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Registered Investment Adviser Caleb Lawrence

The major averages fell sharply in early trade after yesterday’s bank stress test inspired buying gave way to further selling. Final first quarter Gross Domestic Product or GDP was revised up to 1.4% considerably less than the 2.1% recorded in the 4th quarter of 2016. That said the last 4-quarters have seen a respectable average of 2.1% GDP growth.

Were it not for a nearly 29% gain in commercial vegetable prices, that looks like a statistical anomaly, agricultural prices would have fallen in April instead of posting a 2% advance as nearly every other category showed price declines.

Reis reports that the office vacancy rate was unchanged in the 2nd quarter at 16%, asking rents advanced .4% during the period while net absorption was positive it came in at a 3-year low.

Fresh off the banks stress test that saw all but one pass in fine form as per the Federal Reserve. The banks promptly announced significant share buyback programs and dividend increases as well that exceeded analysts’ expectations. The timing of all this is somewhat surprising especially in light of Fed chairwomen Janet Yellen’s recent comments about how she doubts she’ll see another financial crisis in her lifetime. Given the debt reset in the post 2007-2009 financial crisis period with data from the Institute of International Finance showing that global debt reached $217 trillion in the first quarter of this year, or 327% of GDP. A number of other metrics relating to valuations, margin debt, Commercial and Industrial lending, non-mortgage consumer debt levels and others here in the USA. You have to wonder if Janet Yellen’s “no crisis in my lifetime” statement is on a par with Ben Bernanke’s now infamous March 2007 statement on sub-prime “the problems in the subprime market seems likely to be contained”. It always amazed me that the Federal Reserve, most mainstream economists and assorted pundits failed to see it coming in 2007 and seem equally blind today.

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