Gross said the situation remains precarious.  His investment has repeatedly called the “new normal” of much slower growth rate than what the normal has been over the last 20 years.  With another drop possible and continued deflation, he said 30-year bonds with a yield of 4.13 to 4.15 percent would become attractive.

Comment:      I am in complete agreement with Gross and his investment firm, Pimco.  Based on slow economic growth it will be difficult for the major indices to keep up with real rates of return, which could exceed six percent when you factor in the current rate of deflation, which most recently has been at 2%. 

Revenues in US Cities fell in fiscal year 2009 for the first time in seven years. According to the National League of Cities, weak growth in property taxes and sharp declines in sales taxes, income taxes and state aid contributed to a 0.4% decline in city revenues with expenses up 2.5%. This resulted in the worst outlook in the 24 years since this survey began. There is no relief in sight, as tax revenue are expected to lag any economic recovery.

Comment:  The long boom in home prices resulted in an ever increasing amount of taxes being collected and an ever increasing number of individuals being employed by municipalities and State governments.  With declining property values and tax bases the municipalities will have to shed employees and this will be a drag on the U.S. economy.

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The default rate on commercial mortgages more than doubled in the second quarter year over year to 2.88% of outstanding balances. Commercial mortgage-backed securities account for 22% of the $3.4 trillion in commercial real estate debt.

Comment:  Defaults could increase significantly in 2010 and they will cause a significant increase in local and regional bank failures. 

The retailers reported their same store revenue or sales for the month of August today.  The analysts and pundits on CNBC were rather giddy about the fact that many of the companies were beating their Wall Street revenue estimates for August. 

However, only five of the 22 retailers reporting sales for the month of August were able to increase their sales as compared to their sales in August of 2008.   The five were led by Ross Stores and Aeropostale, which are the only two retailers that have grown consistently over the past five years. 

I checked the dividend growth for Ross Stores, which was put on the BMN Watch list today.  It has grown its dividend for every year for the past five and over that period its dividend payout has increased by over 100%.  Ross stores shares have been volatile and I could see them trading down to below $35.00 before the super bear market concludes.   Investors should be patient and be ready to pounce on Ross when its shares get back to $35.00 or below. 

The table above indicates that revenue for retailers remains depressed and those companies who are growing are taking market share from their competitors.  Other than the dividend paying Ross Stores I would avoid investments in the retail industry.