Share the Wealth – September 19, 2017

Registered Investment Adviser Caleb Lawrence

Volatile early trade gave way to modest gains into the final hour on mixed data. North Korea gets threatened again, another hurricane bears down on the south east and Kentucky admits that its pension programs are grossly underfunded. The current account deficit increased to 123.1 billion in the 2nd quarter, on weakness in income payments.

The Treasury International Capital or TIC report fell sharply in October dropping to just 1.3 billion, a 7-month low. Treasury paper and equities sold off, while agency and to a lesser extent corporate bonds remained popular. Demand for equities has now fallen for two consecutive months.

Trade prices jumped .6% in August as energy costs surged. Import prices increased .6% snapping a string of declines. Export prices advanced .6% as well a second notable gain. On a year ago basis import prices increased 2.1% while export prices advanced 2.3% both back above the Fed’s 2% target. Almost all of the gains are being driven by energy prices which jumped 4.8% for the month.

Housing starts fell again in August down .8% and a 5th decline in the last 6-month’s as multi-family or rental starts continue to fall sharply. Permits however increased 5.7% but have been very volatile of late. Completions slipped again down 10.2% for the month.

State and Local Tax Revenue grew 2.3% in the 2nd quarter, on strength in sales, corporate and severance taxes. Individual income tax receipts slipped 1.1%.

Share the Wealth – September 18, 2017

Registered Investment Adviser Caleb Lawrence 

The major averages surged at the open on little real news entering the final hour mixed on a late tech led decline. Though of course we had another round of sabre rattling with North Korea. The National Association of Home Builders Index or NAHB fell 4 points in September to 64. All regions declined except the west which gained 2 points to 79. Buyer traffic remained below 50 for a 4th consecutive month.

The Equifax scandal is the latest example of big corporate finance demonstrating that it flat out doesn’t give a “beep”. Caused by the failure to patch a known 2-month old network vulnerability that led to 143 million plus accounts being hacked, personal data including name, address, Social Security numbers, Driver’s License data and other information was accessed by the hackers as a result. As bad as this is, it gets worse. The Information Technology executive was a double music major unqualified for the position held and in fact this hack marks the 3rd major breach of Equifax’s technology systems in the last 2-years. Company executives rightly fearing the worst kept the information secret for 2-months, using the opportunity to unload millions in company stock and do a little “ahem” options trading before the announcement crashed the share price, additionally two have announced their retirement apparently un-willing to face the music related to their malfeasance and carelessness. Classic insider trading, the definition of which is trading on material non-public information to either avoid loss or achieve gain. The companies’ response to the crisis included trying to dupe those affected into signing away their rights to sue, a public relations firm hired was kept in the dark unable to help people when they called, a website that didn’t work and returned random information when the individual tried to find out if they had been affected by the breech. You couldn’t possibly screw it up any worse than this if you tried. Given the extent and severity of this breach it is being recommended that consumers place a credit freeze on their accounts as credit monitoring is likely to prove insufficient. Additionally, if you have not done so already it is advisable to place PIN numbers on important accounts involving banking, credit, investments, taxes, and cell phones, amongst others to prevent unauthorized changes to these accounts further limiting the opportunities for fraud. If ever there was an event that warranted lengthy prison sentences this would be it, given the events of the post crisis period since 2007 I won’t be holding my breath.

Share the Wealth – September 15, 2017

Registered Investment Adviser Caleb Lawrence 

Despite another North Korean rocket launch, terrorist attack in London and some fairly significant economic data misses the major averages enter the final hour with small gains. Since Monday the Standard and Poors 500 Index is up 22 points or .9% while the NASDAQ has gained 34 points or .5%.

Retail sales missed expectations in August falling .2%, July and June were revised materially lower sending the 4-month average to zero or no growth. Weakness was noted in online, clothing, electronics, and appliance sales. On a year ago basis sales are up 3.2% but the trend is definitely down. While some pundits attempted to blame the miss on Hurricane Harvey it didn’t come ashore until the 25th when the month was all but over.

The New York Fed regional index slipped .8 points in September on weakness in the average workweek, all other subcomponents improved. Prices paid advanced 4.8 points to 35.8.

In a sharp miss to expectations industrial production fell .9% in August on a very large decline in utilities output, mining and manufacturing also fell. This marks the largest monthly decline in 8 years for the series, capacity utilization also fell sharply dropping .8 points to 76.1%. Again, Hurricane Harvey was blamed but I think that excuse is a little thin based on the calendar, that said the hurricanes will start to have a meaningful short-term impact in the coming months. For all the pundits, out there that think destruction is an economic positive, all I can say is don’t forget to factor in the various declines when you trumpet the gains of whatever metric your promoting.

Share the Wealth – September 14, 2017

Registered Investment Adviser Caleb Lawrence

The major averages enter the final hour mixed after a slightly lower opening. The August Consumer Price Index or CPI advanced .4% on gains in energy and shelter costs. On a year ago basis the rate increased to 1.9% a 3-month high, but remains below the Fed’s desired 2% target.

The Fed’s targeting of 2% inflation means that prices will effectively double every 36-years based on the “Rule of 72”. A great deal of debate goes on regarding the inflation data. Many would argue that it is wildly inaccurate and underreported particularly with respect to asset prices like real estate. Based on MIT’s Billion Prices Project I think the inflation data is fairly accurate. The arbitrary targeting of some value is suspect, in this case 2% as it can be argued that nobody really knows what the inflation rate should be despite endless surveys and proclamations to the contrary. Though as a general rule the deeper in debt a person or entity is, such as the government, the more desirable inflation is as it erodes the value of the currency used to pay back the debt with over time. Recent pieces on the subject of inflation in both the Wall Street Journal and Bloomberg citied the now discredited Phillips Curve regarding inflation and expectations of. Given the mainstream media and the Fed’s track record on inflation, asset bubbles, debt, and interest rates one has to take discussions of these subjects with a grain of salt, or three.

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.