When Black Friday Comes...

Going shopping today? Surveys showed that 95.5 million Americans planned to get a jump-start on their holiday shopping on Black Friday this year. We're expecting a big holiday retail season this year, with purchases expected to grow by 4.1 percent over 2013, according to the National Retail Federation. The ten-year average increase is 2.9 percent.

Holiday shopping has a huge impact on our economy. Sales in November and December are expected to total $616.9 billion this year. Retailers are expected to hire anywhere from 725,000 to 800,000 seasonal workers to help pitch in.

But more and more shoppers are planning to skip the stores and shop from home. Some 56 percent of us plan to do at least a little shopping online, up from 51.5 percent last year. And 44 percent of all holiday shopping will be done online. So that figure of 95.5 million shoppers, if anything, understates the Black Friday craze.

Thoughts for Thanksgiving

"Feeling gratitude and not expressing it is like wrapping a present and not giving it." ~William Arthur Ward

"We tend to forget that happiness doesn't come as a result of getting something we don't have, but rather of recognizing and appreciating what we do have." ~Frederick Keonig

"Grace isn't a little prayer you chant before receiving a meal. It's a way to live." ~Jacqueline Winspear

Thanksgiving Spending Roundup

With gas prices the lowest they've been in years, it's no wonder that more of us say we'll be traveling this year for Thanksgiving. Four out of ten Americans are going somewhere for the holiday - a whopping 92 percent of them traveling by car, with 6.6 percent saying they'll be flying. Of those driving, 80 percent said they'd be going at least 50 miles.

While the cost of traveling has been dropping, the cost of dinner itself has been rising - but just barely. According to the American Farm Bureau Federation, a Thanksgiving dinner for ten will cost an average of $49.41, which is up just 37 cents from last year.

The turkey itself will cost you an average of $1.12 to $1.16 per pound this year, according to figures compiled by the USDA. That's up from $1.05 per pound last year.

2014's Biggest Little Winners

So far this year, there have been nine stocks in the small-cap Russell 3000 that have more than tripled or, in other words, grown by 200 percent or more. That may seem like a lot, but last year at this time, there were 45 such stocks, according to research from Bespoke Investment.

The big nine for 2014:

1. RadNet, Inc., up 388.6 percent
2. Receptos Inc., up 345.7 percent
3. Avanir Pharmaceuticals, up 331.6 percent
4. Pernix Therapeutics, up 314.3 percent
5. Agios Pharmaceuticals, up 301.5 percent
6. Achillion Pharmaceuticals, up 298.0 percent
7. TG Therapeutics, up 287.1 percent
8. VASCO Data Security, up 256.1 percent
9. IGI Laboratories, Inc., up 209.3 percent

Tuition Trends

There's some good news out this week for college students - and the parents who are paying their tuition. Big banks have been reluctant to lower interest rates for student loans, but Wells Fargo just announced it would modify some existing loans, as well as extend some repayment periods starting next year. Similarly, Discover Financial Services said it would begin modifying some loans early next year.

There might be some relation between that decision and the news that college revenues are increasingly unable to keep up with inflation.  More than half of all public colleges said their fiscal 2015 revenue increases wouldn't be able to keep up with even a modest 2 percent inflation. All told, universities said this year would be their weakest year of revenue growth in more than a decade.

The connection between those two stories is that both lenders and colleges are starting to feel like they need to be more competitive to attract students' money. Those could be good signs for parents with kids headed for college in the near future.

Small Caps Coming to Life

The stock markets were up across the board yesterday, with the S&P 500 and Dow Jones industrial average both gaining 0.2 percent, and the Nasdaq up 0.6 percent. But the small-cap Russell 2000 index was the biggest gainer of all, rising by 1.1 percent.

The small-cap benchmark has struggled this year, but it's been showing signs of life lately. Since bottoming out a little over a month ago, on October 13, the Russell 2000 has added an impressive 10 percent. But given the troubles it had earlier in the year, it's still up less than 1 percent for 2014 as a whole.

Remember, the S&P 500 and Dow Jones, by definition, don't include any smaller stocks. For a full picture of the market, it's important to keep that Russell 2000 in mind. And it's good to see it coming around.

Banking on Honesty

Does banking make a person dishonest? That's the suggestion from a study published in the journal Nature this week. Researchers at the University of Zurich divided 128 employees at a large, international bank into two groups. One filled out a survey about their personal lives, and the other answered questions about their banking background.

They were then asked to toss a coin 10 times, without anyone watching, and report on the results. If they told researchers they guessed correctly on a toss, they collected $20 for each correct answer. The people who’d been asked about their personal lives said they won 51.6 percent of tosses, but those who talked about their banking jobs said they won 58.2 percent of the time. In the group of bankers told to think about their jobs, 8 percent reported winning all ten tosses, compared with 3 percent in the other group.

