Share the Wealth – January 18, 2018

Registered Investment Adviser Caleb Lawrence

The major averages enter the final hour mixed after some disappointing data. Crypto’s get hammered again. While the government looks to avert yet another shutdown on Friday with a last-minute stop gap funding measure because they can’t get their act together to pass an actual budget.

The November Treasury International Capital Flows or TIC report showed foreigners remained willing buyers of our securities with net purchases of 57.5 billion Dollars. Equities, Corporate and Agency Bonds remained popular, Treasuries sold off for a second month. This report marks a 4th consecutive month of solid foreign buying.

Residential construction activity disappointed in December with starts falling 8.2% to 1.192 million units annualized. Permits slipped .1% to 1.302 million units annualized. On a year ago basis starts have fallen 6%.

The Beige Book on regional economic activity showed more of the same moderate activity levels in January and tight labor markets that contrary to the Philips Curve are not driving meaningfully higher wages. At the regional level on a 3-month moving average basis Chicago showed weakness while Cleveland, Dallas, Minneapolis, New York, Philadelphia, Richmond, and Saint Louis all improved. San Francisco was unchanged.

Share the Wealth – January 17, 2018

Registered Investment Adviser Caleb Lawrence

The major averages opened higher and enter the final hour with decent gains on generally positive news. The crypto currencies fell hard again in early trade with Bitcoin briefly slipping below the $10,000 level before recovering somewhat.

Mortgage activity advanced 4.1% last week as per the Mortgage Bankers Association or MBA. Refis gained 4.4% while purchase apps increased 2.7% a second solid advance for the series. The 30-year contract rate for a jumbo loan jumped to 4.25%, a more than 1-year high.

Industrial Production beat expectations significantly with a .9% gain in December on large jumps in mining and utilities production. Capacity Utilization also surged hitting 77.9%. While this series covers a little less than 20% of the economy the numbers are encouraging just the same.

The National Association of Home Builders Index or NAHB slipped 2 points in January to a still very high 72 on a 4-point drop in traffic, for an otherwise unremarkable report.

Median usual weekly earnings growth fell hard in the 4th quarter of 2017 as the growth rate plunged to just .9%. That said this series shows solid wage growth for 2017 averaging 3.3% which is just about 1% greater than the official Consumer Price Index or inflation over the same period.

Share the Wealth – January 16, 2018

Registered Investment Adviser Caleb Lawrence

The melt up continues with the major averages opening higher on little real news, though they slipped late and enter the final hour about even. That said global financial stress continues to climb as the crypto currencies get wacked again. Britain’s biggest construction company Carillion goes bankrupt. Commercial real estate slides in 2017 for the first time since the last crisis.

The New York Fed regional index fell 1.9 points to 17.7 in January. Most of the report was unremarkable save huge employment related declines of 19.1 points, while the work week fell 8.5 points to a barely positive .8.

Despite significant trade related negative factors going into the end of the 4th quarter Gross Domestic Product estimates are running some 3% putting the 4th quarter on track for a 3rd consecutive solid quarter as 2017 looks to peg Trumps boastful 3% growth estimate. He’s going to need a lot of help to keep that going.

Recent municipal bankruptcies have put a real spotlight on the sanctity of pensions in California and other states of late. Despite funding levels in the 70% range being all to common, CalPers is currently running some 68% and that after the significant market gains of late. That said it remains largely the norm for pension fund managers to assume 7-8% rates of return despite reality being about half that. Many, particularly in California figured that pensions were sacrosanct as the agreements stipulated that should deficits occur taxes would be raised to cover the difference, end of story. But a looming California supreme court case looks to cast these guarantees to the wind, something already decided by lower courts. When promises are made that can’t mathematically be kept, sooner or later push will come to shove, and the courts are increasingly recognizing that the needed tax increases will prove ruinous by necessity. California is far from alone on this as pension funding looks to become quite the scandal nationwide over the next 10-20 years.

Share the Wealth – January 12, 2018

Registered Investment Adviser Caleb Lawrence

The irrational exuberance melt up continued this week with the Dow Jones industrial average on track for 26,000 by the end of the month. The NASDAQ gained 120 points or 1.7% for the week while the Standard and Poors 500 Index is up 41 points or 1.5% since Monday.

The December Consumer Price Index or CPI advanced .1%, on a year ago basis the series is 2.1% higher, despite a significant drop in energy prices for the month. This marks a 4th consecutive month at 2% or better and ahead of the Fed’s desired 2% target.

Business Inventories increased .4% in November on a big jump in wholesale inventories, rebounding from the previous 2-months anemic figures.

December retail sales missed expectations with a .4% gain. That said the final 4-months of 2017 featured robust sales gains across most categories. An odd series, while sales were weak from February through June it’s hard to reconcile the sales data with the record number of store closing seen in 2017 as the figure exceeded the total recorded in the depths of the previous crisis in 2008. Data such as this combined with a 4.1% unemployment rate and yet little in the way of meaningful wage gains makes it difficult to embrace the everything is going great theme pushed by the mainstream media, because if it was we wouldn’t have these types of glaring inconsistencies.

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.