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Registered Investment Adviser Caleb Lawrence 

The major averages begin the week with solid gains as the confrontation with North Korea deescalates over the weekend. The 2nd quarter earnings reporting season is rapidly coming to a close with nearly all of the Standard and Poors 500 companies having reported to date. So far a second consecutive quarter of double digit earnings growth seems to set for the books, at least using adjusted earnings with all the bad stuff taken out as is the preference with Factset Research who reported 10.2% earnings growth for the index led by energy, information technology, utilities and financial, all other sectors were in the single digits. Revenue growth is tracking 5.1% led by the energy sector. Solid numbers to be sure despite the adjusted gross earnings data. That said looking at the bigger picture and earnings have shown no net growth since the 2nd quarter of 2014 and spent 2016 falling. Still the decent earnings of the last 2-quarters have managed to bring down the Price/Earnings ratio a little from a painfully high 26.6 in March to 24.3 in August. I can’t imagine what these numbers would look like were it not for the magic of debt funded share buy backs that through the reduction in shares outstanding meant that the earnings on a per share basis increased materially despite no change in the actual earnings themselves as the historical record shows. But, that’s just me, and maybe I worry about things that don’t really matter anyway.

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