The HOPE chart, are we finally reaching the first milestone?

I believe this chart was originally posted by @The_Ni or @TheHouse and should be something we pay closer attention to. Everyone here wants the market to fall right now but that’s not how things work, outside a forced global shutdown the economy is a very slow moving monster and things take time.

As the fed raises interest rates, these four key indicators happen which in turn bring down inflation.

New Orders

Right now we are likely just on the cusp of seeing the housing market possibly slow.

Yesterday we saw housing starts drop 9.6% & building permits fall 1.3%. As @dooknukem also mentioned lumber prices have been falling dramatically too (from insane record highs) due to drop in demand.

This morning total mortgage application volume fell 2% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand stands at the lowest level since 2000.

New Orders still seem to be stubbornly high, though we did see a huge reduction in a recent NY Empire State Manufacturing Index. I think we could see this be a lagger as companies are not so much JIT anymore (due to China lockdown uncertainty and other supply chain factors) but instead try to simply get large batches of inventory of something that they believe the consumer will continue to purchase so they have product on the shelves. As we have just seen from Walmart & Target earnings, consumers have cut back purchases mostly to food and necessities while high inflation drains the pocketbooks and job uncertainty looms.

We’ve seen in the recent round of earnings that some companies have remained positive for Q3 & Q4 while others have tried to get out ahead and slashed their profit forecasts. Likewise many companies are starting to layoff small amounts, likely trying to trim some fat and see where things go before making more drastic decisions.

This isn’t meant to replace the Kodiak Bear Thesis thread , instead I would like to focus on the 4 indicators mentioned above. As new numbers & articles come out I will continue to post to this thread and hopefully we can start to develop a timeline for the next step down, or possibly if we see a trend reversal.


Ive been trying to be better at not giving so much unsolicited opinions, so I appreciate this post. :)[Insert evil pepe emoji]

I have always liked this chart, I believe it was @The_Ni that originally posted it as you mentioned.

I suppose its up for speculation on where we may be sitting at, but I also wonder how this chart could warp depending on time periods in the past that didn’t have the level of inflation we are seeing today. It also makes me wonder how hiking cycles in the past compare when we know that the fed waited to take action when inflation started to pick up 13 months ago due to hesitancy around covid. Without a doubt housing is cooling now, this would suggest we are early on the HOPE chart, but on the other hand we are already seeing changes new orders, profits, and have started to see early signs of weakness in labor like hiring and pay freezes.

The most recent Philly Fed and NY Empire Manufacturing survey’s show recent steep declines into negative territory.

Philly Fed July 22 Manufacturing Survey

NY Empire August 22 Manufacturing Survey


Profits are interesting because we have the energy sector showing unbelievable profits, but if we exclude energy S&P 500 Q2 22 so far we are seeing a 4% decline.

Now one could argue that energy should be included in that basket but record profits to the energy sector has never been a good indicator of financial health and discretionary income of the average American and its exactly that which effects corporate profits then labor.

My opinion would be that we are much further along on the chart than it may seem, somewhere between 3 and 4.

I know I sound like a broken record here but one indicator that is not mentioned enough and surely you will never hear from J Pow and friends is credit impulse. I am obviously in the camp that inflation is squeezing the average American household, 67% of American’s are currently living paycheck to paycheck while real wages have continued to decline.

To make up for this deficit, American’s appear to be taking on more debt at a rate we have never seen in history. This credit impulse is ofcourse not sustainable as eventually people run out of access to more money. Credit cards topped 500 million cards for the first time in the US just last quarter with on average an increase in balances of +13% as just one of the many examples we are seeing in the consumer financing world.

I personally back when I was a little younger and a little more brash fell into this trap. Thank god I found Mr Ramsey early in life to teach me that strong personal finances has more to do with behavior than financial literacy. This period of my life was a long road of cutting back spending and developing the strength to tell myself and others no in the best interest of my family’s long term financial goals.

Id imagine many American’s are primed to feel this same pain.

Eventually the chickens come home to roost and without the ever expanding credit impulse that we have seen this last decade, where is this inflated demand going to come from? Most especially now that the fed has made it clear they are not going to pivot anytime soon.

I again appreciate the post and look forward to the continued descision.


You’re like Leo in Don’t Look Up, we’re all gonna come back to your posts a year from now and be like, wow, dude was a prophet.

