Extra Disclaimer – First, we want to emphasize the speculative nature of our forecasts and these markets, in particular, with their very high level of volatility. We definitely could be wrong. Also, implementation is another risk factor. We believe the markets will continue to be very risky with huge price moves up and down for a time – making it very difficult to not lose money, unfortunately. We believe emotionally charged markets like these increase the difficulties of being successful. As always, past success, of ours or anyone else’s, does not guarantee future results. Please read all the disclaimers all over our website. Be careful and be safe.
Introduction – This blog (in reverse chronological order below) will document and discuss our forecast unfortunately of the very very large economic contraction.
Importantly, we are seeing a market DOUBLE TOP! (12-17-2023) at least in the Dow Jones Industrial Average and we expect in the S&P500; however, we do not expect these tops to exceed those of late 2021/early 2022 by very much, and, importantly, we expect that few other indices nor market categories will see Double tops – i.e. they will be putting in “Lower Lows.” Importantly, these types of divergences are common at market tops. ([See our discussion on 12-17-2023])
For previous “real-time” market discussions, see The Beginning of the Super All-Everything Top – First Peak where we documented and discussed the Super Everything Top (in real time!). As with last time, we will include all the previous elements of the older blogs (- Deflation Watch – Elements of Market Tops– Major Trend Changes ) (where we forecasted the 2006-2007 major Housing Bubble top and the Financial Crash bottom in 2009) into the “The Contraction Resumes” and, then into this blog, “Calling The Super All-Everything Top” for the super top that we believed peaked in late 2021/very early 2022.
Also, see our Annual Forecasts where we Forcasted the 2000 Tech Top (before we were blogging) and several subsequent market bottoms & tops: Tech Wreck (bottom), Housing Bubble Top, & Financial Crash (bottom), etc.
Please note that, as we’ve discussed before, tops are usually rounded with various indices and media discussions occurring spread out over a longer time period than bottoms where they all spike down to the low together. Also note, the size of a rebound generally indicates the period of time required for all the various areas to top; thus, a very large top takes a long time to put itself in place. For example, the 2000 equity top actually saw some indices topping back as far as 1998 and as late as late 2000; the 2006/2007 Housing Bubble (and equities) top was actually spread out over four years. With that said, this downturn will almost certainly be just as large and we think even larger, unfortunately.
The Reverse Chronological Commentary Starts Here (directly below):
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4-17-2024 – A Whiff of Inflation and interest rates go up (bonds down) and stocks slump – That is what we speculated was going on (previously) & interest rates have continued to break up from the short-intermediate term on out, and most equity indicies have been putting in lower lows, so much so (with a lot more information and analysis than that) that we believe “The Second Top” is likely “In” at least for the vast majority of stock indices. For example, the Russel 2000 (proxy “RUT”) is down about 8%; the Dow Jones Industrial Average is down about 5%. Still holding, as we pointed out below, only certain indicies have put in “new all-time highs” for their “Second Tops;” – most have not and we did not and do not expect them to. In fact, we think that, for those that have not, their second tops are in; for those that did, we think they likely could go higher. We think the most likely case is that, of those that did put in new All-time highs, only a couple might put in new ones – not the rest. In other words, we believe the Second Tops are likely in for the majority of the equity market. Confirmation would come with a new significant drop.
As for commodities, Silver did join Gold in putting in new All-time highs but most industrial commodities have not. Given our current Acting Model that any whiffs of inflation will continue to push interest rates up (bond prices down) giving headwinds to all asset prices, including not only industrial commodities but also financial commodities like gold and silver. Still, we would not bet the ranch on this – it seems easier to predict the bond market (interest rates) and stock prices. Of course, rising interest rates would also push real estate, which is hugely overvalued, down in price. The iShares U.S. Real Estate ETF (“IYR) is down almost 30% from its All-Time High on 12-1-2021. Hence, we believe the residential real estate market has a lot of catching up to do. Up to this point, we believe significant other factors have held it up – will they continue? that is the question.
4-17-2024 – Our Most Recent Tax-Free Performance & The Muni Market – The return for the Short Term Category average was essentially zero for the month and the month that dropped off for the current twelve months was pretty good, so the Category Average total return dropped a bit. The Short Index got hit worse. However, we actually had a bit of a positive total return for the current month resulting in a rise in our current 12 month return. Of course, the one year performances are not nearly as important as the longer terms and that is where we shine in the chart below:
Stamper Capital & Investments, Inc.
Separately Managed Accounts (National Tax-Free) vs. Tax-Free Municipal Bond Indices
Annual Total Returns, Period Ended 3-31-2024
| PERIOD | Morningstar Muni Short Category Average | SCI Separately Managed Tax-Fee Municipal Accounts Composite Net of Fees | SCI Separately Managed Accounts Net Pre-Tax Equivalent* | Bloomberg Barclay’s 3 Year Tax-Free Muni Bond Index |
|---|---|---|---|---|
| 1 Year | 2.66% | 3.06% | 4.70% | 1.74% |
| 3 Years | 0.47% | 2.14% | 3.30% | -0.05% |
| 5 Years | 1.13% | 2.15% | 3.31% | 1.06% |
| 10 Years | 1.10% | 2.06% | 3.17% | 1.20% |
| 15 Years | 1.50% | 2.23% | 3.43% | 1.61% |
| Since Inception (1/1/1995) | N/A | 3.64% | 5.60% | N/A |
Note: Indices do not have fees (trading costs, custody fees, management fees, etc.) deducted from their returns. We now have a much more reasonable index to compare to – the Bloomberg Barclay’s 3 Year Tax-Free Municipal Index. We still aim for similar or better returns with less risk – The key with this table is that our longer term pre-tax municipal bond returns are noticeably higher than the bond market index but with What We Think is less risk – we will see when rates start to rise and/or credit quality yield spreads widen.
