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Registered Investment Adviser Caleb Lawrence 

The major averages enter the final hour with modest gains on little real news. Higher mortgage rates are starting to take their toll as the Mortgage Bankers Association reports that mortgage activity fell 7.4% last week as refis plunged 13% and purchases apps dropped 2.5%. The 30-year contract rate for a conforming loan increased to 4.22%

The Fed Beige Book on regional economic conditions showed more of the same muddle along economic conditions with nothing really remarkable one way or the other for the 6-week period ending in late June.

The state of Illinois took another big step recently on the way to becoming the next poster child for mismanaged finances and quite possibly bankruptcy as well. Following 3 straight years of no budget and IOU’s running some 15 billion a recent court ruling pushed the state closer to a junk credit rating and bankruptcy when a judge ruled that the state needed to pay its bills and particularly its Medicaid bills. In addition to the backlog the state is running some 6 billion in the red each year stoking a looming financial crisis that disproportionately hurts the poor and disadvantaged while jeopardizing the state’s higher education institutions as well. The court ruling will force a reallocation of insufficient state funds that will likely leave more than a few pension recipients out in the cold through reduced pension payments amongst other items including cuts to education. When your state budget deficit is running some 25% of spending, a financial crisis such as this was to be expected. Mathematically challenged politicians infamous for can-kicking amongst other items of course failed to deal with it until it became a crisis which was then used to justify a 32% increase in state income tax rates. A maneuver likely to increase the exodus of citizens leaving the state for greener pastures.


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