Your analysis is solid and I do believe rough times are ahead. I’m fairly well positioned for the decline. If you are right, lots of people will suffer. Not looking forward to that.


@TheHouse certainly called this one before most of us saw this coming. I know I was initially in denial too.

TheHouse, please keep the “unsolicited opinions” coming - we’re all that much better for it :cheers:

Michael Kantro, Chief Investment Strategist at Piper Sandler, came up with the HOPE framework, and he regularly posts updates to it in his twitter feed. It is a good source of macro information indeed.


Just saw this article talking about home prices dropping in a lot of areas…

Bloomberg (paywall):

Archive (no paywall):


For those who don’t pay for Bloomberg here are screenshots of the article


So notice a few not so good things we are starting to see. First is people are starting to not pay their utility bills.

Link paywall: A ‘Tsunami of Shutoffs’: 20 Million US Homes Are Behind on Energy Bills Can’t Pay Utility Bills? 20 Million US Homes Behind on Payments, Facing Shutoffs - Bloomberg

Second luxury homebuilder TOL reported a 60% plunge in orders. What I’ve learned about “rich” people is that if they aren’t buying something thing you should pay attention.

Link paywall: Toll Brothers Home Orders Sink 60% as Rates Hit Luxury Buyers Toll Brothers Home Orders Slide 60% as Rates, Prices Hit Sales (TOL) - Bloomberg

Looking like are starting to see bad signs. I’m think we are starting to approach stage to of HOPE.


Something something here’s some charts on housing

Sacramento area but this guy I follow posts great data:

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Sharing a statistic that supports the decline of housing. Supply is increasing fast.

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Thx @The_Ni for posting this. Seems very relevant today. Looks like new orders are taking a hit now after housing has already been showing weakness. I’d say we are in phase 2. Employment still strong which makes sense at phase 4.

Update to HOPE:

#HOPE (housing, orders, profits, employment) is fading, with the respective lags. Here is an update since April 2022 (pinned tweet).
H: NAHB fell to 46 today
O: ISM New Orders @ 51
P: 2023 EPS Are At $243 (down from $251 in June)
E: Claims remain low still


Given we are already seeing early movement in E- Employment, Q3 Earnings is where P- Profits steps into the picture. Im curious how many FedEx’s there are in the market right now. If FedEx is closing stores there are many more to follow imo.


ERs list…


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Granted, this time is supposedly a bit different, but since we’re tracking the HOPE framework, this is an important update.

#HOPE cycle update: Largest YoY Drop In NAHB In History (and it’s still going to keep falling).

Great chart (keep it simple) of $SPY and NAHB Index. This is one key way we separate bear market rallies from NEW bull markets. Stocks will bottom when/right before housing bottoms.

Here are the individual component scores:


Update to the HOPE framework - P is starting to weaken, but E remains strong:

#HOPE Update For November 2022 YTD
H) NAHB @ 38 (from peak of 84)
O) ISM NO @ 49 (from peak of 61)
P) 2023 EPS @ $234 (from peak of $251)
E) Claims remain low, employment slowing


Getting this weird feeling that once people “think” tech jobs aren’t safe anymore… then we’ll get that E to pop… so not just yet but amazon layoffs trying it’s darndest here with that theory…


Update from the #HOPE guy:

The #HOPE cycle is moving along in order. How much economic pain will investors celebrate with the backward-looking focus of Fed policy? This is why we think most of the pain will be felt AFTER employment weakens, not before. Inflation still a larger fear than recession. macro


Update from the #HOPE guy:

1 year #HOPE update … H) housing bouncing as it always does near end of a tightening cycle. We always see a head fake before recession. O) ISM index at new cycle low P) EPS estimate for 2023 at cycle low E) employment softening accelerating, yet claims remain low for now (higher in H2?).

Housing is in a weird setup with seller strikes and all that, will leave that for its own thread. Here’s New Orders - that’s a clear slowdown:

Here’s S&P profitability -We had one negative quarter in Q4 2022, and analysts expect two more before turning positive again. (How likely is that?)

(Un)employment doesn’t seems to have not gotten the memo yet:

Seems like we’re still very much working through the various #HOPE stages.

On unemployment, while the rate itself has not picked up, we are starting to see some softening. JOLTS was below 10M for the first time in a while, and temp services seem to have plateaued.

All in, looks like we still have a bit more to go before the slowdown hits.