Please see the Disclaimer and Footnotes at the bottom of the page for more information.
* at 35% Federal tax rate
4-2-2024 – Interest Rates & Stocks & Commodities Update – Based on a ZeroHedge article today, “Market Now More Hawkish Than The Fed As June Rate-Cut Odds Fade” forecasts for 2024 by 13 broker/dealer economists is from 75 basis points to 125 basis points. In fact, based on the futures market, “…the market is now pricing in just 65bps of rate-cuts in 2024 (remember in January it was pricing in almost 170bps of cuts).” However, we post the following graph from 2016 through 3-15-2024 showing (if you look very closely) that the Fed Funds rates lags the combination of the U.S. 3 month and 6 month T-Bill yields:
Importantly, on 3-15-2024 both the 3 & 6 month U.S. T-bill yields were above the Fed Funds rate, making it, to us, unlikely that a cut will be made, at least in April [and quite possibly the rest of the year per inflation fears per the next paragraph].
In conjunction with that information and based on the rise of gold to new highs, we posited to an acquaintance on 4-2-2024:
“I guess the treasury market traded off a bit….it seems to me when gold hit
a new high…bonds traded off, interest rates up…Looks like the Ten Year and 30 Year yields are breaking up….Reminds me of the late 1970’s – so they’d been pumping the money supply and creating this inflation for several years [in the 1970’s]….until, it started causing interest rates to go up…then they had to stop printing money….This time [now], much earlier in the cycle (not nearly as much inflation) because the debt levels are enormously larger, I suppose. Of course, We will see.”
Importantly, interest rates went up and up and up after that time.
Thus, we believe the cycle of easing/increasing the money supply by credit and/or fiat inflation could very well be over because gold has put in new highs – it looks to us like “the brakes have been put on.” The evidence is that the yields on the 10 year and the 30 year have broken up (although only slightly at this juncture). If we are correct, we expect the prices of assets like stocks to start to tumble as the prices of real estate did from 1979 down into the 1982-1985 bottoms. Of course, we will see.
One may ask, “How do you know it isn’t a general inflation like the 1970’s?” Our answer is that, of course, we don’t for sure, but in the 1970’s all commodity prices were hitting new highs; however, right now, it is only gold, not oil, not silver, etc. Still, that one special commodity is enough to stop fiat/credit inflation policies, especially with short term rates fairly high and not falling so far. However, if other commodities join in, that could change our outlook. Another part of our answer is that the 1970’s inflation was mostly fiat (more dollars) but the current Super Bubble, until recently, is mostly credit (borrowing and lending) – At a certain point, more credit cannot be issued, and, fiat inflation (including debt bailout/forgiveness) more directly turns into rising commodity prices – it seems to us, that we are at that point and if the bubble isn’t inflating it is deflating, unfortunately.
3-18-2024 – Our Most Recent Tax-Free Performance – What happened last month in the short term municipal bond market reversed for the current 12 months, as a very bad month dropped off and the latest month came in relatively strong. The result is a very big rebound in the total return of the Category Average and the Category Index of about 100 basis points. Our rebound for the current 12 months was 21 basis points, but we never dropped as much. To us, the “proof” is in the Three Year total returns! You can see we have done very well.
Stamper Capital & Investments, Inc.
Separately Managed Accounts (National Tax-Free) vs. Tax-Free Municipal Bond Indices
Annual Total Returns, Period Ended 2-29-2024
| PERIOD | Morningstar Muni Short Category Average | SCI Separately Managed Tax-Fee Municipal Accounts Composite Net of Fees | SCI Separately Managed Accounts Net Pre-Tax Equivalent* | Bloomberg Barclay’s 3 Year Tax-Free Muni Bond Index |
|---|---|---|---|---|
| 1 Year | 3.73% | 3.27% | 5.03% | 3.55% |
| 3 Years | 0.54% | 2.08% | 3.20% | 0.12% |
| 5 Years | 1.21% | 2.16% | 3.32% | 1.19% |
| 10 Years | 1.07% | 2.05% | 3.15% | 1.19% |
| 15 Years | 1.52% | 2.23% | 3.43% | 1.67% |
| Since Inception (1/1/1995) | N/A | 3.64% | 5.61% | N/A |
Note: Indices do not have fees (trading costs, custody fees, management fees, etc.) deducted from their returns. We now have a much more reasonable index to compare to – the Bloomberg Barclay’s 3 Year Tax-Free Municipal Index. We still aim for similar or better returns with less risk – The key with this table is that our longer term pre-tax municipal bond returns are noticeably higher than the bond market index but with What We Think is less risk – we will see when rates start to rise and/or credit quality yield spreads widen.
