As citizens, business owners, and parents, we all have certain responsibilities placed upon us and certain requirements we must abide by.  We must pay our income taxes on a timely basis; we must have the necessary business licenses, and we must care for the needs of our children.  If we ignore or neglect any of these responsibilities, then we face possible fines, and other penalties from various government organizations (i.e., the IRS, city hall or Social and Rehabilitation Services). 

Unfortunately, this is not a two-way street as it relates to the government and what is required of it.  The following are just a few examples: 

Last week, the Wall Street Journal reported the following:  “at the request of The Wall Street Journal, DPC DATA Inc., a specialist in municipal disclosure, did an extensive analysis of disclosure and found the problem growing since a 2008 study.  Of 17,000 bond issues it studied, more than 56% filed no financial statements in any given year between 2005 and 2009.   Read more

• Over the past week executives with the three largest North American  railroads reported that not only are their profits up, they believe the business environment is so good they are rehiring more laid off workers and even adding new staff as imports of consumer goods pick up and exports of coal, metals and grains rise.   If railroads are confident enough to hire back or even add new workers; that is a sign that their customers (i.e., businesses) are producing and selling more goods, which is a positive omen for the economy. 
• Oil companies have ramped up drilling activity in response to higher oil and gas prices. 
• In an effort to keep interest rates low and boost the U.S. economy, the Federal Reserve has decided to continue its plan to buy $600 billion of long-term U.S. Treasury bonds.  Federal Reserve policy makers believe that the economy is in a slow recovery and even though commodity prices have risen, long-term inflation expectations have remained stable.  Bottom line, the Federal Reserve is going to do all it can to nudge economic growth. 
• American Express reported this week that its customers increased their spending by 15% in the fourth quarter of last year. Read more

Wednesday’s and Thursday’s market downturns signaled that the stocks may be taking a pause.  The U.S. and many overseas markets have been progressing upward nicely with minimal retrenchment.  As a matter of fact, Barron’s, a weekly investment magazine, noted this prior weekend (January 17, 2011) that the Dow Jones Industrials Average (DJIA) had not suffered a one-day loss of more than 1% since last Thanksgiving.  Is this unusual? You bet it is!  1965 was the last time the DJIA’s went this long without a larger correction. 

As a result, market volatility is down, and investors are becoming lackadaisical.  As I have noted in prior commentaries, it would not be surprising to see a correction, maybe in the range of 5% – 10%, at some point before the market moves upward to new highs this year.  A downward trend for a couple of days, weeks or even a month or two, is not the end of the world, but just reality. Read more

• Developed markets like the U.S. and Europe are old hat, but developing markets like the BRICs; Brazil, India, China and Russia are currently the “in” crowd.  However, emerging markets like Africa are the next hot area.  In the U.S. we have growing concerns regarding the fiscal health of our middle class, but the emerging market countries are seeing a rise in number of their middle class and businesses are rushing to capture them.  One example of this is in Kenya where several large international telecommunication firms are battling for cell phone subscribers. 
• Just today I received an e-mail from LinkedIn (an online professional networking tool) that showed in 2010 approximately 21% of the professionals I’m connected with changed jobs or their career paths.  Read more

Payroll processor Automatic Data Processing and Macreconomic Advisors, LLC, a consulting firm, issued a report this week stating that the private sector (i.e., non-governmental entities) added 297,000 jobs last month.  Other positive items were the Federal Reserve’s announcement that weekly commercial and industrial loans loan growth was back in positive territory for the first time since late 2008, and the Commerce Department reporting that factory orders increased in November.  Also, MasterCard Advisors’ Spending Pulse report noted that retail spending of all kinds during the holiday season reported its largest gain in five years. Read more

It doesn’t matter where you look; retail sales during the Christmas / holiday season, unemployment figures, consumer confidence, the stock market, or even Christmas tree sales.  All have shown improvement.  This renewed confidence, whether it is from keeping your job to seeing your 401(k) or IRA accounts appreciate, is creating momentum. 

Barring some huge economic event, such as one of the European nations defaulting on their debt or a string of municipalities doing the same here at home in the U.S., we should see pretty clear skies for investors in 2011.  Along these lines, I would not be surprised to see higher energy and food prices in the year ahead.  Inflation has been quite tame; however, many of the inflation figures bantered about do not take into consideration energy and food prices. Read more

• Retail sales rose 0.8% in November from a month before, reaching their highest level since 2007, the Commerce Department said Tuesday.  More broadly, sales were up 7.8% from a year ago for the three-month period through November.
• The surge pushed stocks higher this week, as retailers, economists and investors, while cautious, were encouraged that consumers—who account for 70% of the U.S. economy—are again opening their wallets.  ”I wouldn’t break out the Champagne, but things are looking better,” said IHS Global Insight economist Chris Christopher.  ”There was a lot of pent-up demand.  Consumers are feeling a little more confident.” 
• Both FedEx and UPS have announced that they are experiencing increased, if not record, shipments in December and are becoming more upbeat about global economies.  This is important because shipments directly relate to sales / business activity and validates the prior information regarding this year’s retail season. Read more

• The Thomson Reuters/University of Michigan’s preliminary December reading on the overall index on consumer sentiment came in at its best level since June, and the third-highest level since the start of 2008, according to the survey.  At the same time, the survey’s barometer of current economic conditions rose to its highest reading since January 2008, just after the economic downturn began. Read more

• The Conference Board, a private research group, said its index of consumer confidence increased to 54.1 in November from 49.9 in October.  While confidence remains low by historical standards, the November reading was the highest since June.
• Various retail industry reports show that Black Friday and Cyber Monday sales showed nice increases over last year.  This is a sign that consumers are not only shopping, but comfortable spending more money. 
• The number of people who signed contracts to buy homes jumped in October, marking the third monthly gain since contract signings hit a low in June.  Economists had forecasted contract signings to decline, given the numerous problems facing the housing industry. 
• Goldman Sachs noted in a memo to clients this week that the bank is very upbeat and has shifted its growth targets considerably upwards.  Its analysts believe that demand is accelerating very rapidly, and that we’ll see it grow at a 5% annualized rate in the fourth quarter.  Read more

Senior European officials met in Brussels this week regarding a bailout of Ireland that could reach $136 billion.  However, Irish representatives stated that the country wasn’t ready to seek help despite a huge budget deficit and sky-high interest rates on its government debt. 

The global stock markets reacted negatively to the news because there are fears that Ireland’s problems could spread the financial crisis into vulnerable members of the euro- zone such as Portugal and Spain.  Since Spain is one of the continent’s largest economies, it would greatly strain Europe’s rescue capacity and pose a severe threat to the euro’s survival. 

In regards to Ireland, unfortunately Dublin finds itself in a mess because at the height of the panic in September 2008, the Irish government thought it wise to guarantee the debts of all Ireland’s large banks—not just depositors, but senior and subordinated bondholders too.   Read more