Camelot Portfolios Talking Points

Feds take is on the Current Economic Conditions

Every 45 days or so, the Federal Reserve’s governors release anecdotal information on each district. The beige book is mainly qualitative in nature, and data is gathered through interviews with regional businesses and economists. The book highlights economic activity, wages, prices and business sector information.

Nationally, economic activity expanded at a “moderate” pace during the summer season (Federal Reserve). Increases in tourism, residential and commercial construction, and loan demand across each district contributed to the national economic output. Governors were stressed about the decrease in auto production and increased auto inventory (Federal Reserve). This concern is particularly highlighted by the Federal Reserve Bank of Cleveland over the above-normal dealership inventories (Federal Reserve).

Along the employment and wage front, the Fed governors believe we are in a tight market for jobs. Although they did not go out of their way to mention the idea of full employment, mentions of labor shortage and difficulty to find skilled laborers in most districts gives this impression (Federal Reserve). Even with this tight labor market, wage growth pressures have not burdened many businesses (Federal Reserve).

Inflation/Price pressures are starting to set in across the country (Federal Reserve). Commodity cost for hard materials increased while soft commodities varied. The low inventory for buildings/homes continues to stress pricing in an exceeding fashion (Federal Reserve).

Other future concerns by the Fed related to economic activity stem from the storms along the Gulf Coast. The Houston metropolitan area is statistically the 4th largest economic driver in the US (Bureau of Economic Analysis). Hurricane Harvey knocked out a fifth of the oil and natural gas production in the gulf coast (Federal Reserve). This storm also shut down refinery productions (Federal Reserve). The disruption by Hurricane Harvey will likely slow economic activity in the coming months.

The Numbers behind Hurricane Harvey

The devastation of last week’s Hurricane Harvey have altered the landscape for the Houston metropolitan area. According to meteorological estimates, roughly 27 trillion gallons of rain dumped on the disaster area (Griggs). This flood of water amassed to 51 inches of rainfall in the hardest hit area (Griggs). There are more than 180,000 houses reported to be damaged by the hurricane, and the cause for these damage will likely be flooding (Griggs).

The catastrophic flooding will likely not be covered for most homeowners living in Houston (Griggs). Flood insurance is covered mostly by the government agency called the Federal Emergency Management Agency, FEMA (FEMA). This agency limits the related payouts to $250,000 for residential properties and $500,000 for commercial properties (FEMA). With only a fraction of homeowners purchasing this insurance beyond their regular homeowners insurance, payouts will likely be a fraction to the estimated $75 billion in property losses (Griggs). Like other catastrophic hurricanes in the past, cleanup will take years to get back to prior conditions.

Compiled by the Camelot Portfolios Investment Committee

Darren Munn, CFA, Chief Investment Officer

Eric Kartman, Research

Drew Steinman, CPA, Trader/Research

Zach Hartenburg, Analyst

Frank Echelmeyer, MBA, CKA®, Advisor Consultant

-for Broker/Dealer and RIA use only-

References

Bureau of Economic Analysis. GDP & Personal Income. 2017. 2017.

Federal Reserve. Beige Book. 6 September 2017. 2017.

FEMA. Fequently Asked Questions. 2017. 2017.

Griggs, Brandon. Harvey's Devistating Impact by the numbers. 2017. 2017.

The material presented is for use by professional advisors only.  It is intended as informational and educational, and is not intended to be interpreted as investment advice.  The references to specific investment ideas, be they concepts, trends, sectors or even specific securities, are not recommendations for any advisor to adopt for any of their clients.  No investor or client reading these materials should view them as investment advice.  These materials are to be utilized as a catalyst for thought and discussion regarding the economy, investments, and responsible investing in general.  Past performance is not necessarily indicative of future returns, and there is no guarantee that any information presented herein will contribute to a profitable portfolio.  All facts referenced herein are derived from sources believed to be reliable.  A493