Please see the Disclaimer and Footnotes at the bottom of the page for more information.
* at 35% Federal tax rate
2-18-2024 – Our Most Recent Tax-Free Performance – Wow, after its best month last month, the short term municipal market’s one year (12 month) return dropped about 100 basis points, as a great month dropped off the front of the period. Our performance also dropped for the current period but not anywhere near as much – only slightly; and now, we are leading the average again for the current 12 months and, importantly, with much less volatility (“measured risk”). The three year return shows our largest relative lead but the other years look good too.
Stamper Capital & Investments, Inc.
Separately Managed Accounts (National Tax-Free) vs. Tax-Free Municipal Bond Indices
Annual Total Returns, Period Ended 1-31-2024
| PERIOD | Morningstar Muni Short Category Average | SCI Separately Managed Tax-Fee Municipal Accounts Composite Net of Fees | SCI Separately Managed Accounts Net Pre-Tax Equivalent* | Bloomberg Barclay’s 3 Year Tax-Free Muni Bond Index |
|---|---|---|---|---|
| 1 Year | 2.60% | 3.06% | 4.71% | 1.83% |
| 3 Years | 0.31% | 2.05% | 3.16% | -0.03% |
| 5 Years | 1.23% | 2.14% | 3.30% | 1.23% |
| 10 Years | 1.10% | 2.03% | 3.13% | 1.21% |
| 15 Years | 1.48% | 2.23% | 3.43% | 1.65% |
| Since Inception (1/1/1995) | N/A | 3.65% | 5.61% | N/A |
Note: Indices do not have fees (trading costs, custody fees, management fees, etc.) deducted from their returns. We now have a much more reasonable index to compare to – the Bloomberg Barclay’s 3 Year Tax-Free Municipal Index. We still aim for similar or better returns with less risk – The key with this table is that our longer term pre-tax municipal bond returns are noticeably higher than the bond market index but with What We Think is less risk – we will see when rates start to rise and/or credit quality yield spreads widen.
Please see the Disclaimer and Footnotes at the bottom of the page for more information.
* at 35% Federal tax rate
2-1-2024 – Huge and Numerous Divergences – The Super All-Everything DOUBLE Top – We spent a lot of ink talking about the numerous divergences, in terms of times and prices of various assets and asset classes, that compel us to think the markets are putting in a Huge Top – in our 2024 Market Comment & Annual Forecast (dated 1-30-2024). One Divergence we didn’t highlight, which we will talk about here, is that between the NASDAQ Comp and the NASDAQ 100. Right now, the narrower NASDAQ 100 is 4.8% above its previous All-Time High on 11-14-2021. However, the broader NASDAQ COMP is still 4.6% below its All-Time High of 11-14-2021. We don’t know if the NASDAQ Comp will put in a new All-Time High but our experience is that it is a normal situation in large tops for similar or related indices to put in official tops at different times of some significance. Also, if you consider the two against each other, you could say the difference is 10% – not huge but notable. Important, to us, is that the more these divergences continue, the more we believe we are experiencing a huge market top, which will be followed by a huge decline. Of course, we will see.
1-17-2024 – Our Most Recent (& Full Year 2023) Tax-Free Performance – The short term municipal bond market had its best month of the year with large price rebounds (yield drops). You can see the performance for the 12 months ending 12-31-2023 in the table below. The average fund did very well in December 2023, improving by 87 basis points! While we did not post as large a rebound, the difference highlights the lower risk (as measured by volatility) of our accounts’ performance. The easiest way to see that higher risk-adjusted performance is to look at the Three Year and Five Year performances and the One Year performance. And, of course, Ten and Fifteen Years also. We achieved our out-performance in all longer run time periods with less volatility & that is our goal!
Stamper Capital & Investments, Inc.
Separately Managed Accounts (National Tax-Free) vs. Tax-Free Municipal Bond Indices
Annual Total Returns, Period Ended 12-31-2023
| PERIOD | Morningstar Muni Short Category Average | SCI Separately Managed Tax-Fee Municipal Accounts Composite Net of Fees | SCI Separately Managed Accounts Net Pre-Tax Equivalent* | Bloomberg Barclay’s 3 Year Tax-Free Muni Bond Index |
|---|---|---|---|---|
| 1 Year | 3.72% | 3.12% | 4.480% | 3.45% |
| 3 Years | 0.39% | 2.02% | 3.11% | 0.11% |
| 5 Years | 1.31% | 2.14% | 3.29% | 1.37% |
| 10 Years | 1.15% | 2.02% | 3.11% | 1.27% |
| 15 Years | 1.61% | 2.28% | 3.51% | 1.79% |
| Since Inception (1/1/1995) | N/A | 3.65% | 5.61% | N/A |
Note: Indices do not have fees (trading costs, custody fees, management fees, etc.) deducted from their returns. We now have a much more reasonable index to compare to – the Bloomberg Barclay’s 3 Year Tax-Free Municipal Index. We still aim for similar or better returns with less risk – The key with this table is that our longer term pre-tax municipal bond returns are noticeably higher than the bond market index but with What We Think is less risk – we will see when rates start to rise and/or credit quality yield spreads widen.
Please see the Disclaimer and Footnotes at the bottom of the page for more information.
