Share the Wealth – November 17, 2017

Registered Investment Adviser Caleb Lawrence 

The major averages enter the final hour with small losses on generally positive data. Unable to build on Trumps Tax Plan as it passed its first hurdle on its way to more debt financed handouts for corporations and the 1%, with the usual drivel about tax cuts stimulate growth. The Standard and Poors 500 Index is essentially unchanged since Monday while the NASDAQ is up 62 points or almost 1%.

Construction activity shattered expectations in October when starts jumped 13.7% to 1.29 million units annualized. Permits increased 5.9% to 1.297 million units annualized. That said Starts have slipped 6 of the last 8-months and Permits have fallen 4 of the last 8-months so neither is a picture of strength despite the hurricane inspired bounce.

Kansas City Fed Manufacturing Survey fell 7 points in November to 16 on broad based declines.

The history of the Federal Reserve, aka the Bankster Reserve as there is nothing “Federal” about it save the name, created in secrecy on Jekyll Island in 1913 ostensibly to serve the public interest with a safer, more flexible and stable monetary and financial system. Has instead brought us 3 horrible financial crises 1929, 2000 and 2007, with another waiting in the wings. Inflated away over 90% of the value of the dollar and blown ginormous debts pushing 21 trillion Dollars. From 1913 to 1971 Federal Debt hit 400 billion, 1971 to 1981 saw an additional 600 billion, reaching a Trillion Dollars for the first time. 1981 to 1997 saw the addition of 4.4 Trillion. 1997 to 2017 brought another 15.2 Trillion and counting, see a pattern here? This year, the US will pay out about $500 billion on nearly $21 trillion in debt...assuming a 2% interest rate. Given that these debts are effectively unpayable without the magic of a printing press you have to wonder where it is going to end. Add state, local and private sector debt and higher interest rates are a non-starter as bankruptcy will follow. Keep on borrowing and a repeat of the 2007-2009 crisis will occur at some point, absent some new miracle, emphasis on the “miracle” part, economic paradigm. It is not just us as this is true for most all of the G-20 countries, primarily western developed economies plus China and Japan. All of which will put an exclamation mark at the end of the fallacious “Debt doesn’t matter.” statement, because frankly if that were true we wouldn’t need bankruptcy courts, laws or debt collectors for starters.

Share the Wealth – November 16, 2017

Registered Investment Adviser Caleb Lawrence

Generally positive but not overly significant economic data sent the major averages into the final hour with large gains erasing all of the week’s losses and then some.

The Philadelphia Fed regional survey fell a larger than expected 5.2 points to 22.7 in November on weakness in employment and inventories. Price data remains relatively high but moderated somewhat.

Import prices advanced for a 3rd month in October with a below expectations gain of .2%. On a year ago basis import prices increased 2.5%. Export prices were unchanged for the month but increased 2.7% from a year ago.

Industrial Production beat expectations in October with a .9% gain. Capacity Utilization jumped .6% to 77%. Non-Durable Goods and Utilities production led the advance and this report is todays reason dujour for the markets impressive gains despite the fact that manufacturing activity only makes up about 16% of total economic activity.

The NAHB or National Association of Home Builders Index gained 2 points in November to 70 on large gains in the Northeast. The South increased for a second month because major hurricanes apparently don’t matter.

Share the Wealth – November 15, 2017

Registered Investment Adviser Caleb Lawrence

After opening lower on generally disappointing data the major averages recovered some of their early declines to enter the final hour with modest losses. I’ll note that tech stock darling Tesla Motors officially made it into bear market territory today with an intraday low more than 20% below its intraday high of $389.61 set in mid-September.

The Mortgage Bankers Association reports that mortgage activity advanced 3.1% last week as refi’s jumped 6.3% and purchase apps advanced .5%. The 30-year contract rate for a jumbo loan was unchanged at 4.12%.

The New York fed regional manufacturing index fell 10.8 points in November to 19.4 on employment related weakness.

Retail sales advanced .2% in October as the previous month’s hurricane related bounce evaporated with building materials and gasoline stations both recording notable declines.

Unlike the Producer Price Index that shows material price gains of late at the wholesale level. The CPI or Consumer Price Index is following a more muted path with a .1% advance in October. The year ago rate slipped .2% to 2% a second month at or above the Fed’s stated 2% target, on a decline in energy prices.

Share the Wealth – November 14, 2017

Registered Investment Adviser Caleb Lawrence

Volatile early trade sent the major averages into the final hour with small losses on generally disappointing data. The Producer Price Index or PPI gained .4% in October, the year ago rate moved up to 2.7% to mark a 5th consecutive month at 2% or better, the Fed’s stated target. Core and intermediate goods prices drove the advance along with services costs, so energy remains a big driver at the year ago level.

Consumer debt hits a new record high in the 3rd quarter as per the New York Fed, same thing happened in the 2nd quarter but it was promptly revised away. Driven by new record highs across the board to 12.96 Trillion dollars in total. Mortgage’s advanced 56 billion, Credit Cards increased 24 billion, Auto Loans gained 23 billion, and Student Loans jumped 13 billion. Loan origination is increasing steadily for most credit tiers while delinquencies increased .1% to 4.9%, bankruptcies slipped to 208,440, lastly foreclosures hit a new record low of just 69,580 in the 3rd quarter. As debt doesn’t matter, just ask Uncle Sam, record high consumer debt is a definitive sign of a vibrant and economically healthy consumer sector just like late 2008.

Trump’s tax plan seems to specifically target high cost coastal real estate markets by limiting the mortgage interest deduction and the ability to deduct very high state and local taxes, California has some of the highest. Another wrinkle seems to go after Silicon Valley’s high tech sector by making vested stock options taxable prior to exercise. Given the high failure rate of startups and that more than a few vested options end up worthless prior to being exercised the effects on the Venture Capital sector could be dramatic for both the startups themselves and the talent they depend on.

This is Caleb Lawrence Registered Investment Adviser Scotts Valley Drive and Willis Road in the Scotts Valley Plaza, Suite 202 or call me toll free at 888-RICH PIG / 888-742-4744.

You can catch me on the radio at noon each business day as well on California’s central coast. KPIG 107.5 FM in the Monterey Bay or KPYG 94.9 FM in San Luis Obispo.

Advisory services offered through Caleb Lawrence Registered Investment Adviser Inc.