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Registered Investment Adviser Caleb Lawrence

 

The major averages shrugged off a brief decline despite generally positive data, to enter the final hour with small gains after a volatile early session.

Final 4th quarter Gross Domestic Product or GDP was revised slightly higher on strength in consumer spending to 2.1% bringing 2016 economic growth to 1.95% just below the Feds desired 2% target, but certainly close enough for government work. The Personal Consumption Expenditures price deflator clocked in at 2% matching the Fed’s desired inflation target. Gross Domestic Investment and Corporate Profits were disappointing for the year.

Despite anemic corporate profits animal spirits pushed margin debt to a new record high in February up 2.9% to 528.2 billion a second consecutive monthly high it also marks the 2nd record high recorded in the last 3-years. Margin debt is now far higher the 400 odd billion seen in 2000 or the 430 or so billion in 2008, on soaring consumer confidence itself at a 16-year high. Historically margin debt tends to peak and then collapse, taking the major averages with it in the process.

With oil exports surging compliments of fracking that has supposedly seen breakeven production costs sink to the $20 per barrel range in some cases, OPEC continues to lose market share according to the lamestream media. Yet inventories have surged because demand remains weak. Additionally, like the Fed regional manufacturing indexes the national trade data does not confirm this. In fact data from the last few months has shown increasing imports of petroleum products. Cash flow and debt levels of the tight oil companies also casts shade on the plunging breakeven costs and casts doubt about the veracity of the tight oil story.

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