* at 35% Federal tax rate
12-17-2023 U.S. Stock Market DOUBLE TOP – The Dow Jones Industrial Average just put in a slight “higher high” – that is correct it is essentially at the same level of its All-Time Market Peak of late 2021. Most importantly, while we believe it could go a bit higher and, if it does, the S&P 500 will likely join it in a new All-Time Market High (it has not yet), however, we believe the prices of most indices and asset categories will not. For example, the Russell 2000 (“RUT”) is about 18% below its All-Time High. Interestingly, the NASDAQ 100 is now at an All-Time Market Peak but the NASDAQ Composite is not – it is a bit over 7% below its. We expect that divergence to hold but will be watching it closely. Of course, it demonstrates that the rebound has been very narrow (as we have documented previously); thus, the 100 has outpaced the Composite.
Here are some reasons why expect a Double Top in only a few indices. We have been following prices in the used goods markets, especially, ultra light hiking equipment, road & mountain bikes, stand up paddle boards (and reading others about prone long boards). Prices are down about 50%.
We just saw an article on prices of used Rolex Watches. Apparently, it is having a similar experience:
So while the narrow number of stocks has been rebounding, other markets are still deteriorating. We have also seen that with oil versus gold. Gold as also put in a slight new All-Time High! However, oil (West Texas Intermediate Crude) has dropped almost 23% since late September 2023, and is 40% below its All-Time Top in mid 2022. Thus, we believe these divergences will hold and over the next few months, most if not all categories will start having notable price declines. Of course, we will see.
12-13-2023 – Our Most Recent Tax-Free Performance – The short term municipal bond market had another great month with large price rebounds (yield drops). That is interesting in that the short term U.S. T-bill market barely budged. So municipal bonds, at the short end of the curve are getting “richer” compared to U.S. T-bills – they were fairly cheap (when not taking into account credit quality). At some point short term municipal bond yields will be too rich. Our accounts also had somewhat of a rebound; however, based on how we have the portfolios structured, our prices are more stable, which was a huge plus when interest rates were shooting up over the past three years, as you can see in our performance in the chart below!
Stamper Capital & Investments, Inc.
Separately Managed Accounts (National Tax-Free) vs. Tax-Free Municipal Bond Indices
Annual Total Returns, Period Ended 11-30-2023
| PERIOD | Morningstar Muni Short Category Average | SCI Separately Managed Tax-Fee Municipal Accounts Composite Net of Fees | SCI Separately Managed Accounts Net Pre-Tax Equivalent* | Bloomberg Barclay’s 3 Year Tax-Free Muni Bond Index |
|---|---|---|---|---|
| 1 Year | 2.92% | 2.91% | 4.48% | 2.65% |
| 3 Years | 0.16% | 1.96% | 3.01% | -0.13% |
| 5 Years | 1.21% | 2.12% | 3.26% | 1.33% |
| 10 Years | 1.04% | 2.00% | 3.08% | 1.18% |
| 15 Years | 1.57% | 2.30% | 3.54% | 1.79% |
| Since Inception (1/1/1995) | N/A | 3.65% | 5.61% | N/A |
Note: Indices do not have fees (trading costs, custody fees, management fees, etc.) deducted from their returns. We now have a much more reasonable index to compare to – the Bloomberg Barclay’s 3 Year Tax-Free Municipal Index. We still aim for similar or better returns with less risk – The key with this table is that our longer term pre-tax municipal bond returns are noticeably higher than the bond market index but with What We Think is less risk – we will see when rates start to rise and/or credit quality yield spreads widen.
Please see the Disclaimer and Footnotes at the bottom of the page for more information.
* at 35% Federal tax rate
11-15-2023 – Our Most Recent Tax-Free Performance – Our Three Year Performance tells the best story – seeking to achieve the best return for the risk!
Stamper Capital & Investments, Inc.
Separately Managed Accounts (National Tax-Free) vs. Tax-Free Municipal Bond Indices
Annual Total Returns, Period Ended 10-31-2023
| PERIOD | Morningstar Muni Short Category Average | SCI Separately Managed Tax-Fee Municipal Accounts Composite Net of Fees | SCI Separately Managed Accounts Net Pre-Tax Equivalent* | Bloomberg Barclay’s 3 Year Tax-Free Muni Bond Index |
|---|---|---|---|---|
| 1 Year | 2.41% | 2.74% | 4.21% | 2.11% |
| 3 Years | -0.38% | 1.79% | 2.76% | -0.85% |
| 5 Years | 0.87% | 2.04% | 3.14% | 0.93% |
| 10 Years | 0.82% | 1.96% | 3.01% | 0.94% |
| 15 Years | 1.45% | 2.28% | 3.51% | 1.73% |
| Since Inception (1/1/1995) | N/A | 3.64% | 5.60% | N/A |
Note: Indices do not have fees (trading costs, custody fees, management fees, etc.) deducted from their returns. We now have a much more reasonable index to compare to – the Bloomberg Barclay’s 3 Year Tax-Free Municipal Index. We still aim for similar or better returns with less risk – The key with this table is that our longer term pre-tax municipal bond returns are noticeably higher than the bond market index but with What We Think is less risk – we will see when rates start to rise and/or credit quality yield spreads widen.
