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Share the Wealth – May 24, 2018

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Registered Investment Adviser Caleb Lawrence 

Despite disappointing data the major averages managed to recover most of their early losses entering the final hour about even. The recent collapse in discussions involving trade and denuclearizing the Korean peninsula spooked the markets early.

Higher interest rates continue to bite with existing home sales missing expectations, after falling 2.5% to 5.46 million units annualized in April. Month’s supply jumped to a still very low 4, while the median price gained 3.24% to $257,900. On a year ago basis existing home prices have increased 5.3%.

The Kansas City fed regional manufacturing index advanced 3 points to 29 in May on strength in production and the average workweek. Price data remains high and increased again.

Recent notable increases in less than prime credit delinquencies and foreclosures in certain markets has apparently got the attention of the FDIC or Federal Deposit Insurance Corporation. While they noted record bank profits in their first quarter banking report and that its problem bank list fell to just 92. It noted that the record profits got a big boost from Trump’s tax cuts and interestingly warned the banks not to exacerbate future financial crisis, while admonishing them to manage their risks effectively. Which brings me to the 4-fold increase in assets held by the banks on the problem list to 60-billion Dollars. The actual number, 60 billion isn’t that big a deal. The real problem is that the last time problem bank assets jumped like this was late 2008 as the last crisis hit its stride. Given the record or near record levels of debt nearly everywhere you look and the recent sharp rise in interest rates, I can’t say as I’m surprised.


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