Thursday, June 1, 2017

Observations and Sample of Recent Trades (FIE:CA):

ADP reported this morning that the private sector added a seasonally adjusted 253K jobs last month. The consensus estimate was for 170K. The April number was revised down by 3K to 174K. 

ADP National Employment Report | May 2017



Gallups daily poll shows that Trump is moving up some in his job approval rating after hitting 37% on 5/21/17:  Gallup Daily: Trump Job Approval | Gallup The most recent number is a 41% approval rating in that poll. 

According to CNN, U.S. intelligence intercepted communications last year where Russians discussed having potentially derogatory information on Donald and certain aides which could be used to influence U.S. policy. The White House called the story "false and unverified" and railed against the use of anonymous sources to "smear" the President.

Trump cited in a tweet that sources told Fox and Friends, one of his favorite programs that he watches everyday, that Kushner did not ask for a private channel to Putin:

Retweeting a story planted at  Fox is not the same as Kushner or Trump denying that claim. Kushner can deny it at anytime Donald that he sought to open a back channel using Russian facilities in order to evade detection by U.S. intelligence agencies, but has not done so yet.

Investigation Turns to Kushner’s Motives in Meeting With a Putin Ally - The New York Times

Report: Investigators examine Kushner's meeting with Russian banker Sergei Gorkov - CBS News

Sergei Gorkov is no ordinary banker.

His bank, Vnesheconombank (VEB), is on the U.S. sanctions list that prohibits U.S. persons from providing financing to it.  Announcement of Treasury Sanctions on Entities Within the Financial Services and Energy Sectors of Russia, Against Arms or Related Materiel Entities, and those Undermining Ukraine's Sovereignty

VEB is viewed by many as "an off-the-books kitty" for Putin to reward his allies and to pay his spies. Why Is Putin’s ‘Private Slush Fund’ Courting Jared Kushner? | Foreign Policy

A VEB employee was convicted in the U.S. for attempting to recruit U.S. citizens as spies for Russia. U.S. charges three in alleged Russian spy ring in NYC | ReutersRussian spy Evgeny Buryakov deported from United States - ABC News

Requesting a meeting with Gorkov after meeting with the Russian Ambassador is going to be difficult to explain to non-Trump supporters.

Eric Trump denies report that Russia funded dad’s golf courses | New York Post-Eric Trump said dad’s golf courses were funded by Russia: report | New York Post

Trump administration moves to return Russian compounds in Maryland and New York - The Washington Post ("The Trump administration is moving toward handing back to Russia two diplomatic compounds near New York City and on Maryland’s Eastern Shore, that its officials were ejected from in late December as punishment for Moscow’s interference in the 2016 presidential election." Both compounds were used for spying)

Is Trump an 'adult'? Ben Sasse (R-Neb.) wont' say - POLITICO (Sasse is a Republican senator from Nebraska so arguably he may not be a "Liptard" but only arguably so in Trump Nation)


Trump does not believe in exercise since that drains his finite lifetime supply of energy. If Donald Trump Were Actually a Battery - The New Yorker

And, I have been following the same path for many years now without even knowing why it was healthy for me to conserve my precious bodily fluids. Dr. Strangelove - Precious Bodily Fluids - YouTubeDr. Strangelove - Water Fluoridation - YouTube

At the recent G-7, all of the leaders, except for Trump, had to walk about 700 feet for a photo op.

Trump rode a golf cart which is interesting since his Doctor referred to him as the healthiest man who ever served as President.

With Italy No Longer in U.S. Focus, Russia Swoops to Fill the Void - The New York Times

Germany's Merkel Signals Deepening Rift With U.S. Under Trump - NBC News

Well, Donald took note of Merkel's statement about the U.S. no longer being a reliable ally for Europe and tried his best to make amends with the Germans:

Germans wonder why Trump keeps lashing out at them and not Russia or Saudi Arabia - The Washington Post (not hard to figure out/no thinking required)

Darrell Delamaide, who is apparently paid to write opinion columns for Marketwatch, gave this dust up between the U.S. and Germany some really deep thought. He concluded that Trump had exposed in his tweets Germany's hidden agenda to dominate Europe. Trump provokes Merkel to reveal her true goal of dominating Europe - MarketWatch 

Yes, of course, anyone can see the real hidden German agenda that Our Dear Leader has now exposed on Twitter. It is only a question of time before our new best Friend Russia will join the U.S. once again to stop Germany from conquering all of Europe. I get it. Just brilliant Darrell. Your profile picture seems to a bit red in the face. I am not the one to say go easy on the refreshments.  

