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Registered Investment Adviser Caleb Lawrence

The major averages struggled to begin the week with small losses despite generally positive data. The Bureau of Economic Analysis or BEA released its income, spending and price data for December. Personal income grew .4%, a 6th consecutive decent month of growth on strength in asset, wage, and rental income. On a year ago basis income growth clocked a respectable 4.1%, though the savings rate fell to just 2.4%. Price pressures moderated in December with the Personal Consumption Expenditures or PCE deflator rising .1%, price declines were fairly broad based for the month. On a year ago basis prices increased 1.7%, a little less than November. Personal Spending advanced .3% in December on strong durable goods and auto sales.

The Dallas Fed regional index gained 3.7 points in January to 33.4, a more than 12-year high. Despite declines in new orders, production, and employment.

Illinois features some of the worst state level finances and deficits, particularly with respect to pensions. Significant tax increases in the last several years has led to increasing numbers of state residents voting with their feat exacerbating the state’s fiscal woes. You really have to wonder about the state’s latest attempt at fixing its pension deficits as it plans to borrow 107 billion and invest in the equities markets despite painfully high valuations that all but guarantee negative returns over the next 7-years or so. Add borrowing costs of some 6% and I fail to see how anybody could justify this strategy, I’m amazed it is even being seriously considered.

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