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Two Debt Warnings
The Market Bull 2018

00:00 / 2:34

Choppy early trade sends the major averages into the final hour about even. Since Monday the Standard and Poors 500 Index is down 9 points or .3%, while the NASDAQ is up 96 points or 1.2%. Trumps much lauded trade deal with Mexico has died a quiet death, due to a lack of Republican support. Elon Musk’s very poorly considered tweets regarding taking Tesla private at $420 per share have come back to haunt him. After the SEC or Securities and Exchange Commission filed fraud charges and also seeks to bar him from ever being an officer or director of a public company again.

Personal Income gained .3% in August, slightly below expectations, strength was seen in rental, wage, and salary income. On a real or inflation adjusted year ago basis income is up a respectable 2.9%. The Personal Savings rate slipped to 6.7%. Personal Spending advanced .2% on strength in other durable goods, clothing, and furnishings. The inflation measuring PCE Deflator increased .1% in August on a big jump in gasoline and energy prices. On a year ago basis this series is up 2.2%, slightly less than last month.

We have not one but two warnings about unsustainable debt bubbles. the first comes from former Treasury Chairwoman Janet Yellen on the dangers of rising interest rates and excessive debt particularly the high-yield or junk variety, and also leveraged debt. Funnily enough, when she was in office, none of this was a problem, just like her predecessors. Waring number 2 comes from the Bank of International Settlements chief economist Claudio Borio who warned about being on the verge of a similar relapse of the global crash 10-years ago. He also went on to warn about a lack of tools to correct the situation. All I can say is let’s hope it’s different this time, and in a good way.

This is Caleb Lawrence Registered Investment Adviser Scotts Valley Drive and Willis Road in the Scotts Valley Plaza, Suite 202 or call me toll free at 888-RICH PIG / 888-742-4744.

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