European leaders did not particularly like the Imperial Donald and do not seem willing to dance to his tune.

This is a statement released by Hope Hicks on behalf of Trump earlier this week:

"President Trump has a magnetic personality and exudes positive energy, which is infectious to those around him. He has an unparalleled ability to communicate with people, whether he is speaking to a room of three or an arena of 30,000. He has built great relationships throughout his life and treats everyone with respect. He is brilliant with a great sense of humor … and an amazing ability to make people feel special and aspire to be more than even they thought possible." 

I may borrow some of Hope's language when I write my own Wikepedia biography: I have started to write it in fact:  "South Gent has a magnetic personality and exudes positive energy. He is brilliant, Albert Einstein reincarnated in fact. Despite his brilliance, SG did not invent the word Covfefe. SG is a Really, Really Amazing Person that treats women and everyone else with respect, tells the best jokes in the history of the universe, and inspires everyone to be almost as great as he is. "  

Thomas Friedman summarized the current status of our Nation somewhat facetiously (maybe not) as the United American Emirates: 

"We have an emir. His name is Donald. We have a crown prince. His name is Jared. We have a crown princess. Her name is Ivanka. We have a consultative council (Congress) that rubber-stamps whatever the emir wants. And like any good monarchy, our ruling family sees no conflict of interest between its personal businesses and those of the state." Trump’s United American Emirate - The New York Times

Friedman's calls Donald's foreign policy the Trump Doctrine which I believe will become better known to future historians than even the Monroe Doctrine or George Keenan's Containment Doctrine which apparently no longer applies to our new best friend Russia and our new best buddy Vlad:

"The Trump doctrine is very simple: There are just four threats in the world: terrorists who will kill us, immigrants who will rape us or take our jobs, importers and exporters who will take our industries — and North Korea. Threats to democracy, free trade, the environment and human rights are no longer on our menu." 

Who made this recent statement in response to Russia's meddling in the election? 

“The people who lost the elections do not at all want to admit that they truly lost and that the one who won turned out to be closer to the people, to understand better what the people, the simple voters wanted. Nobody wants to admit this,” he claimed. “They want to explain this to themselves and to prove to others that their policy was right, they did everything well but someone else cheated and swindled them. But that’s not the case. They simply lost and they must admit that."

Putin: Russian meddling 'fiction' invented by Democrats - ABC News

Donald has someone who agrees with him or maybe it is Donald agreeing with what Putin says.

In a rebranding that stale name United States of America, maybe TrumpLand will sound more appealing to Donald.



How Jared Kushner built a luxury skyscraper using loans meant for job-starved areas - The Washington Post

Jared Kushner’s Other Real Estate Empire - The New York Times

Tenants Of "Kushnerville" Have Mass Complaints - CBSN Live Video - CBS News

Jared Kushner’s Rise: NY Magazine



I was thinking about making champagne popsicles to honor our soldiers, but thought that some might view it as gaudy. I wonder if that activity has occurred to anyone else in the U.S.

Men probing Ivanka Trump brands in China arrested, missing: CNBC

Bad idea to embarrass the Princess, especially in China, or even worse in our Second Best New Friend Saudi Arabia.


How does a Muslim man divorce his wife in India, usually with no financial support?

Just say the word Talaq, which means divorce in Arabic, three times. Muslim Women in India Challenge ‘Instant Divorce’ Law - The New York Times

The man who stabbed three men on that Portland train, who responded to his hate filled speech directed at two teenagers, stated that he hoped that those three liberals died. He is a Trump supporter, of course, and will apparently be unable to attend the upcoming Trump rally in Portland:

Portland pro-Trump rally organizer: "I can't control everybody" - CBS News ("That's what liberalism gets you" and "You call it terrorism. I call it patriotism. You hear me? Die!" One of the intellectuals of the Alt-Right Movement no doubt).

