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Registered Investment Adviser Caleb Lawrence 

The major averages enter the final hour with strong gains on better than expected data. Since Monday the Standard and Poors 500 Index is up 100 points or 3.7% while the NASDAQ has gained 320 points or 4.4%. the first solid week for the averages in some time.

February saw the creation of 313,000 new jobs as per the Bureau of Labor Statistics, well above expectations, the previous months were revised up by 54,000. The official unemployment rate was unchanged at 4.1%, average workweek increased to 34.5 hours, average earnings growth slowed to just .1%. This last series should be accelerating and suggests that the recent gains had more to do with mandated increases in the minimum wage than people asking for and receiving a raise.

Wholesale trade increased .8% in January, a 3rd consecutive advance. Sales fell 1.1% for the month. Falling sales and rising inventories are a bad combination, but 1-month does not make a trend. The inventory to sales ratio increased to 1.26, still very low.

Shades of 2006 have returned to the mortgage market as non-bank lenders originated half of mortgages last year, far more than the 1/3 they originated just prior to the 2007–2009 crisis. As before should a liquidity crisis occur the shocks will be even larger this time, due to greater market share. Losses of course will ultimately end up with taxpayers as that is how it is structured. Rising interest rates have already put a serious bite on housing, while the Fed continues to talk higher rates. Should they come to pass it could get ugly very quickly as another collective lesson in the perils of debt combined with gross overvaluation is laid bare.

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