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Fed Deficit Jumps
The Market Bull 2018

00:00 / 2:21

The major averages enter the final hour mixed on little economic data. The Institute of Supply Managers New York Manufacturing Index slipped 4 points to a still strong 72.5 in September, the details were unremarkable.

The Make America Great Again tax cuts for the 10% and corporations helped push the 2018 fiscal year deficit to 1.271 trillion Dollars, sending the total deficit to 21.52 trillion. Usually government debt soars during hard times as tax receipts collapse and social spending jumps. But with nominal economic growth running 5.4% over the same period that’s not the case this time round. The 33% increase in fiscal year debt came with a 1% gain in tax receipts despite the 5.4% advance in economic growth. Personal income taxes advanced 4%, corporate taxes fell by 30% while other taxes slipped 6%.

The latest look at equity market valuation shows stocks to be somewhere between tremendously and extremely overvalued. Warren Buffets preferred indicator looks at market value of all equities divided by total economy and yields a 3rd all time high of 129.6%. The all time high for this series occurred in 2000 just before the Dot-Com crash at 151.7%. another metric is Tobin’s Q or the relationship between equity market value and replacement cost. Currently this series is at 1.17 second only to the 1.6 seen just prior to the Dot-Com crash in 2000.

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.

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