In the U.S. now, a liberal (more affectionally called a LipTard) includes true conservatives, moderates and liberals. All liberals are retarded and read Donald's tweets either for their entertainment value or to become more depressed about nation's future.  


1.  Intermediate Term Bond/CD Ladder Basket Strategy:

A. Bought 2 Sierra Pacific Power 2.6% General Mortgage Bonds Maturing on 5/1/26

Issuer: Sierra Pacific Power is an indirect subsidiary of Berkshire Hathaway Energy, a consolidated subsidiary of Berkshire Hathaway. 
Finra Page: Bond Detail (prospectus not linked)
Credit Ratings: 
Moodys at A2

YTM at Total Cost (97.140) = 2.965%
Current Yield =  2.68%


The parent of Sierra Power and Nevada Power is a company called NV Energy which is an indirect wholly owned subsidiary of BHE. (page 18):  

B. Bought 1 Consolidated Edison 2.9% Senior Unsecured Bond Maturing on 12/1/26-A Roth IRA Account:

Issuer: Consolidated Edison Inc. (ED)

Finra Page: Bond Detail (prospectus linked)
Credit Ratings: (ratings shown in the snapshot are believed to be wrong)
Moody's at A3
Moody's Affirms ConEd's A3 Rating; Outlook Stable
S & P at BBB+
Fitch at BBB+ Fitch Affirms ConEd & Subsidiaries at 'BBB+'; Outlook Stable

Con Edison - Investor Relations - Credit Ratings

YTM at Total Cost (98.253) = 3.112%

Current Yield = 2.95%

Con Edison Reports 2017 First Quarter Earnings

2016 Annual Report (debt discussed starting at page 86)
ED Analyst Estimates - Consolidated Edison Inc

C. Bought 2 Pepsico 2.75% Senior Unsecured Bonds Maturing on 4/30/25:

Issuer: PEP Stock Price - PepsiCo Inc.

Finra Page: Bond Detail (prospectus not linked)
Credit Ratings:
Moody's at A1
Moody's rates PepsiCo's new notes at A1
S & P at A
Fitch at A
Fitch Rates PepsiCo's $4.5 billion Notes Issuance 'A'; Outlook Stable

2017 First Quarter Results

2016 Annual Report
PEP SEC Filings
PEP Analyst Estimates

YTM at Total Cost (99.189) = 2.864%

Current Yield = 2.78%

D. Bought 1 PPL 2.5% First Mortgage Bond Maturing on 9/1/22:

Issuer:  PPL Corp.

Finra Page: Bond Detail (prospectus linked)
Credit Ratings:
Moody's at A1
S & P at A

YTM at Total Cost (99.449) = 2.611%

Current Yield = 2.51%

2017 First Quarter Report

2016 Annual Report


Over the past several days, I have profitably sold some low yielding intermediate term bonds and could find nothing in the Bond Land that I wanted to buy. The proceeds went back into cash or short term CDs. Generally, when I hit the point where I find buying opportunities unattractive and/or non-existent, Left Brain has come to a conclusion that it is better to sell than to buy at current prices.


2. Continued to Pare Canadian Reset Equity Preferred Stock Allocation:

A. Sold 100 FTSPRI at C$15.27:

Profit Snapshot: +C$479

Item # 6. Bough 100 FTSPRI AT C$10.46Update For Exchange Traded Bond And Preferred Stock Basket Strategy As Of 3/28/16 - South Gent | Seeking Alpha

Quote: FTS.PR.I Stock Price - Fortis Inc. Pfd. Series I Stock Quote (Canada: Toronto) 

The Series I pays cumulative dividends at the 3 month Canadian Treasury Bill plus 1.45%. Par value is $25. Fortis has the option to redeem at par value plus accrued dividend on June 1, 2020 and on June 1 every five years thereafter.

