The Insider Probe and the Fiduciary Standard

You've probably heard about the insider-trading probe going on here in the Northeast, in which several hedge funds have been investigated by the SEC over charges that they'd sought out nonpublic information from employees at publicly held companies and used that to buy and sell stocks. More than a dozen people have been charged so far, and one - a former executive with Connecticut's SAC Capital Advisers - has pleaded guilty. Attorney General Eric Holder has confirmed that the Justice Department is part of the investigation.

One bit of fallout from all this could be a renewed focus on an upcoming meeting between the SEC and the Committee for the Fiduciary Standard. As part of last summer's financial regulation bill, the SEC was mandated to study the fiduciary rules, which state that an investment advisor must always place the client's needs first and foremost. Wealth managers such as myself uphold that fiduciary standard, but they don't apply to some investment professionals, such as brokers.

"I think this will remind everyone in the regulatory and legislative arms that the only protection the public is going to have is by making those who are providing the advice personally responsible," said Harold Evensky, a financial advisor who's on the Committee for the Fiduciary Standard. His group meets with the SEC on December 8th. Will heightened concern about the propriety of hedge funds lead to tightened fiduciary standards? That could only help the individual investor.

Black Friday: The Fallout

So was this year's Black Friday a strong step forward for the economic recovery, or a sign that it's still stuck in the mud? It depends on whom you ask. Retail sales over the long weekend totaled $45 billion, but the trendlines being reported by various entities vary widely:

* According to the National Retail Federation, the average shopper spent 6.4 percent more this weekend than he or she had last year.

* A Chicago research firm called ShopperTrak says sales on Black Friday itself were up only 0.3 percent over the previous year.

* Traffic in the retail stores on Black Friday was a bit stronger than that, rising by 2.2 percent over 2009.

* The Black Friday numbers may have been depressed by people starting their shopping earlier. Retail sales for the first two weeks of November were up more than 6 percent over the same period last year.

* Online sales showed the biggest jump, with Internet sales increasing by almost 16 percent over last year.

Black Friday

Black Friday dawns this year with much more optimism than last year's. This traditional kickoff to the Christmas shopping season - when retailers hope to turn the year's accounts into the black - was a bit of a downer last year, when sales rose just 0.5 percent from the previous Black Friday, when consumers spent $18.6 billion. This year, the forecast from MasterCard Advisors Spending Pulse calls for an increase of 3.5 percent.

One factor that may complicate that growth: People are increasingly saying they will keep their credit cards in their wallets. Only 8 percent of shoppers say they will use more plastic this year, while 35 percent say they will use more cash. Overall, 90 percent of shoppers say they'll pay for their purchases with cash.

That could cut seriously into their spending habits. According to a study from the American Research Group, the average shopper using a credit card spends $87 per purchase; those using cash, check or debit cards spends just $41.

Thoughts for Thanksgiving

As we express our gratitude, we must never forget that the highest appreciation is not to utter words, but to live by them. ~John Fitzgerald Kennedy

When it comes to life the critical thing is whether you take things for granted or take them with gratitude. ~Gilbert K. Chesterton

The Pilgrims made seven times more graves than huts. No Americans have been more impoverished than these who, nevertheless, set aside a day of thanksgiving. ~H.U. Westermayer

Revising GDP Upward

You may remember a few weeks ago that we reported the American economy grew at 2.0 percent in the third quarter of this year. Yesterday, the Commerce Department announced that the figure was actually 2.5 percent. How could the original number have come in so wrong? There are three basic changes to the figures that were first reported:

* The original estimate of aggregate exports was increased by $5.9 billion.

* Consumer spending turned out to be higher than originally thought, to the tune of an additional $5.7 billion.

* The first GDP estimate showed that spending by state and local governments had dropped by $900 million in the quarter. In reality, their spending was up by $2.9 billion, so that's a $3.8 billion swing.

All told, that's a 25 percent increase in GDP growth over what was first reported. That's a pretty solid improvement.

Consumer Wariness in the Holiday Season

A new consumer confidence survey, intended to signal what we might see heading into the holiday buying season, shows some of the same contradictory attitudes we've been seeing for a while with this economy. The survey, from the Consumer Federation of America and the Credit Union National Association, makes two things clear: The outlook is brighter for consumer spending this year than it was last year, but it's still pretty bleak.

To be sure, the numbers are moving in the right direction. In last year's survey, only 19 percent of consumers said their financial situation had improved in the past year, and 8 percent said they'd spend more on the holidays this year than last. This year, those numbers are up to 23 percent and 10 percent. While the indicators are getting better, it's distressing that, in the economic recovery we find ourselves in, less than one in four consumers say they're in better shape this year than they were last year.

Maybe the brightest note in the survey is the one concerning credit-card debt: Only 10 percent of the respondents said they were worried about meeting their monthly payments. All told, the people running the survey said they expect the rise in holiday spending to be only about half the normal 5 percent increase. We'll be keeping our eyes on this in the coming weeks.

Adding Jobs, All Over the Country

You may have heard last week that New Jersey's jobless rate fell in October, dropping 0.2 percentage points to 9.2 percent. The growth was in the right area, with the private sector adding 4,800 jobs. The public sector dropped 2,200 jobs, 1,800 of them casualties of the end of the census.

Those kinds of numbers were repeated around the country. In the four largest states in the nation, we saw the following figures for October:

California added 39,000 jobs
Texas added 47,900 jobs
New York added 40,500 jobs
Florida added 6,900

October was the first month since May in which all four of those states added jobs.