successful ideas, do not require multiple steps, just conviction and understanding and recognition the shortest distance is straight between two lines.

Real Estate Industry has a long history of lack of discipline. Appears safe and people let their guards down and then trouble.   

No one has ever proved that scale works in Real Estate. Do not be afraid to be a small profitable company rather than a big less profitable, not all companies should be big.

Discipline keeps Zell safe.

Real money by long term holdings, be patient.

Mentions a company sold after holding for 37 years and another for 20 years that were not always profitable every year, but over longer term very successful. Sustainability is often times more important than constant success.

If market timing is selling something that some one will pay you too much for, so be it, next.

Many investors are assigning no risk to certain hard assets today, but history shows that is never the case, there are always risks.

Will you slow down?  People ask me that all the time…”Slow down from what…I like what I do,”

There you have it, thoughts, habits, beliefs and ideas from a legendary investor…. some of which we could all integrate into some aspects of our life!

Have a Great “Sam Zell Review” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Reviews of FULL Two Days of Virtual Gathering…. Cyber, Inflation Transitory NOT, Interesting Fatigue from Event…

Last week the team happily carefully gathered and divided to maximize our time at a two day Virtual Conference that is usually “In Person” lasts about a week, and is located in alternating years on the West Coast and then the East…

The conference lasted two days (Tuesday and Wednesday 10 am-3 pm) and was a straight (small morning break of 20 minutes, but no lunch break or bathroom break) five hours each day, with overlapping events except for several “Main” general sessions such as a talk with Ben Bernanke….

The method of attack was for each of us to choose what looked the most interesting and if there was an accidental overlap of desired events, one change to a different session. Oddly, and maybe this speaks to each of desires and roles, we rarely overlapped… there were a few sessions that were “Full” , for the record not sure how a virtual session can get full, but oh well…

As of this time, the sessions are not up for post live review so our review here is part for our own notes (living diary) and mostly for your shared knowledge …

Cyber Threats and Interesting Home Threat Note

Regular followers know we take Cyber security VERY seriously, and just by chance yours truly ended up in lengthy Cyber Security sessions on both days.

Key Takeaways from an office standpoint were more two factor authorizations (extra step of logging into important programs that includes a text to cell)

For the record over the weekend after telling the team last week “I always have my cell” a chance package delivered to the office led a trip up to the office with the cell in the car and the need to log into an important program….. Guess I DON’T always have my cell…haha

A new interesting reminder for those that work from home at all was a statement “If your home router is older than three years and especially if not a commercial router, you may be unsecure!” This of course led to a quick review of each of our home set ups with the note of having a now 14 year old gamer, and a complete security review of all at home security was completed…. just for extra security additional security was set up along with a special at home “Guest Wifi” rather than the family’s for friends who may carry unwanted programs into the network…

Inflation Less Transitory than Thought

Jerome Powell, chair of the FOMC (Federal Open Market Committee) during a speaking event last week mentioned that the coming inflation may be less transitory than initially expected…

Recall this was the main debate at the Mauldin SIC conference early in the Second Quarter as mentioned here and in our Q 3 2021 Newsletter..

Several guests, most notably Lizanne Saunders echoed this thought during a fast speaking opening session…

The basic thought originally was the CPI line below would roll over quickly, now more are thinking it may last longer, especially with the afore mentioned FOMC on record to allow without intervention…

Interesting Observable Fatigue from Event

This was one our first events of this length and without much of a break, we all noted an interesting (high) level of fatigue. It seems like there would be no reason for any tiredness given sitting in front a computer for 10 hours in two days, but is sure was.. heck we were not participants, only observers…

Will keep a tab on this moving forward, sure others have experienced the same, but our first notable occurrence.

Have a Great “Virtual Conference” Update!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Robert Kaplan Dallas FOMC President Town Hall Analysis and Update, New York President Williams Chimes in, Wall Street Journal’s Favorite Fed Reporter Too – Taper Transition to Begin

While not sure why all Federal Reserve Chairs do not do this type of event … there are an even dozen Fed Banks scattered across the country for roots in various geographic areas, we are very happy our local favorite, Dallas’s own Federal Reserve Bank President, Robert Kaplan has started his own town hall event.

Think this is our third or fourth attendance, with the first as mentioned here, becoming an accidental question…

Incidentally at this event, the first three questions were from acquaintances… Great Minds I guess!

Another Robert Kaplan Town Hall Update New York Fed Williams Chimes in

The most important item mentioned in this town hall was that Kaplan supports a taper of the 120 billion monthly purchases of Mortgage and Treasury bonds as soon as October, with an announcement in two weeks at the September 22, 2021 Fed meeting.

Luckily with the delay of the weekend to produce this full post, New York Federal Reserve (debatably the most powerful bank) Chair John C. Williams in a speech via video conference to St. Lawrence University said the following:

“There has also been very good progress toward maximum employment, but I will want to see more improvement before I am ready to declare the test of substantial further progress being met. Assuming the economy continues to improve as I anticipate, it could be appropriate to start reducing the pace of asset purchases this year. I will be carefully assessing the incoming data on the labor market and what it means for the economic outlook, as well as assessing risks such as the effects of the Delta variant.”

Wall Street Journal’s Go To Reporter Pens Friday Article

Then the following story hit the Wall Street Journal Friday, September 10, 2021 by the Fed’s favorite go to reporter, NIck Timiraos..

NIck runs with a November 2021 Taper Transition and a 15 Billion per meeting drop off from the current 120 Billion monthly purchase…

What to Watch – Longer Term Interest Rates, Markets Themselves

If this is true, and the FOMC does begin taper, we will need to keep a sharp eye on interest rates, especially the longer end i.e. 10 year treasury.

