Caleb Lawrence – KPIG-KPYG Radio – Share the Wealth – February 9, 2017
Despite little real news today and disappointing consumer credit data the major averages enter the final hour with modest gains. December consumer credit advanced a much less than expected 14.2 billion as revolving of credit card use dropped sharply. 2016 saw consumer credit advance 4.5% as revolving or credit card debt gained 2.9% while non-revolving debt essentially student and auto loans advanced 5.3%. The 4.5% figure is the smallest annualized gain recorded since January of 2016.
A recent analysis of the major oil companies shows that Economic Return on Investment has plunged in the last few years along with oil prices. Aside from decimating net income, free cash flow and the like, debt levels have soared since 2012. The bigger picture is this, when oil slipped below $100 per barrel company financials came under pressure, when oil plunged to $60 or so per barrel as it did in the last few years the mirage that fracking really is from a financial and economic perspective was exposed meaning it costs more to get the oil than its worth. Negative energy and financial return on investment.
On the international stage, China is rapidly running out of rope as its liquid foreign reserves will deplete this year at the current rate of repatriation, something that will likely force a significant Yuan devaluation, that’s the best case and assumes no panic or a trade war. The British on the other hand took another big step towards Brexit following a vote on the subject yesterday. I always figured the Brexit referendum would be allowed to quietly fall by the wayside, but apparently not. If it goes through the odds of additional exits by European Union countries goes up dramatically with Greece, France, and Italy on the short list. The groundswell of global popular discontent grows in the aftermath of the unsustainable and shortsighted policy failures that have marred the new millennium.