Registered Investment Adviser Caleb Lawrence
The major averages opened higher, slipped late but recovered into the final hour with small gains on mixed data. Mortgage applications increased 3.3% last week as refi’s jumped 5.1% and purchase apps gained 1.4%. The 30-year jumbo loan rate slipped 4 basis points to 3.96% as per the Mortgage Bankers Association. The Fed’s Beige Book on regional economic conditions showed more of the same with moderate activity occurring and nothing really remarkable.
The international trade deficit increased fractionally to 43.7 billion in July after exports dropped .5 billion and imports slipped .4 billion. The imported oil deficit fell to just 6.8 billion.
The Institute for Supply Management Nonmanufacturing or services index fell .6 points to 55.3 in August despite most subcomponents showing small gains. Prices paid increased 2.2 points to 57.9.
With most central banks including the Federal Reserve desperate to generate inflation in the aftermath of the 2007-2009 credit bust and Great Financial Crisis. The bailouts and various stimulus programs ballooned global government debt 75% between 2007 and 2014 to $58 trillion. Aside from trying to fix the problems caused by too much debt with even more debt, central bank targeting of inflation, currently 2% in an environment of falling wages is a rather pernicious strategy to say the least. Tax Dollars primarily taken from the citizenry were used to bail out the corporations who were the principal cause of the last crisis. Adding insult to injury by fostering an environment of falling wages, heavily influenced by the Fed’s zero interest rate policies has pushed many to pursue reckless and leveraged speculation in an attempt to make up the slack. If the various asset markets tip again, what then? Sharply negative interest rates that will crucify savers and pension plans already on the ropes from a funding perspective. At the same time, unable to effectively lower credit costs the heavily indebted will be stuck, with nowhere to run or hide.