Share the Wealth – August 17, 2017

Registered Investment Adviser Caleb Lawrence

The major averages enter the final hour with large losses despite generally positive news. Industrial production advanced .2% in July. The miss to expectations compliments of a significant decline in motor vehicle and parts production, capacity utilization was unchanged at 76.7%.

The Philadelphia Fed regional index slipped .6 in August to 18.9 despite large gains in new orders and the average work week. The inflation proxy prices paid advanced 2 points to 21.1.

Online or E-Commerce sales increased 5.8 billion to 111.5 billion in the 2nd quarter. The 16.2% gain from a year ago put online sales at nearly 9% of the total. This has been a particularly brutal year for traditional retail with the record bankruptcies generating a lot of fear in the sector.

Much has been said about debt in the post crisis period. Some insist it does not matter and even go so far as to use it as a measure of economic vibrancy. Others point to the historical record and the financial ruin debt often engenders particularly when it is excessive or poorly considered. As with most things the truth is somewhere in the middle. The New York Fed’s 2nd quarter report on Household Credit and Debt shows that households have reached a new record high debt level with a .9% gain to 12.84 Trillion dollars. Credit card delinquency rose for a 3rd straight quarter, though the overall rate was largely unchanged. Given the post crisis reduction in the labor force participation, and homeownership rates, and that real wages have declined for quite some time I would view this as evidence that consumers are worse off now than they were in 2007 on net compliments of more debt and less income and assets.

Share the Wealth – August 16, 2017

Registered Investment Adviser Caleb Lawrence 

Despite disappointing data, the major averages enter the final hour with small gains. The June Treasury International Capital Flows or TIC report showed net foreign purchases of securities totaling 34.4 billion for the month. Treasury and Agency bonds and notes remained popular while equities sold off again. The Chinese purchased 44.3 billion net, followed by Turkey 9.4 billion and Saudi Arabia 8.8 billion. The top three sellers were Japan $20.5 billion, the Cayman Islands 12.1 billion, and Mexico $6.6 billion.

Housing starts and permits disappointed in July after both missed expectations. Permits fell 4.1% to 1.223 million units annualized on weakness in multi-family units. Starts dropped 4.8% to 1.155 million units annualized on weakness in multi-family construction as well. This marks a second material weakness in starts in the last 6-months, and a third for permits.

Share the Wealth – August 15, 2017

Registered Investment Adviser Caleb Lawrence

The major averages enter the final hour about even, unable to build on yesterday’s gains despite generally positive news. Retail sales advanced .6% in July, May and June were both revised up. Gains were fairly broad based with the exception of Gasoline, Electronics and Appliances as they all declined.

The New York Fed regional Index jumped 15.4 points in August to 25.2 on strength in new orders and employment. The inflation proxy, prices paid advanced to 31.

Import and export prices snapped a pair of declines advancing .1% and .4% respectively in July. On a year ago basis export prices advanced .8% while import prices gained 1.5%, both far below the Fed’s desired 2% target.

Business inventories increased for a 2nd month in June with a .5% gain. Led by improvements in retail and wholesale inventories for a second month.

The TIC or Treasury International Capital report comes out after the close will take a look at that tomorrow.


Share the Wealth – August 14, 2017

Registered Investment Adviser Caleb Lawrence 

The major averages begin the week with solid gains as the confrontation with North Korea deescalates over the weekend. The 2nd quarter earnings reporting season is rapidly coming to a close with nearly all of the Standard and Poors 500 companies having reported to date. So far a second consecutive quarter of double digit earnings growth seems to set for the books, at least using adjusted earnings with all the bad stuff taken out as is the preference with Factset Research who reported 10.2% earnings growth for the index led by energy, information technology, utilities and financial, all other sectors were in the single digits. Revenue growth is tracking 5.1% led by the energy sector. Solid numbers to be sure despite the adjusted gross earnings data. That said looking at the bigger picture and earnings have shown no net growth since the 2nd quarter of 2014 and spent 2016 falling. Still the decent earnings of the last 2-quarters have managed to bring down the Price/Earnings ratio a little from a painfully high 26.6 in March to 24.3 in August. I can’t imagine what these numbers would look like were it not for the magic of debt funded share buy backs that through the reduction in shares outstanding meant that the earnings on a per share basis increased materially despite no change in the actual earnings themselves as the historical record shows. But, that’s just me, and maybe I worry about things that don’t really matter anyway.

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.