Many investors are worried that the next financial crisis in the USA will occur very close to home.  The pension and health care obligations of dozens of US states and hundreds of local municipalities are threatened by overly optimistic actuarial assumptions and a financial market that has failed to produce returns anywhere close to what a majority of experts had projected a decade ago.  Speculation surfaced at the end of 2010 that the federal government and US taxpayers may be forced to come to the rescue once again, a storyline that was originally written less than 2 ½ years ago for a failing mortgage industry.  Fed Chairman Ben Bernanke refuted that idea last Friday (1/07/11) when he told the Senate Budget Committee that state and local governments "should not expect loans from the Fed" (source: Federal Reserve). 

The monthly jobs report for the end of 2010 was a mixed bag for market watchers.  The "good" was a national unemployment rate falling to 9.4%, its lowest level in 19 months.  The "bad" was that there are still 14.5 million out-of-work Americans.  And the "ugly" was that there are an additional 8.9 million Americans working part-time only because they are unable to find full-time employment (source: Department of Labor).         

4^th quarter 2010 earnings reports from US corporations will begin to be released this week.  Investors have witnessed a disconnect between the recent success of the US stock market (see bullet # 1 below) and a labor market that has failed to gain any significant momentum (source: BTN Research).