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July 2010 Update from Rodney Johnson, President of HS Dent:
1. July 1st is the beginning of the fiscal year for most states. It should be very interesting to see what happens as many states have factored into their budgets stimulus money that was never voted on and now does not appear to be forthcoming. It might be that the game is finally over. With cities like Maywood, CA firing all employees, Oakland, CA cutting 10% of the police, and states like new York threatening to lay off tens of thousands, there might actually be some movement in the slerotic world of public finance.
On this note, I recently saw an article as to how great muncipal bonds are because deflaults are so rare and ratings are so high. What nonsense! Municipalities commonly do not follow GASB guidelines for reporting their finances, so what you find must be closely examined to make sure that they are 1) up to date and 2) complete. Cities are part of the great financial meltdown, and the fiscal year starting July 1 will shine a cold hard light on what many have been hiding or at least minimizing for years.
2. July 2 Unemployment Report: I know the markets have sold off dramatically in the last several days, and that we are 1,500 points off the top of the Dow from April, but I would still have expected a pretty dismal day with these numbers. But it's not dismal, so far it's kind of boring. Which tells me that people aren't surprised. That's the part that is so interesting. Market participants are not surprised that, after 2 and 1/2 years of this, we are barely treading water, if that, on the jobs front. Which must mean that few people are believing the recovery hype and are realistic in their assessment of what lies ahead.