Please see the Disclaimer and Footnotes at the bottom of the page for more information.
* at 35% Federal tax rate
11-06-2023 – Market Update – We’ve been on a roll. So, the Lower Lows we forecasted in both the Bond Market and the Equity Markets happened in Late October 2023 – on 10-27-2023 in most indices like the Dow Jones Industrials and the S&P 500. A very notable Lower Low was in the Russell 2000 on 10-22-2023 which was as low as it was back on 11-1-2020, about 3 years ago.
Of course, we haven’t been forecasting a market that is going straight down but a Series of Lower Lows and Lower Highs. And, right now, equity indices have since been rebounding sharply (which is normal in Bear Markets – see our Analysis for the Tech Wreck (2000-2003) and also for the Financial Crash (2007-2009)); and we are forecasting that, like previously, even though the current rebounds are sharp and sizeable, we are experiencing Lower Highs – notably lower than the All-time Highs around December 2021 through January 2022, documented numerous times – and lower than some other lows. In fact, we think we are at around the appropriate levels for Lower Highs to be put in right about now/here. We could have some large drops and another set of rebounds but not much above current levels – either way, then we expect we will be off to the races for new notable Lower Lows in equities. At some point, we expect an accreleration downwards in equity prices with downlegs notably longer than sharp counter-trend rebounds – This is what happened in previous Equity Bear Markets that we documented.
Bonds – Similarly, the high grade bond market; well, the yield of the U.S. Thirty Year Long Bond traded up and above 5% for the last half of October 2023 (Lower Low in prices) before the current large 20+ basis points rally (new Lower High in price). Most of the curve performed similarly except the short end which saw less movement. As before, we expect yields to now start moving back upwards notably (prices down), especially the long end of the yield curve working toward Un-Inverting the Yield Curve. Most people use the yield of 30 year Long bond to the the Two Year Treasury which is at a 4.94% but we will use the Three Month T-Bill which is at 5.44% to determine if the Yield Curve has a positive slope – that would be “more normal.” So, with the U.S. 30 Year yield currently at 4.81% (Lower High price) it has a notable way to rise in yield (down in price to a new Lower Low).
10-19-2023 – Market Update – This update is going to sound a lot like our Update from last month, except that the forecasted targets were hit but, the new forecast are essentially a continuation of the previous forecasts, all within our long term forecast framework.
Equities – Essentially all equity indices did put in new Lower Lows before rebounding a bit with the most recent new (renewed) “war” before putting in current, new choppy rebounds. Given our Long Term Outlook, we are forecasting more new Lower Lows and we believe eventually (and sooner rather than later) we will see dramatic drops in the equity indices. The leader of this category seems to be High Yield Municipal Bonds (proxy “HYD”), our old specialty! (Clark was the Portfolio Manager of “Vmpax” for 20 years ending mid-2010, which was originally in the High Yield Municipal category, until he moved it into the Short Term category). High Yield Muni proxy, “HYD,” has been dropping the most of the equity and/or equity-like indices we follow compared to previous lows. Following that category is Junk (taxable) bonds (proxy “JNK”), another of our old specialties (Clark was Portfolio of a Junk Taxable Bond fund for a concurrent 8 years). Yes, these are not equities and they do have a very large interest rate component but they are much more risky than high grade bonds – they have risky equity-like credit quality components & they seem to lead equities in the price cycles especially down from the tops. As for “pure” equities, the small caps (proxy Russell 2000, “RUT”) seems to be leading the other equity indices – it has also been heading downwards and seems to be about to break down to a new larger Lower Low. Thus, to us, the trend is down and we are expecting very large notable drops coming soon. Of course, “we will see.”
Interest Rates – As forecast, interest rates have continued to rise with the long end rising faster than the short end. We have been forecasting the reversing of the current yield curve inversion, by the long end trading off (interest rates up) more than the short end & that is what has been happening. In fact, all across the long end of the U.S. Treasury yield curve we are seeing new Record Higher High Yields (since the All-Time record lower lows a couple of years ago. The U.S. Treasury Long bond has seen its yield breach over 5% a couple of times over the past couple of days. We expect continued stair-stepping of yields of longer maturities until the curve is no longer inverted. The U.S. Treasury 3 month bill is currently at 5.42%! so the Long Bond, just to get the yield curve back to “flat” (or level), would need to rise around 42 basis points – We think a 6% Long Bond yield is very likely (and even higher after that).
Real Estate – Long term Housing Mortgage interest rates are now above 8% and we have read that “housing affordability” is the lowest since the late 1980’s – so almost 40 years. They showed a chart of it but it did not go all the way back into the 1970’s when we had the huge inflation that shot the real estate market up before it collapsed down into 1982 (the beginning of the Super Bull Market in Stocks that we think ended in late 2021 – about 3 years ago). I’ve not doubt that homes were very unaffordable at the 1979 real estate peak (that we have documented several times over the years) – we seem to be in a similar situation now.
Commodities – We are less confident on the direction of commodity prices right now, especially precious metals as they have had a bit of a breakout. However, they are largely financed and the cost of financing inventories of commodities has just gone up as we detailed above; thus, we still expect prices to tumble but are less certain.