Near then end of 2018, the FOMC began lowering asset purchases AND raising rates at the same time… Markets protested with a sharp 20% drop, causing Fed members to reverse course.

Kaplan and other officials are reiterating that just because the Taper may begin, interest rate increases are not on the horizon yet.

Recall in our very recent Kyle Bass review, where Fed officials are known to carefully watch the Capital Market reaction to their comments. If as true as Bass thinks, Fed officials will be watching close!

Other Kaplan Notes from the Town Hall:

  • Delta hurting travel, and leisure, Dallas Fed US GDP estimate 6.5 down to 6 because of delta
  • Slow workers with Jobs, Aug jobs number not surprised Sept slower than expected, JOLTS showing work avail, fear of delta keeping away,
  • 3 mill folks left workforce since 2-20, 1.5 milion left for care of kids – matching problem work
  • Supply demand on materials,  PCE will be 4% PCE headline will be 2.6% 2022-
  • Economy recovering slow Q3 but still growing, 3% inflation 2021
  • Economic Fits and starts bc delta- vaccine, booster, masks help but
  • High frequency mobility data not falling, folks adapting and managing through
  • Business expect supply demand last longer than thought
  • Worker demand higher pay, higher absence, reluctant to come back to labor force
  • Mid to small business tougher time with employee—Larger Businesses more flexibility
  • Broadly all businesses raising prices and they will stick

Apologies for the length of this post … this was a combination Reporter, notes and collection of various data points…

A smooth transition is very important, and long desired by many in the investment community, buckle up and let’s see how it goes!

Have a Great “Smooth Taper Transition” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Kaplan Town Hall/Newsletter Preview Breaking News … Friday … Sports Begin …

Another Fantastic Kaplan (Dallas FOMC President) Town Hall

On Wednesday evening of this week, Robert Kaplan did another Town Hall …. Pretty sure this is our third or fourth to attend so there is some continuity working as we can hear changes, continued thoughts and just a general getting to know Kaplan…

The most BREAKIN NEWS from the talk, was Kaplan saying the following…

“If there are not major changes in the Economy before our next meeting on September 22, 2021, I will suggest taper is announced and it begins in October of 2021!”

This was a big (so soon) enough statement that we were surprised not to see any public media discuss yesterday….

We will dig into Kaplan’s comments next week in a deeper fashion and the possible outcomes should this statement come to fruition.

Newsletter in the Works

The Newsletter is coming right along, we have found some greater details from our Expectations Post Earlier in the Quarter, along with our candid comments…

On a personal note, if you ever want to know how fast a Quarter can go, do an all original Newsletter every 90 days… All Great, but really seems like we just completed the last one…. Time is flying I guess!

Friday

Ahhhh, it is a VERY late summer Friday heading closer to fall… Sports is getting into full force…


Enjoy your Friday and Weekend – Talk Next Week!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Thoughts and Forecasts From Kyle Bass … Oil $100/Barrel By Year End 2021 ?

The summer garnered a new found passion towards Podcasts…. While we do our Monthly reviews and Newsletters in an Audio, Video, Podcast like format…. Most podcasts are an hour or longer, making for interesting deep dives into the discussion, especially if the person(s) talking are very intelligent in the specific material….

Hat tip JP for the shove in sharing your favorites…. I have taken the ball and run with it!

In another crossing with this interesting investor, Kyle Bass, on a paid podcast platform, specifically for professional investors…. we highlight Mr. Bass’ current thoughts…

Six years ago, we highlighted his thoughts here in our post and in reviewing his comments, his bets were very correct!

Forecasts and Future Expectations from Kyle Bass

Once again, like we did six years ago, in our public Diary of sorts, we outline Kyle’s thoughts for future reference …. so here we go:

  • The Federal Reserve will continue to support the markets with continued purchases.
  • Federal Reserve feels responsible for Capital Markets … i.e. Every Federal Reserve member has a Bloomberg Investment terminal on their desk and post public talks, Fed members go back to their office to check the markets reactions to their comments.
  • Much more inflation than actually as printed by CPI – (Consumer Price Index) Example of car price increases up 300% over last thirty years, but CPI auto costs increased 5% over that period.
  • Cost of Food increases may cause social inequity problems.
  • Oil hits $100 per barrel this year … due to mal investment over the last 7 years.
  • Short term interest rates not to go higher than 1.5% and long term (10 year) rates will not go higher than 2.5%. i.e. Bernanke Helicopter speech outlines the difficulty in raising rates a lot once they are at a lowered level for some time.
  • We push through the Delta Variant and there is a REAL re-opening effect that works its way through the economy (Hope this is correct!)

These were actually done in order of the Podcast (basically taking notes while listening) but the most interesting in our opinion are the last three points…

Marked as Forecast, which we have had a lot of lately…will review for accuracy in the future!

Have a Great “Kyle Bass” Forecasting Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Another New Economic Measuring Stick Care of DOT – Department of Transportation … Highway Miles Driven and Prior Year Comparisons …

My absolute first question was where the heck do they get this data from?

TSA – Which we have been monitoring for some time is easy …. Checkpoints!

Ah Ha …. This from the DOT FAQ

The TVT report is based on traffic data from the Highway Performance Monitoring System and on data submitted to the FHWA by State highway agencies throughout the entire U.S. The State highway agencies collect the data through permanent automatic traffic recorders (ATR) on public roadways.

TVT is the abbreviation for Traffic Volume Trends.

All Roads, Urban and Rural Comparison

All Roads:

Urban

Rural

Makes some sense after you think about it that Rural traffic has bounced back and is tracking almost back to normal…. BUT Urban areas, with workers still working from home, lagging!

Latest Kastle Back to Work Tracker Stubbornly stuck below 50% Across the Country

Another fun Economic related item to monitor moving forward!

Have a Great “DOT Road Traveling” Update!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents