Share the Wealth – December 11, 2017

Registered Investment Adviser Caleb Lawrence 

The major averages enter the final hour with small gains on little real news. A recent review of Federal Reserve data shows that it is indeed following through on its promises to reduce its bloated balance sheet compliments of the QE or Quantitative Easing programs run in the post bust period since 2008. The small 29 billion Dollar decline last month reduced the Feds holdings to 4.437 trillion Dollars on a reduction in Treasury and Mortgage Backed Securities balances.

The 2007 financial crisis began with a pair of what was thought of at the time relatively inconsequential hedge fund failures that rapidly spiraled out of control engulfing Bear Stearns and Lehman Brothers. The recent default of Steinhoff International Holdings, and sharp credit downgrade from investment grade to junk as the multinational retail entity hurtles towards bankruptcy with 21 billion in debt outstanding plus off-balance sheet holding that could push the figure much higher. The whole thing has shades of 2008 written all over it and involves the European Central Bank and other significant multinational banks who bought the investment grade paper at par or a little higher only to watch it lose half its value. Fake transactions with subsidiaries, share price manipulation and other forms of egregious financial fraud are of course front and center. The last few years have seen substantial financial chicanery so far with minimal negative consequences, but there is rarely just one cockroach in the pantry.

Share the Wealth – December 8, 2017

Registered Investment Adviser Caleb Lawrence 

The major averages enter the final hour with small gains on better than expected data. Since Monday the Standard and Poors 500 Index is up 6 points or .25% while the NASDAQ has lost 42 points or .6%. The government dodges another shutdown with a last minute 2-week deal.

Consumer credit came out after the close yesterday gaining 20.5 billion in October a second 20+ billion Dollar advance on strength in revolving or credit card debt. Non-Revolving debt essentially student and auto loans slipped a little but remained strong. The usual mantra about consumer debt levels being low and having room to run followed while omitting the 10+ point drop in the homeownership rate, and the mortgages that go along with it. That said student and auto loan debt remains at a record high and the recent strong gains in credit use have pushed credit card debt to near record highs as well.

The November employment report beat expectations with a gain of 228,000 new jobs. The official unemployment rate was unchanged at 4.1%, the average work week increased .1 to 34.5 hours, average earnings went up .2%, previous months job gains were revised up by 3,000. A second solid headline number to be sure, that said the Labor Force Participation rate at 62.7% hasn’t gone anywhere for 8-months and wage growth remains tepid. These last 2-items are contrary to economic theory that states low, or very low, 4.1% unemployment in this case, should be putting considerable upward pressure on wages while drawing people back into the workforce that had previously given up. The fact that neither is occurring speaks volumes about the true strength of the labor market as it isn’t anywhere near as strong as the official 4.1% unemployment rate implies.

The October Wholesale Trade data is the latest in a string of trade reports showing weakening trends with a .5% decline, and snapping a string of gains, on a large decline in non-durable goods. September was revised lower to just +.1%. The inventory to sales ratio dropped to 1.25.

Share the Wealth – December 7, 2017

Registered Investment Adviser Caleb Lawrence

 The major averages enter the final hour with modest gains on little real news, though the saber rattling continues in Korea, and Trump stokes the fire in the Middle East. Bitcoin looks hard at $20,000, while another Bitcoin hack sees 60 million go missing.

Despite the record post bust run for real estate that has seen a new and improved even bigger bubble than last time, the location, location, location mantra holds true as CoreLogic reports that 2.5 million homes remained underwater at the end of the 3rd quarter, a decline of 9%, on an average equity gain of 11.8% in the last year.

A Volkswagen executive gets a 7-year prison sentence, the maximum incidentally, for his role in the emissions cheating scandal, and rightly so. A few items to note, this was Volkswagens 1st offense, while it had been going on for some time and the crime spawned collateral damage for both the environment and the citizenry. This punishment stands in stark contrast to the banksters that have demonstrated serial criminogenic behavior, particularly in the last 10 or so years and yet almost no one went to jail save a few low-level mortgage execs at Taylor, Bean, and Whittaker, that got 3-5 years if memory serves. Despite considerable collateral damage in the form of a devastated global economy and untold human suffering from the resultant bankruptcies, foreclosures, and unemployment just for starters. Once again, the double standard is on parade, making a mockery of justice and the rule of law in the process.

Share the Wealth – December 6, 2017

Registered Investment Adviser Caleb Lawrence

Volatile early trade sends the major averages into the final hour about even on mixed data. The latest government shutdown looms Friday absent some last-minute stop gap deal.

Mortgage activity gained 4.7% last week as purchase apps increased 2.4% while refis snapped a string of declines with a 9% gain. The 30-year jumbo loan rate increased fractionally to 4.16%.

Productivity increased 3% in the third quarter to mark a 6th consecutive quarterly gain. Hourly compensation advanced .7% despite a .2% decline in unit labor costs.

Paul Craig Roberts latest piece titled “Plunder Capitalism” looks at the Republican Tax Plan and concludes unsurprisingly that it is yet another debt funded handout for the 1% and corporations, at our expense of course. The capital gains rate cuts designed to spur economic growth ala the now thoroughly discredited Laffer Curve will instead simply drive the deficits higher along with wealth and income inequality subjects that are already at dangerously high record levels. One of the parallels drawn is the example of a Nurse earning $50,000 per year being taxed at a 25% marginal Federal rate while a corporation pays just 20%. If you happen to be a high-income earner north of $191,000 per year your tax rate is 33%, yet capital gains, were the 1% derive much of their income is taxed at just 15%. It used to be by the people, for the people and of the people, aka democracy. In the modern era it has become by the 1%, for the 1%, of the 1%, which sounds an awful lot like an oligarchy if you ask me.

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.