10-16-2023 – Our Most Recent Tax-Free Performance – Similar to other recent previous months, the short term municipal bond market had another tough month but for the current twelve months, its total return rebounded because the month that dropped off had a more negative total return than the current month. As usual our performance was much more stable. So while the averages caught up a bit for the current twelve months, we are still far ahead for the longer periods.
Stamper Capital & Investments, Inc.
Separately Managed Accounts (National Tax-Free) vs. Tax-Free Municipal Bond Indices
Annual Total Returns, Period Ended 9-30-2023
| PERIOD | Morningstar Muni Short Category Average | SCI Separately Managed Tax-Fee Municipal Accounts Composite Net of Fees | SCI Separately Managed Accounts Net Pre-Tax Equivalent* | Bloomberg Barclay’s 3 Year Tax-Free Muni Bond Index |
|---|---|---|---|---|
| 1 Year | 2.36% | 2.68% | 4.12% | 1.94% |
| 3 Years | -0.43% | 1.75% | 2.69% | -0.95% |
| 5 Years | 0.80% | 2.04% | 3.14% | 0.89% |
| 10 Years | 0.86% | 1.95% | 3.00% | 0.97% |
| 15 Years | 1.42% | 2.25% | 3.47% | 1.73% |
| Since Inception (1/1/1995) | N/A | 3.64% | 5.60% | N/A |
Note: Indices do not have fees (trading costs, custody fees, management fees, etc.) deducted from their returns. We now have a much more reasonable index to compare to – the Bloomberg Barclay’s 3 Year Tax-Free Municipal Index. We still aim for similar or better returns with less risk – The key with this table is that our longer term pre-tax municipal bond returns are noticeably higher than the bond market index but with What We Think is less risk – we will see when rates start to rise and/or credit quality yield spreads widen.
Please see the Disclaimer and Footnotes at the bottom of the page for more information.
* at 35% Federal tax rate
9-24-2023 – Market Update – Equities – The new Lower Lows we mentioned we were looking for in our previous update arrived in essentially all equity indices we follow, with the Russell 2000 and the Dow Jones Transports leading the pack. Junk taxable bonds (proxy “JNK”) have also put in a new Lower Low and are following the High Yield Municipal Bond Market (proxy “HYD”) which seems to be leading all indices. The Housing Market (proxy “IYR”) and the Home Builders (proxy “ITB”) that we have been talking about also put in new Lower Lows. So, to us the current short term trend is downward. We expect new Larger Lower Lows shortly which would make the intermediate term be downward. If that happens we would not be surprised to see an acceleration in the downward trends.
Bonds/Interest Rates – We have recently seen all longer term U.S. Treasury yields put in Higher Highs – the 30 Year just barely and the Ten Year by quite a lot. We had talked previously about the Yield Curve Inversion and that we thought it would be resolved (to a more normal sloping yield curve with longer rates higher than shorter rates) by longer rates rising, not from shorter rates dropping. It looks to us that this breakout (upward in yields) all along the curve is the beginning of that change in yield curve shape. If this is true and long rates continue to go up (as we are forecasting), as we have discussed so many times in these pages, an ultimate impact will be declining prices of all things that are heavily financed which is pretty much everything these days. Of course, we will see.
9-17-2023 – Our Most Recent Tax-Free Performance – The short term municipal bond market, in general, had a slight negative total return for August 2023; however, for the trailing twelve months the returns improved dramatically, as a very negative month dropped off. Our performance was somewhat different with a positive total return for the month & we continued to beat the averages for the twelve months without having such a poor month drop off, because our total returns have, in general, been much more stable and positive. You can easily see how well we have done in the table below.
Stamper Capital & Investments, Inc.
Separately Managed Accounts (National Tax-Free) vs. Tax-Free Municipal Bond Indices
Annual Total Returns, Period Ended 8-31-2023
| PERIOD | Morningstar Muni Short Category Average | SCI Separately Managed Tax-Fee Municipal Accounts Composite Net of Fees | SCI Separately Managed Accounts Net Pre-Tax Equivalent* | Bloomberg Barclay’s 3 Year Tax-Free Muni Bond Index |
|---|---|---|---|---|
| 1 Year | 1.70% | 2.61% | 4.01% | 1.12% |
| 3 Years | -0.18% | 1.77% | 2.72% | -0.58% |
| 5 Years | 0.91% | 2.07% | 3.18% | 1.01% |
| 10 Years | 1.00% | 1.96% | 3.02% | 1.11% |
| 15 Years | 1.38% | 2.23% | 3.42% | 1.72% |
| Since Inception (1/1/1995) | N/A | 3.65% | 5.61% | N/A |
Note: Indices do not have fees (trading costs, custody fees, management fees, etc.) deducted from their returns. We now have a much more reasonable index to compare to – the Bloomberg Barclay’s 3 Year Tax-Free Municipal Index. We still aim for similar or better returns with less risk – The key with this table is that our longer term pre-tax municipal bond returns are noticeably higher than the bond market index but with What We Think is less risk – we will see when rates start to rise and/or credit quality yield spreads widen.
Please see the Disclaimer and Footnotes at the bottom of the page for more information.