The researchers repeated the experiment was repeated with 133 employees at other companies and 222 university students. For those people, talking about money had no effect on their dishonesty.

Trouble Among the Young

Even though the unemployment rate has been dropping steadily this year, the aftereffects of the recession are still making it difficult for young workers to find stable, full-time work. The recession technically ended five years ago now, but most people aged 18 to 30 remain pessimistic or uncertain about their future employment prospects, according to a Federal Reserve survey published Tuesday.

According to the survey, 34 percent of younger workers said they were unsure of their future employment outlook, and another 21 percent said they were pessimistic. Just 45 percent said they were optimistic.

A look inside the unemployment numbers can help explain their fears. While the overall unemployment rate is at 5.8 percent, the jobless rate for Americans between the ages of 25 and 34 was 6.1 percent. And the unemployment rate for those aged 20 to 24 was all the way up at 10.1 percent.

Inflation Staying Cool?

The Federal Reserve Bank of Philadelphia released a report yesterday showing that many major economists have lowered their inflation forecasts, down even from the tepid level it's been at. The Fed's Survey of Professional Forecasters indicates that inflation will stay below the Fed's target rate of 2 percent through at least 2016.

The surveyed forecasters predict the Personal Consumption Expenditures price index will average 1.5 percent for this year, down from their 1.8 percent estimate of three months ago. The group also reduced their view of expected inflation next year from 2 percent to 1.8 percent, and from 2.0 percent in 2016 to 1.9 percent.

Annual inflation is currently running at 1.4 percent. Many economists feared that the Fed's asset-buying program might lead to higher inflation, so with that now coming to an end, it appears that our already-low inflation has nothing left to fuel a higher run.

Going Up To Eleven

We've often discussed in this space the ten sectors of the S&P 500, as a way to analyze what's going on in the market. But before long, that number will be up to eleven: At the end of August in 2016, S&P will add a sector on real estate.

To this point, real estate investment vehicles such as the mall ownership group Simon Property Group have been subsumed under the financial sector. The financial sector is the second-largest in the index at this point, with more than 16 percent of the S&P's value.

This will have some meaning for investors beyond just the way we analyze the market's moves. Many funds concentrate on one sector or another, so many instruments focusing on the financial sector will soon remove real estate from those portfolios. We shall see whether that helps or harms the financial sector a year and a half from now.

America Keeps Pumping Away

Here's another reason why gas prices keep falling: U.S. oil production is at its highest level in decades. The U.S. Energy Administration said yesterday that America produced 9.1 billion barrels a day last week. We hadn't produced more than 9 billion barrels of oil a day since 1986. By comparison, Saudi Arabia is currently churning out about 9.6 billion barrels of oil per day.

As a consequence, oil prices have dropped 30 percent since mid-June. Nationwide, a gallon of gas has dropped below three dollars a gallon on average, and now goes for about $2.92.

The Department of Energy projects that production will stay at around that 9 billion barrel a day level through next year. With that kind of output, we would see the highest annual U.S. oil production since 1972.

Earnings Winners and Losers

We are almost through the current earnings season, with more than 400 of the S&P 500 companies having already reported. Six stocks have done well enough on earnings day that their share prices have popped by 10 percent, led by Tractor Supply, a Tennessee-based retailer. The biggest one-day winners for this earnings season:

• Tractor Supply, up 15.82 percent
• Whole Foods, up 12.15 percent
• Edwards Lifesciences, up 11.00 percent
• Newfield Exploration, up 10.89 percent
• Visa, up 10.24 percent
• Devon Energy, up 10.00 percent

On the other side of the coin, four stocks fell by more than 10 percent on earnings day:

• Genworth Financial, down 38.45 percent
• Netflix, down 19.37 percent
• TripAdvisor, down 14.13 percent
• First Solar, down 10.85 percent

Fretting About Retirement

Who do you think is more worried about aging—men or women? In what may be a surprising finding, it's men, by a healthy margin. According to a new survey by Financial Engines, among American adults ages 55 and older, 40 percent of men say anxieties about getting older have sparked worries about retirement. In contrast,  just 29 percent of women report that aging is a major worry.

The pattern holds up for nearly every issue related to aging the survey asked. For example, 49 percent of men are anxious about rising health-care costs, but only 44 percent of women are. Nearly a third of men worry about losing a spouse prematurely, as opposed to just 24 percent of women, even though women tend to live longer than men. One greater concern on the part of women: 43 percent of them are worried about running out of money in retirement, while just 41 percent of men are.

Given all those additoinal worries on the part of men, it makes sense that women are more excited about retirement than men. Overall, 51 percent of women surveyed said they were excited about retirement, as opposed to 41 percent of men.

Good News on Roth IRAs

Roth IRAs have long been a great way for investors to put away money for retirement that can grow tax-free. Unlike regular IRAs - in which pretax money is put into the account, and then considered ordinary income when it's withdrawn - Roths allow savers to put away taxable income, which can then be withdrawn without being taxed.

