What will 2010 bring?  That is the question occupying many minds as this decade begins. Certainly the markets started with a hiss and a roar, to reach heights last seen in September 2008. I fear this bout of enthusiasm for the new decade is misplaced.

Before the market opened yesterday (Friday 8th Jan), Marketwatch’s main headline was about how the non-farm payroll number would be zero. (No jobs lost for December). Instead at 8:30 the number came in at minus 84,000. Yikes, how could they be so wrong? But after a drop at the opening the market decided to focus instead on the “better than expected” retail sales.  Of course those that have survived are going to have better sales than last year, half of their previous competitors have gone bankrupt. Shoppers have no choice but go to the survivors.  The real test is whether sales tax has risen, and the answer is NO.

States and major cities are running out of money.  California is seeking Federal aid, so far without success. Cities are hurting because of reduced revenues, leaving them little option but to cut jobs or services (or both). There are record mortgage defaults which are likely to get worse as many adjustable rate mortgages reset to higher levels. More defaults mean less money to the city in rates etc., making a bad situation worse.

To add to the woes of the average American there is the real possibility of tax hikes at local, state and federal level. There will be a double dip recession, its just a matter of when. Last post I said the 2nd quarter, I think I’ll make that the 2nd or 3rd quarter.

The FED having handed out money hand over fist is now trying to work out how to reduce, stop the stimulus without unforeseen consequences. Unfortunately there always seem to be unintended consequences.