* at 35% Federal tax rate
9-5-2023 – Market Update – Equities – We have new Lower Highs in most equity indices around 9-1-2023. We are looking for new Lower Lows. If we get the new Lower Lows we are expecting, then we expect the Bear Market will be resuming in force, unfortunately. The size (spread out nature) of this top has been remarkable – it has taken a long time and is so far very flat. However, we think it will be accompanied by similarly sized price drops which we believe will could be starting soon. The first step will be new Lower Lows (the initial ones of which are not that far away). Over time, the counter-trend rebounds (corrections) will be smaller and the drops will be larger; thus, the decline will accelerate. Of course, we will see.
8-15-2023 – Our Most Recent Tax-Free Performance – The short end of the Municipal Bond Market had a tough July 2023 – rates up pushing prices down and negative total returns “on average” resulting in a drop in their performance for the current twelve months. We actually, did well, picking up just a bit of performance over the periods and still putting a solid performance over all periods reported. Whether we could do this with “size” is definitely a question.
Stamper Capital & Investments, Inc.
Separately Managed Accounts (National Tax-Free) vs. Tax-Free Municipal Bond Indices
Annual Total Returns, Period Ended 7-31-2023
| PERIOD | Morningstar Muni Short Category Average | SCI Separately Managed Tax-Fee Municipal Accounts Composite Net of Fees | SCI Separately Managed Accounts Net Pre-Tax Equivalent* | Bloomberg Barclay’s 3 Year Tax-Free Muni Bond Index |
|---|---|---|---|---|
| 1 Year | 0.94% | 2.53% | 3.89% | 0.05% |
| 3 Years | -0.12% | 1.77% | 2.73% | -0.50% |
| 5 Years | 0.95% | 2.08% | 3.19% | 1.06% |
| 10 Years | 0.98% | 1.95% | 2.99% | 1.14% |
| 15 Years | 1.44% | 2.24% | 3.44% | 1.80% |
| Since Inception (1/1/1995) | N/A | 3.65% | 5.62% | N/A |
Note: Indices do not have fees (trading costs, custody fees, management fees, etc.) deducted from their returns. We now have a much more reasonable index to compare to – the Bloomberg Barclay’s 3 Year Tax-Free Municipal Index. We still aim for similar or better returns with less risk – The key with this table is that our longer term pre-tax municipal bond returns are noticeably higher than the bond market index but with What We Think is less risk – we will see when rates start to rise and/or credit quality yield spreads widen.
Please see the Disclaimer and Footnotes at the bottom of the page for more information.
* at 35% Federal tax rate
7-26-2023 – Market Update – Equities Still Chopping Sideways to Upward & and an Interesting Divergence – Similar to our previous Update, the markets have continued to Chop (up and down) some sideways and some even down a bit and some upwards quite lot. However, essentially all are below their All-Time Highs. The Dow Jones Industrial Average is up to only 2.38% below its All-Time High; the S&P 500 4.2% below; the NASDAQ Comp 12.2% below; the Russel 2000 18.75% below; the KWB Bank Index (“BKX”) is 39.2% below! and, the Dow Jones U.S. Total Stock Market Index is 6.4% below its All-Time High. More interest sensitive categories we track are also down – “JNK” (Junk bond) is 15.8% below its high and “HYD” (High Yield Municipal Bond) is 19.22% below its. Of course, as we have been documenting, interest rates and financing rates are up considerably over the past couple of years (from their All-Time Lows).
We note, as have others, that the rally over the past year is attributable to chiefly only five or six stocks which are reputably in the AI (Artificial Intelligence) arena. This attributable is why the narrower NASDAQ 100 is only 5.77% below its All-Time High while the broader NASDAQ COMP is 12.2% below its All-Time High. It also accounts for the very strong recent showing in the Dow Industrials and in the S&P 500, as compared to other categories without those AI stocks. Markets that shoot up with very narrow breadth like we are seeing usually are putting in major market tops – this makes sense to us in these markets.
Given the Dow Industrials is now so close to its All-Time High, we would not be surprised for it to put in a new one, while we expect most indicies will not. That would be a major “divergence” which is what is generally seen at major market tops.
Ok, the Interesting Divergence we have been following for a few months now is the differing performance of general real estate ETF’s (“IYR”) and home building ETF’s (“ITB”). IYR is 22.9% below its All-Time High while recently ITB has shot up to a New All-Time High! Wow – what a divergence. We think it will be interesting to see how this resolves.
We believe the markets that haven’t topped recently could top at any time, and soon the markets will see a resumption of their declines, including accelerations downwards in their prices. The large sizes of the divergences, in terms of price and time, to us, are indicative of how large the downturns in price and time will be. Accordingly, we think the upside is minimal and the downside is very large.
7-15-2023 – Our Most Recent Tax-Free Performance – We have continued to outperform. The general short term municipal bond category got a bit of a bounce this month and a negative month dropped off, resulting in a nice twelve month total return. We bounced too but not as much and we had a less poor month drop off but still bested the category quite nicely because we had dramatically less downside volatility last year. Looking forward, we think municipal bond yields in general continue to be far too low for the possible risk of declining tax revenues in the economic downturn that we are forecasting.
Stamper Capital & Investments, Inc.
