Caleb Lawrence – KPIG-KPYG Radio – Share the Wealth – January 23, 2017
The major averages struggled at the open on little real news as the first week of Trumps administration gets underway. Higher interest rates are beginning to have material negative effects on real estate as one would expect. The National Multifamily Housing Council or NMHC reports that its index for apartments softened materially in January with all four sub-indexes, Market Tightness (25), Sales Volume (25), Equity Financing (33) and Debt Financing (14) remaining far below the breakeven level of 50 for the second quarter in a row.
Barely out of the gate and Trump is proving a lightning rod with respect to controversy as the lawsuits, protests and accusations fly along with the executive orders. The bottom line is the era of debt based growth is over, this isn’t opinion, selective presentation of the facts, massaging the numbers or whatever variation of fake news is preferred. It is basic math, high school math at that and it can probably be figured out with middle school math as well. Federal debt is about 20 trillion and has grown at the rate of about 9% per year over the last 40-years or so. Corporate debt has nearly tripled to 7 trillion in the last 10-years. Private household debt is 12.35 trillion and while less than the 14 odd trillion set in late 2008 the reduction is compliments of 8 million or so foreclosures and god knows how many bankruptcies since the 2007-2009 financial crisis. Currently private sector debt is composed of 1.14 trillion in auto loans with delinquency rates rapidly going south. 1.28 trillion in Student Loans who we just “ahem” learned have much higher delinquency rates than previously reported. Credit card and other debt is 1.12 trillion and growing rapidly, while mortgage debt is 8.82 trillion. None of this includes unfunded liabilities or state and local government debt, which add substantially to the outstanding balances. And the Federal Reserve wants to raise interest rates? Really the Fed has 2 choices here. Leave rates essentially unchanged and crucify savers, pension funds and those trying to live on a fixed income like your grandparents. Raise rates and crucify debtors who are legion as the data has and continues to show. Tell me again how deficits don’t matter? Because while the figures don’t lie, liars can certainly figure and the chickens are on their way home to roost, because they don’t have anywhere else to go.