The three month Canadian Treasury Bill has been stuck near .5% for awhile: Canada 3-Month Bond Yield -

B. Sold 100 PPL.PR.C (C$1 Commission):

Profit Snapshot: C$496

Item # 4. Bought 100 PPLPRC at C$16.66Update For Exchange Traded Bonds And Preferred Stocks Basket Strategy As Of 5/20/16 - South Gent | Seeking Alpha

Quote: PPL.PR.C Stock Price - Pembina Pipeline Corp. Cum. Pfd. Series 3  (Canada: Toronto)

This Pembina Pipeline cumulative preferred stock is currently paying a C$1.175 annual dividend in quarterly installments that translates into a 4.7% coupon on a C$25 par value. That rate is in effect to 3/1/19 whereupon the coupon resets at a 2.6% spread to the five year Canadian government bond yield.

Canada 5 Year Government Bond  Yield

3. Long Term Bond Strategy: Slightly Underweighted as of 6/1/17 (several Tennessee Municipal bond purchases have not yet been discussed):

A. Bought 5 Knox County, Tennessee 3% General Obligation Bonds Maturing on  6/1/35:

EMMA Page:

Credit Ratings:
Moody's at Aa1
S & P at AA+

YTM at Total Cost (95.819) = 3.309%

Current Tax Free Yield = 3.13%

Tax Equivalent Yield Calculator

Knox County, Tennessee  includes Knoxville, Tn., home to the University of Tennessee.

Knox County - Google Maps



Optional Redemption at Par on or after 6/1/25:

Sourced: OFFICIAL STATEMENT  (see description of county at pages B-18 et. seq.)

If redeemed within ten years after purchase, the bond becomes part of my intermediate term bond basket strategy.

I am funding internally the purchase of this bond from the following securities maturing in July with some money leftover given the discount to par value:

1 Merchants Bank .8% CD 7/19/17

3 Bank of China .95% CDs 7/19/17
1 Guildford Savings .65% CD 7/24/17
1 of 2 Bank of China .9% CDs 7/27/17

Proceeds from some maturing CDs are being using to buy newly issued short term CDs.

5. Canadian Income Strategy:

A. Bought 100 of the ETF FIE:CA at C$7.20 (C$1 Commission):

B. Bought 100 of the ETF FIE:CA at C$7:

I eliminated a 1700 share position earlier this year with the last 200 share disposition discussed here: Item # 4 A. Sold 200 FIE:CA at C$7.54-Stocks, Bonds & Politics: Observations and Sample of Recent Trades: 3/10/17 (GMTA, UL, FIE:CA, UL, PSAPRE )(total realized gain on 1700 shares was for USD557.32.

I am now back up to 200 shares.

Quote: FIE Fund - iShares Canadian Financial Monthly Income ETF (Toronto)

I discussed selling the 1500 share lot in a 1/5/17 comment.

This ETF owns Canadian banks, insurance companies and REITs along with two Canadian ETFs that invest in Canadian bonds and preferred stocks respectively. Dividends are paid monthly at C$.04 per share. At a total cost of C$7.2, that distribution level produces about a 6.67% yield.

Top Holdings as of Date of Purchase (5/3/17)

iShares Canadian Financial Monthly Income ETF | FIE

Dividends at paid monthly at a current rate of C$.04 per share. At a total cost of C$7 per share, the dividend yield would be about 6.86%.

The Canadian banks have been trending down recently based primarily on concerns about a bubble in Canadian home prices. Those concerns were exacerbated after a subprime lender got into financial difficulties. Canada's Subprime Lenders Collapse-Seeking Alpha The bubble in U.S. housing prices started to pop when defaults started to surge in the subprime lending market and what is commonly referred to as Alt-A loans (derisively called "liar loans"). The improvident mortgage lending by U.S. subprime lenders contributed to the price bubble, where home prices were disconnected from a borrower's ability to service the loan.

While Canada measures debt to disposable income somewhat differently than the U.S., Canadian household debt to disposable income was recently reported at 169.41. Canada Households Debt To Disposable Income | 1990-2017 | Data | ChartReconciling Canadian-U.S. measures of household disposable income and household debt

The U.S. ratio topped out near 132+% back in 2007:

U.S. Household Liability Level to Disposable Personal Income-St. Louis Fed (debt payments to disposable income is also important and can make higher debt levels manageable when interest costs are abnormally low as now)

This issue is more complex than my summary above. In a February 2015 post, I discussed this potential problem for Canadian banks in slightly more detail. Dividend Growth And Large Cap Valuation Strategies: Bought Toronto Dominion Bank (TD) - South Gent | Seeking Alpha

6.  Short Term Bond/CD Ladder Basket Strategy:

A. Added 2 USTs .625% Maturing on 11/30/17:

YTM at Total Cost (no commission) = 1.025%

I now own 6.

