The Market Bull – June 6, 2019
The major averages closed with modest gains despite increasingly bellicose trade statements with the Chinese and imminent Mexican tariffs.
The struggle with China is really about wealth and power. We don’t want to give it up and they of course want their fair share. For the record the USA was one of the most protectionist countries in the world during the late 19th and early 20th centuries. We went so far as to balance our books with tariffs as there was effectively no income tax back then. Tariffs routinely ran as high as 50% protecting not only domestic producers but also American wages. While I’m still of the opinion that Trumps approach is ham fisted and crude, something had to be done. The danger with tariffs and trade wars is that they often deteriorate into shooting wars.
The Fed 1st quarter Flow of Funds report is out, always an interesting read. Household net worth increased 4.42% to 108.6 trillion in the first quarter. Real estate values have surpassed their pre bust peak set in early 2006 on a nominal or not adjusted for inflation basis. Household percent equity reached a 17-year high of 60.4%. It’s worth noting that some 30.3% of homeowners have no mortgage so of the 50 odd million homeowners that do have a mortgage their equity level is far less than the 60.4% reported. Additionally some 2 million homeowners are still underwater more than 10-years after the last crisis. Mortgage debt continues to decline falling 25 billion in the first quarter. At 49.2% of GDP or Gross Domestic Product it is far below its bubbelicious high of 73.5% set at the height of housing bubble
Las Vegas managed to post a real estate sales gain of 4% in May, but inventories came in 98% higher than a year ago. Prices remained stuck at about $300,000 for a 3rd straight month. Dramatic gains in inventory is usually the first sign of trouble for real estate.
Standard and Poors 500 Index closed at: 2,843.49 up 17.34
NASDAQ finished the day: 7,615.55 up 40.08
Gold ended trading at: $1,339.40 up $5.80