Registered Investment Adviser Caleb Lawrence
The major averages enter the final hour with modest gains on little real news. The Chicago Fed National Activity Index increased to .34 in April, the 3-month moving average doubled to .46 indicating more moderate economic growth. This series covers about 85% of total economic activity and is quite broad based.
Credit card delinquencies remain relatively modest in total. As problems often start at the periphery and work their way back to the core, it’s worth noting that the smaller banks that chased less than prime borrowers aggressively with credit cards of late are now seeing delinquency rates exceeding that of the previous crisis after rates hit 5.9% in the first quarter. Charge off rates have also spiked since late 2016 to reach 8% last quarter, though they remain a little below the 8.78% crisis peak seen in 2009.
Another funny money metric comes to us today in the form of an analysis of last year’s IPO’s or Initial Public Offerings that showed some 80% had negative earnings right out of the gate. This has happened 4 times since 1998, twice just before the Dot-Com bust, once in 2014 with no negative consequences and of course last year. That said negative earnings IPO’s have run at a very high level in the post Dot-Com era in general, and especially in the 2013-2017 period.