Disclaimer: I am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep". Stocks, Bonds & Politics: ERROR CREEP and the INVESTING PROCESS Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals and situational risks. I can only make that kind of assessment for myself and family members.


  1. OHI: Buyers did emerge today after a spike down.

    $31.38 +0.06 (+0.19%
    Day's Range $30.46 - $31.4

    The intra-day bottom was hit near 10:45 A.M E.S.T., and the stock worked its way higher thereafter. Volume accelerated to 4,460,056 shares for the day, compared to a per day average 3 month volume of 2,053,654.

    Looking at a one day chart, volume was heavier in the morning and spiked near the intra-day low point. It looks like 167K shares traded at the low point.

    I would not want to see a rise tomorrow that continues the uptrend that started near noon today.


    The anecdotal information contained in the Beige Report, released yesterday, reflected that most districts cited labor "shortages across a broadening range of occupations and regions."

    "Despite supply constraints impeding the ability of firms to attract and retain qualified workers, most Districts reported that employment continued to grow at a modest to moderate pace. Similarly, most firms across the Districts noted little change to the recent trend of modest to moderate wage growth"

    I suspect that wage growth will have to pick up to keeping workers from quitting and accepting higher wages from another employer. The Beige report mentioned one manufacturer in Chicago had to raise wages 10% to keep workers from leaving.

    However, "many" districts reported a softening in consumer. Retail contacts responded in mid-May "that year-over-year comparable-store sales ranged from low-single-digit declines to low-single-digit gains. Furniture sales were said to have been unexpectedly soft. Other retailers attributed some of the weakness in sales to decreased customer traffic in brick-and-mortar stores. While some contacts said the outlook for the rest of 2017 is a bit uncertain, most continued to expect that sales will end up growing by low single-digit percentages over the year."

    Since the U.S. is a consumer led economy, continued softness in consumer spending will be a major negative for the economy. Those spending numbers need to be watched closely in the weeks and months ahead.

    1. I have a lot of brain malfunctions that are caused by the word "not". In the OHI section, last sentence, strike the word "not" so that the sentence reads as follows:

      " I would want to see a rise tomorrow that continues the uptrend that started near noon today."

  2. WP Article: In an article published this evening, the WP points out that the Russian state owned bank Vnesheconombank and Kushner have different explanations why Kushner met with Sergey Gorkov who runs that bank for Vlad:

    "The bank maintained this week that the session was held as part of a new business strategy and was conducted with Kushner in his role as the head of his family’s real estate business. The White House says the meeting was unrelated to business and was one of many diplomatic encounters the soon-to-be presidential adviser was holding"

    The WH will not say when the meeting took place. The WP has found flight logs that a VEB company jet flew from Moscow to the U.S. on 12/13/16.

    1. The WP story can be viewed by non-subscribers at MSN.

      Bezos bought the WP for $250M in cash back in 2013.

  3. South Gent,

    Re. OHI the dividend of 8.05% is attractive, but the chart looks terrible. Merrill Lynch has a TP of $28.5 (Underperform), Jefferies' TP is $33 (Hold), and Stifel Nicolaus' TP is $35 (Buy). I would think the high dependency on government payment (88% of revenue from Medicare and Medicaid) will be the biggest negative in the current political environment.

  4. Y: I am cautious with OHI, buying and selling within pre-set parameters.

    The chart is awful, but highlights potential entry and exit points where I may be able to harvest both a profit and the dividend payments.

    I view OHI as a trade only.

    I do not view that REIT as a blue chip like Brad Thomas and other writers at SeekingAlpha.

    E.G. "Omega Healthcare Is A Blue Chip Model Of Predictability"

    I was leaving comments to SA articles when Brad published that article. I noted "that the federal government has not exactly planned too far ahead to fund programs like Medicare for the baby boom generation and the government's debt accumulation has been rapidly rising since passing the $1 trillion mark around 1980." I also discussed some past reimbursement changes that caused major heartburns and one heart attack to nursing home operators and the REITs that lease to them.