Separately Managed Accounts (National Tax-Free) vs. Tax-Free Municipal Bond Indices
Annual Total Returns, Period Ended 6-30-2023
| PERIOD | Morningstar Muni Short Category Average | SCI Separately Managed Tax-Fee Municipal Accounts Composite Net of Fees | SCI Separately Managed Accounts Net Pre-Tax Equivalent* | Bloomberg Barclay’s 3 Year Tax-Free Muni Bond Index |
|---|---|---|---|---|
| 1 Year | 1.68% | 2.47% | 3.80% | 0.96% |
| 3 Years | 0.01% | 1.76% | 2.70% | -0.37% |
| 5 Years | 0.95% | 2.08% | 3.19% | 1.08% |
| 10 Years | 0.97% | 1.93% | 2.98% | 1.16% |
| 15 Years | 1.46% | 2.25% | 3.45% | 1.86% |
| Since Inception (1/1/1995) | N/A | 3.65% | 5.62% | N/A |
Note: Indices do not have fees (trading costs, custody fees, management fees, etc.) deducted from their returns. We now have a much more reasonable index to compare to – the Bloomberg Barclay’s 3 Year Tax-Free Municipal Index. We still aim for similar or better returns with less risk – The key with this table is that our longer term pre-tax municipal bond returns are noticeably higher than the bond market index but with What We Think is less risk – we will see when rates start to rise and/or credit quality yield spreads widen.
Please see the Disclaimer and Footnotes at the bottom of the page for more information.
* at 35% Federal tax rate
6-13-2023 – Market Update – A Potential Turn Back down for equities. Since the previous update on 5-14-2023 the markets have continued to Chop (up and down) mostly sideways with an upward tilt except for the NASDAQ Comp and NASDAQ 100 which have been screaming upwards. (Note: the NASDAQ was already above its early February high back in May; we didn’t mention that fact then.) Over the past month, we continued to see divergent behavior in the various indices. With some like the S&P500 rising above their early February 2023 highs and many not even close to them, like the Russell 2000 small cap index (“RUT”). The KWB NASDAQ Bank indes (“BKX”) which we highlighted last update as being in “a clear downtrend,” remains clearly so to us – far below its early February top – basically, the Current Leader.
Important to us is that THE ALL-TIME HIGHS REMAIN CLEARLY INTACT! including the NASDAQ which is still more than 15% below its 11-14-2021 All-Time Top! Also,very important to us is that most of this counter-trend rally is the result of the performances of only fewer than 10 stocks! All of those stocks are in the NASDAQ which is why the NASDAQ looks like it is in a Blow Off Top compared to the rest of the indices. They are also in the S&P500 which is why it is also above its early February 2023 high. In stark contrast, while it may not seem like it, for the vast most part, the rest of the equity market is flat to slightly down over the past several months if you don’t include the performances of those few stocks.
As for the timing of the “Resumption of the Down Durn,” at today’s close the Dow Jones Industrial Average essentially just kissed its early February 2023 high! We think this area would be a perfect place for the fairly large, but exceedingly narrow, counter-trend rally to end. Of course, we will see.
6-12-2023 – Our Most Recent Tax-Free Performance – We have continued to perform very well. The Category Average had a poor month (negative total return) and a good month dropped off the beginning of the current 12 month period. On the other hand, we had a relatively good month (positive total return) and our month that dropped off was not as good. Bottom line, the Category average lost almost 100 basis points in total return for the current twelve months versus the previous, while we lost only two basis points – the results: total return for the Category was 0.86% while we had 2.23%. Yes, the Category Average three year average annual return was reported at exactly 0.00%! while the Short Term Muni Bond Index was a -0.51% (a negative); we were 1.69% so we are pretty happy with that relative outperformance, especially over that long of a time period.
Stamper Capital & Investments, Inc.
Separately Managed Accounts (National Tax-Free) vs. Tax-Free Municipal Bond Indices
Annual Total Returns, Period Ended 5-31-2023
| PERIOD | Morningstar Muni Short Category Average | SCI Separately Managed Tax-Fee Municipal Accounts Composite Net of Fees | SCI Separately Managed Accounts Net Pre-Tax Equivalent* | Bloomberg Barclay’s 3 Year Tax-Free Muni Bond Index |
|---|---|---|---|---|
| 1 Year | 0.86% | 2.23% | 3.43% | 0.24% |
| 3 Years | 0.00% | 1.69% | 2.60% | -0.51% |
| 5 Years | 0.89% | 2.06% | 3.17% | 1.03% |
| 10 Years | 0.83% | 1.91% | 2.94% | 1.02% |
| 15 Years | 1.40% | 2.23% | 3.44% | 1.78% |
| Since Inception (1/1/1995) | N/A | 3.65% | 5.62% | N/A |
Note: Indices do not have fees (trading costs, custody fees, management fees, etc.) deducted from their returns. We now have a much more reasonable index to compare to – the Bloomberg Barclay’s 3 Year Tax-Free Municipal Index. We still aim for similar or better returns with less risk – The key with this table is that our longer term pre-tax municipal bond returns are noticeably higher than the bond market index but with What We Think is less risk – we will see when rates start to rise and/or credit quality yield spreads widen.
Please see the Disclaimer and Footnotes at the bottom of the page for more information.
* at 35% Federal tax rate
Please go to our previous blog, The Beginning of the Super All-Everything Top – First Peak, to view previous “real time” market discussion.