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Registered Investment Adviser Caleb Lawrence

The major averages opened sharply lower following the latest North Korean missile launch but recovered late to enter the final hour about even.

The Case/Schiller home price index advanced .4% in June and 5.7% over the last 12 months to push the national index further into record high territory. That said the 10 and 20 city indexes still trail by a handful of percent. Denver is the recovery poster child with prices 43.4% above the August 2006 high followed by Boston 10.8% and San Francisco 8.9% greater than their respective peaks.

Considerable debate in the post crisis period since 2007 has centered around why it is that wages, employment, and inflation haven’t followed the established Phillips Curve, or in plain English low unemployment drives higher wages and inflation. A relationship used by the Fed for decades to set monetary and interest rate policy. A recent study by the Philadelphia Fed showed that the Phillips Curve has been broken for at least 30-years dating to the mid-80’s. The latest attempt by the Fed to understand why inflation can’t gain traction despite trillions in stimulus, quantitative easing, and the application of voodoo economics. Could it be that credit busts are inherently deflationary ala the Great Depression and Japan?

A recent piece on the Sovereign Man Blog looked at Bank of America annual report data and found that the banks customers had more on deposit per household in 1997 at $13,067 than they did in 2016 at $12,870 and that’s not adjusting for inflation which would have painted a much worse picture as a Dollar in 2016 purchases much less than a Dollar did in 1997.


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