    The government reimbursement issues do not appear problematic short term. The long trend based on the government's growing fiscal problems will be toward more restrictive reimbursement rules and individual coverage under Medicaid.

  5. JOBs Report: The Bond Ghouls got what they wanted in today's jobs report.

    The 10 year treasury immediately spiked down in yield and is now near 2.17%:

    According to BLS, 138,000 jobs were created in May. The consensus forecast was for 185K. The March and April numbers were revised down by a combined 66K.

    Marketwatch Article:

    "The change in total nonfarm payroll employment for March was revised down from +79,000 to +50,000, and the change for April was revised down from +211,000 to +174,000."

    BLS Release:

    The Bond Ghouls did not believe the ADP jobs report yesterday, as interest rates barely moved in response.

    I do believe that Trump voters remain optimistic that the GOP will deliver better economic conditions through lower taxes and fewer regulations. Must stock investors are Trump voters and have been ebullient since the election.

    As the saying goes, the rubber will meet the road and their optimism may be drenched with cold hard facts that even they can no longer ignore. Watch consumer spending closely.

    1. Hello southgent,

      I had read your reply to me about inversion of the yield curve.

      I wondered if you could explain the chart which you referenced the 10 year treasury minus the two year period

      I am having trouble understanding the ratio. It seems that if the two-year goes above the 10 , that the chart would show a minus number, so my question is how you have chosen to use this basic ratio to illustrate inversion of the yield curve

      Thank you

    2. Sam: The 10 year treasury yield minus the two year treasury yield is the most commonly used ratio.

      You could also use other short term rates compared to the ten year treasury.

      Move the Left Cursor All the Way to the Left:

      "10-Year Treasury Constant Maturity Minus 3-Month Treasury Constant Maturity"

      Once you expand that chart to include data going back to 1984, you see the yield inversions occurring before a recession which is indicated in the chart by a gray shaded area.

      A minus number would indicate that the 3 month yield is greater than the 10 year yield which is what inversion means. Inversion refers to shorter term yields exceeding longer term ones rather than a normal upward slopping yield curve where the bond investor receives a higher yield going further out in time. When the yield curve inverts, the bond investor receives a greater yield with the short term instrument like a 3 or 6 month T Bill compared to a 10 year treasury.

    3. 1/3/2017
      10 YR 2.45% Minus
      2 YR 1.22%
      = 1.23%

      10 YR 2.21% Minus
      2 YR 1.28%
      = .93%

      Generally, the inversion is likely to occur when the FED has been increasing the FF rate and the economy is slowing for that reason and others to such an extent that a recession within a year or so becomes likely.

      In that scenario, bond investors are buying high quality paper driving yields down in a flight to safety, which contributes to a yield curve contraction and then an inversion until the FED starts to lower the FF rate again, causing short term rates to fall, and economic conditions improve coming out of a recession.

      Looking at a FF chart going back to 1954, I can see where the FED keeps raising the FF rate until a recession occurs and then it lowers the rate:

      Effective Federal Funds Rate

  6. Good day for bonds with the longer maturities doing better:

    The longest duration treasury ETF is ZROZ:
    PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF

    $117.26 +$2.01 +1.74%


    iShares 20+ Year Treasury Bond ETF
    $125.62 +1.47 +1.18%


    iShares 7-10 Year Treasury Bond ETF
    $107.57 +$ 0.47 +0.44%

    The 10 year minus 2 year treasury yield, fell to .87% from .93% yesterday. The 2 year yield remained at 1.28% but the 10 year yield declined .06% which narrowed the interest rate spread between those two maturities.

    The spread between the 3 month treasury bill and the 2 year treasury note is only .3%.

    The odds that the FED will raise the FF rate by .25% on 6/14/17 is at 94.6%:

    Call that 100%.

    The odds of two more .25% increases is at 49.3% through December. After the FED raises in June, the December 2017 meeting would be the most likely one for another .25% hike.

