The Market Bull – December 13, 2018.

The major averages closed mixed on little real news. The trade war seems to have moved to the back burner at least for now despite the high-profile arrest of Huawei’s CFO in Canada.

Import prices plunged 1.6% in November on a double-digit decline in petroleum prices. Export prices fell .9%. Of note both the Consumer and Producer Prices Indexes were about neutral despite the aforementioned double-digit decline in energy prices for the month.

So, color me a little skeptical on those two data points. Regardless I expect price data to continue falling until the tariffs kick into high gear when the current 90-day stay of execution expires.

Denver joins the ranks of formerly hot real estate markets to report a large decline in sales and a jump in inventory after the November data showed sales down 24% from a year ago and inventory up 47% on the same basis.

When a business sells its product below cost and debts steadily rise as a result. Initially they are labeled “zombie” companies and there’s no shortage of them at present, I believe 17% of the Standard and Poors 500 Index falls into this category if memory serves. Tight or fracked energy falls in this group despite substantial reductions in operating costs as fracked wells have alarming depletion rates approaching 90% in 3-years. The combination of excessive debt levels and rising interest rates is a toxic combination. Add a 30 odd percent decline in oil prices of late and companies begin to throw in the towel. Parker Drilling’s bankruptcy filing serves to underscore the risks faced by the tight energy complex. The company listed assets of 691 million and liabilities of 937 million. Of that 585 million are unsecured bonds, aka covenant lite. A product and term that is all but certain to dominate the narrative of the looming financial crisis.

Standard and Poors 500 Index closed at: 2,650.54 down .53

NASDAQ finished at: 7,070.33 down 27.98

Gold ended trading at: $1,246.90 down 3.10

This is Caleb Lawrence Registered Investment Adviser I can be reached directly 831-334-5318 or stop by my office 5321 Scotts Valley Drive in the Scotts Valley Plaza, Suite 202, Scotts Valley, Ca, 95066.

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