There's been one serious drawback to these plans: Roth IRAs haven't been available to high-net-worth individuals. Taxpaying couples with adjusted gross income above $191,000 (or singles with income above $129,000) have been barred from contributing directly to an IRA.

But a recent IRS ruling has changed all that. The IRS recently announced it would allow taxpayers of any income level to shift money from a 401(k) to a Roth IRA. The ruling officially goes into effect next year, although the IRS says taxpayers can start shifting that money right now.

On the Cusp of Double Digits

The S&P 500 Index now stands with an increase of 9.9 percent for 2014, with a little less than two months to go. It seems likely that we will see a double-digit rise in the index for this year, especially since the most common down months of the midsummer are in the rearview mirror.

That's not the only reason to think we might be headed for another double-digit annual gain. Last year, the S&P 500 finished up by 26.9 percent - just the fourth time it has increased that much in the past forty years.  In each of the prior three instances, the index followed up that performance by rising by at least 10 percent the following year.

If that does happen, 2014 would mark the third straight year in which the S&P has had double-digit gains. That is a rarer occurrence than it might seem. We haven't had three straight years of double-digit gains since 1997-1999.

The October Jobs Report

October's unemployment figures, out this morning from the Bureau of Labor Statistics, are right on track with the recent history. The economy added 214,000 new jobs for the month, and the unemployment rate ticked down a tenth of a percentage point, to 5.8 percent. The average monthly job gain for the past 12 months has been 222,000.

One downside: Many of the jobs are being created in relatively low-paying areas, such as food and drinking establishments (which added 41,000 jobs) and retail (which added 27,000 jobs). Temp services added 15,000 jobs. Meanwhile, the information sector lost 4,000 jobs on the month.

The past two months' jobs figures were also revised: September went up from 248,000 to 256,000, and August's from 180,000 to 203,000. The new August figure means that we've now had nine months in a row where the economy added at least 200,000 jobs, stretching back to January.

Economic Fears Drive the Electorate

One of the reasons for the stunning reversals we saw all over the country on Election Day is that Americans still perceive this economy as weak. Despite the fact that the unemployment rate has been dropping, and the GDP numbers have been strong, the country remains very uncertain about the future of the economy.

According to the Wall Street Journal, roughly the same percentage of voters - 32 percent - see this economy getting worse as those who see it getting better (33 percent). When asked the top issue that concerned them this election, 45 percent of voters said the economy, far ahead of the second place issue, health care, at 25 percent.

Four out of five voters said they were either “very worried” or “somewhat worried” about the direction of the economy in the coming year. Roughly 70 percent said the economy was “not so good” or “poor"; just 1 percent said it was "excellent."

GDP: Not So Fast...

Last week the Commerce Department reported its first estimate of third quarter GDP growth at 3.5 percent, but there are already rumblings that that figure will be downsized in the next estimate. The big issue is exports.

At the time of the initial estimate, Commerce thought that the export deficit had narrowed over the summer, and estimated that September's trade deficit would be little changed from August's. But now they think the trade deficit widened in that month, by a sizable $3 billion. Because of the slowing economy worldwide, U.S. exports fell by 1.5 percent.

The biggest chunk of that trade gap comes from China. We imported a record $44.9 billion from the Chinese in September, up 13 percent - but exported a mere $9.3 billion to China, down 3 percent.

October Keeps the Streak Alive

October came to a close last Friday, and the S&P 500 surged on that day, rising by 23 points. That allowed the index to set a new closing high that day, at 2018. That marked the first time it had closed at a new record in the month of October.

Why is that significant? Because October was the 16th consecutive month in which the S&P 500 set a new closing high. That streak, which started in July 2013, is the longest in the history of the index. So far this year, we've had 35 separate record-high closes.

It should go without saying that this kind of thing is not very common. The S&P 500 set a closing high in October 2007, for instance - and then didn't reach that high again until March of 2013.

What Made the Economy Grow?

There was some very good news for the economy last week, when the Bureau of Economic Analysis announced that GDP had grown at 3.5 percent in the third quarter. While that's down from the 4.6 percent we had in the second quarter, it's still an above-average figure for the post-Recession economy.

Many of the indicators dropped somewhat from the strong second quarter, but most of them remained strong. Personal consumption fell from a 2.5 percent increase in the second quarter to a 1.8 percent increase in the third. Exports fell from an increase of 11.1 percent to 7.8 percent. Durable goods fell from 14.1 percent to 7.2 percent. Remember, those second quarter numbers were starting from a much lower floor after a miserable first quarter, in which the economy actually shrank.

The one area in which growth increased over the second quarter was in federal spending. After defense spending increased by just 0.9 percent in the second quarter, it jumped up by 16.0 percent in the third.