  7. South Gent,

    "Don't fight the Fed." It seems that the Fed is in a steady hand and determined to carry out a mission and the investors are cautiously optimistic after being burned twice since 2000, which would be an ideal environment for the market to grind higher (a period of multiple expansion from S&P 2100 to S&P 2439) until something big and bad happens.

  8. There are a few interesting data points in Barron's cover page article titled "The Surprising Threat to the American Economy":

    "year-over-year growth in personal spending on goods routinely surpassed 11% during the economic expansions of the 1960s and 1970s. But by the 1990s, that figure never got above 9%, and during the 2002-07 expansion it peaked at just 7.7%. In the current expansion, spending growth on goods got as high as 5.9% in early 2015. It was recently at 3.6%."

    The nominal and inflation adjusted personal consumption expenditure numbers over the past several months have been anemic.

    First 4 months 2017: Percent change from preceding month
    Current dollars 0.1 0.1 0.3 0.4
    Chained (2009) dollars -0.3 -0.1 0.5 0.2

    "Just 20% of the income growth during the early 1950s expansion went to the top 10% richest households, but by the current expansion their share grew to 80%"

    1% of todays U.S. wealth is held by the bottom 50%

    " average debt a graduating college senior is saddled with swelled to $35,000 in 2015 from less than $10,000 in 1993"

    There is also debt incurred by parents to send their children to college.

    Due to increases in tuition costs over the years, student debt now makes up 11% of household debt compared to 5% in 2008.

    As I have discussed in several recent posts, credit card delinquencies are increasing as the unemployment rate hits an 16 year low.

    Rent costs are rising faster than wages and CPI which has to crimp spending particularly for millennials with student debt that live in apartments. That data can be found in Table 2 of the BLS monthly CPI report. The April Y-O-Y increase in rents was 3.8%:

    Household debt levels recently surpassed the 2007 peak. Increases in debt servicing costs, which will occur, will constantly place a strain of many household's discretionary disposable income.

    The GOP led U.S. government wants to significantly cut back on transfer payments directed to low income households which will lower their spending. The number of financially distressed households currently is a very large portion of the total.

  9. South Gent,

    I share your concern on "wealth inequality" in America and we will need our brightest to help solve that problem.

    I think it is also important to teach people how and encourage them to build wealth because wealth begets wealth. It is harder to build wealth with just salaried jobs.

    1. The rural white culture is an impediment to individuals breaking out of the poverty and disability cycle.

      I will be discussing that issue in the next post.

      For those of us who are familiar with that culture, and I am, J.D. Vance's book Hillbilly Elegy was simply a reminder of how difficult it is to break out of that cycle.

      Reviewed here:

      If the government cuts off transfer payments to those households, it will have an adverse impact on the real economy which the GOP never considers, having posited the conclusion that the wealth benefits will trickle down to them and the white high school educated people in rural areas actually believe that will happen. It will not happen to any meaningful extent for them and the GOP's plans will be a net negative for them.

      What will happen is that the cutbacks proposed by Trump will increase the homeless rate and decrease the overall level of consumer spending.

      The rural areas that voted for Trump have a heavy reliance on the programs that he wants to slash.

      SS disability payments are frequently multi-generational in rural America where three and even four generations receive disability payments. There are multiple causes that contribute to drug dependence (legal and illegal) and mental illnesses in those areas, and those causes are not easily changed. It takes an unusual person to break out of the cycle that is described in the WP article.

      WP Article Focuses On One Such Family:

      "As the number of working-age Americans receiving disability rose from 7.7 million in 1996 to 13 million in 2015, so did the number of households with multiple family members on disability, climbing from an estimated 525,000 in 2000 to an estimated 850,000 in 2015, according to a Post analysis of census data. The analysis is probably an undercount."

      Putting aside what is right or wrong morally, and the likely huge negative impact on budget deficits from the GOP's plan, the economic impact on the consumer led economy will be significant when tax cuts are given to corporations and high net worth individuals and social programs for the poor (and even the middle class) are slashed.

      Corporations will use the additional funds to buy back stock and to increase management compensation and dividends.

      High net worth individuals will use a lot of their tax savings to invest in financial assets.

      The poor will spend their transfer payments in the real economy as soon as those payments are received by them.

  10. I have published a new post: