Friday, January 23, 2015

The Outlook for Really Small Small Businesses

We hear a lot about the concerns of small-business owners, but Gallup has taken that a step further with a new survey of microbusiness owners - defined as people who own businesses with one to five employees. And they are increasingly positive about the stability of their businesses.

At the end of 2013, some 24 percent of the microbusiness owners surveyed said they expected their income to drop in the coming year. Now that number is down to 12 percent. Meanwhile, 35 percent of them expect their personal income to increase in 2015.

More than half of the respondents, 60 percent, say they expect their business' sales and revenues to grow this year. Nearly half, or 44 percent, agreed with the statement, "I am confident in the future of my company." It looks like optimism is the watchword for this little corner of the economy.

Thursday, January 22, 2015

Big Trouble in the Big Banks

This week was the key one for earnings reports by big banks, and it turned out to be a bit of a rout. After Morgan Stanley fell short of expectations yesterday, the six biggest U.S. banks - including JP Morgan Chase, Bank of America, Citigroup, Wells Fargo and Goldman Sachs - all disappointed in one way or another.

Morgan Stanley missed the analysts' earnings expectations by 0.4 percent, and its share price suffered yesterday as a result, dropping by about 4 percent. It joined J.P. Morgan, Bank of America, and Citigroup, all of whom fell short of earnings estimates. On average, banks this season have missed analysts’ earnings estimates by 6.3 percent.

Wells Fargo and Goldman Sachs at least met expectations, but they still underwhelmed investors. Wells Fargo's shares fell by 1.6 percent after its earnings report, and Goldman's income dropped by 7 percent from a year earlier. It was a tough week to be a big bank.

Wednesday, January 21, 2015

Europe Looks to QE

Just after America's bout of quantitative easing has come to an end, the European Central Bank is expected to embark on QE for Europe at its meeting tomorrow. The program appears to have been a success here, with a constantly growing stock market and inflation very much under control. Will Europe see the same result?

The recovery in Europe has remained sluggish, with the GDP for the Eurozone remaining lower than it was in 2008, before the recession, and unemployment is still in double digits in some areas. About a quarter of all government bonds issued in Europe are paying negative yields.

One problem is that our Federal Reserve was able to purchase U.S Treasury bills for our QE, while the ECB would have to buy 19 different countries' bonds. But with Europe at risk of deflation and interest rates still at zero, Europe's economic ministers may have no other choice.

Tuesday, January 20, 2015

Another Headache from the IRS

IRS season is all of a sudden upon us, with the agency beginning to accept tax returns starting today. And if you're in need of some help, it might be even more painful than usual. The IRS itself is warning that its customer service will be the worst since 2001.

According to the National Taxpayer Advocate's office, fewer than half - just 43 percent - of all people who call the IRS for help will actually get through this year. Even for those who do, their hold time is estimated to be at least 30 minutes.

It wasn't so long ago that the IRS was relatively responsive and helpful to taxpayers. In 2004, it handled 87 percent of all help calls, with a wait time of just two and a half minutes. Not bad for an agency that receives 100 million calls every taxpaying season.

Monday, January 19, 2015

Sports and Stocks

There's a new study out about how the success of sports teams affect the stock performance of local companies, which may take on some relevance now that we know that the Seahawks and Patriots will be meeting in the Super Bowl. The researchers found a strong correlation between stock prices of local companies and the performance of NFL, MLB, NBA and NHL teams.

In other words, if the local team wins, the local stocks win too. They argue that it's possible to create a portfolio based on this knowledge that would increase returns from 0.08 percent to 0.13 percent per week.

The effect appears to be caused by simple sentiment: Exuberance over the area sports team tends to spread excitement in lots of different directions. The authors say the effect washes out about three years after the success, so any effect from the Giants' victory in Super Bowl XLVI is just about done by now.

Friday, January 16, 2015

Jobs: Not an Issue

After a December employment report that capped off the biggest year for jobs since 1999, it's no surprise that Americans' confidence in the job market is soaring. In its monthly poll for January on the most important problems facing the country, Gallup found that just 7 percent of Americans say that jobs are our biggest challenge. That's the lowest that figure has been since October 2008.

American saying jobs were our top problem peaked at a whopping 39 percent in September 2011. What's replaced it? No one issue is nearly as prominent at this point; "dissatisfaction with the government" was named by 17 percent of the respondents, while 14 percent said "the economy in general."

Even those numbers are down from their recent peaks. In late 2013, dissatisfaction with the government was cited by 33 percent of the respondents. And in late 2012, the economy in general was the biggest issue for 37 percent of Americans.

Thursday, January 15, 2015

Inside the Retail Slide

Retail sales fell an alarming 0.9 percent in December, according to figures released by the Commerce Department yesterday. But there are mitigating factors to that little bit of bad news. Most of the drop in retail sales is a result of the drop in gas prices: Americans spent nearly $6 billion less at the pump in December than they had in December 2013.

Without the loss of gas sales, retail spending would have slipped 0.4 percent from November to December, which is still a disappointment in what has been a season of fairly good economic news. But December's retail figures - excluding gas sales - were an increase of 5.3 percent over December of 2013.

Although it seems like a huge part of our expenditures, gas station spending accounted for just 9 percent of retail spending in December. That's below autos and car parts, at 20.6 percent, food and beverage stores, at 12.8 percent, and general merchandise stores, at 12.5 percent.