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Registered Investment Adviser Caleb Lawrence 

The major averages enter the final hour about even after opening lower on little real news. The August Producer Price Index or PPI advanced .2% on gains in energy prices. On a year ago basis the PPI is up 2.4% moving firmly above the Fed’s desired 2% target largely driven by energy prices.

Mortgage activity jumped 9.9% last week as per the Mortgage Bankers Association or MBA. Refi activity advanced 8.9% while purchase apps gained 10.9%. The 30-year contract rate for a jumbo loan increased slightly to 4%.

Two of the real mysteries of the last 20-years or so is what happened to productivity and income growth. The Census Bureau released its 2016 report on Income, Poverty, and Health Insurance earlier today. The good news is that real or inflation adjusted median household income advanced 3.2% to $59,039 a second consecutive year of growth and has now passed the previous high set in 1999 at $58,665 a paltry $22 average gain for each of the last 17-years. Moving the time series back to the early 70’s shows that all of the gains have accrued to women who saw their median household earnings advance from $30,000 per year to $41,554 though they remain below that of men. Another item of note changes to the methodology used to calculate the series produced sharp gains in income over the last few years. The report went on to note a sharp reduction in poverty over the last few years but poverty levels haven’t really changed in some 45-years, though more people today have healthcare coverage. Also of note most of the income gains in the report went to the top 25% of wage earners.

The state of Kansas 5-year experiment with trickledown economics, aka tax cuts stimulate the economy and pay for themselves based on the now thoroughly discredited work of Arthur Laffer and the Laffer Curve Theory has ended in abject failure. State republicans quietly undid the tax cuts earlier this year concluding that they had “wrecked” the state economy and provided no material benefits. Despite yet another failed example of the Laffer Curve Theory, Treasury Secretary Steven Mnuchin is making the rounds promising more tax cuts, particularly for the wealthy to promote growth, maybe a better description would be to promote debt as that and war seem to be Washington’s only real strong suits anymore.

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