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Caleb Lawrence – KPIG-KPYG Radio – Share the Wealth – February 17, 2017

Despite the growing train wreck that is the Trump administration and its most recent stop, yesterday’s news conference that would have made a great Twilight Zone episode the markets continue to hit new highs. Since Monday the Standard and Poors 500 Index has gained 23 points or 1% while the NASDAQ has advanced 69 points or 1.2%, go figure.

The New York Fed latest household debt survey shows that it surged 1.8% in the 4th quarter to 12.58 trillion, the largest quarterly increase since Q-4 2013. This pushed total household debt to just .8% below the 12.68 trillion Dollar late 2008 peak. Debt increased across the board, mortgages +1.6%, credit cards +4.3%, auto loans +1.9% and student loans +2.4%. Keynesian economists like Fed chair Janet Yellen I’m sure will be pleased and view this as prima facie evidence of the success of their economic and monetary policies along with the associated asset bubbles just like early 2007. Let’s hope it’s different this time. On the plus side bankruptcy and foreclosure notations hit an 18-year low. Delinquency data was essentially unchanged with just 4.8% of outstanding debt delinquent at the end of 2016. Debt was the primary cause of the 2007-2009 financial crisis and it will be the primary cause of the next crisis as well. This time round it won’t be essentially sub-prime debt but all sorts, student, auto, credit card, mortgage, corporate, state and local government etc., etc. Since the last bust student loan debt has nearly tripled to 1.3 trillion. Auto loan balances are 1.2 trillion and counting. It recently came to light that student loan delinquency rates were far higher than previously reported and the latest data shows that delinquency rates for auto loans is jumping particularly at the sub-prime end.
The parade of data seemingly disconnected from the everything is great narrative continues. Caterpillar reports a 50th consecutive month of declining sales in January. This of course helped to send its stock price soaring since the beginning of 2016 as earnings went ever father south. As an aside the 2007-2009 financial crisis and recession saw just 19 consecutive months of falling sales.

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