Charles Payne's  Instablog

Corruption, the most infallible symptom of constitutional liberty.
-Edward Gibbons

I had the honor of being keynote speaker at the One Hundred Black Men ceremony for young men graduating from Eagle Academy schools. These charter schools are doing remarkable things in places people gave up on a long time ago. The graduates are all going to college and most know their majors. I hope to have the speech on our website soon, in the meantime here's an excerpt.

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Tomorrow [today] is a holiday known as Juneteenth

Not many people know about this holiday in New York but it's very important in American history. Abraham Lincoln issued the Emancipation Proclamation on September 22, 1862 ordering an end to slavery on January 1, 1863. That of course didn't happen as Confederate States including Texas, continued to hold onto slaves. But on June 18th, 1865 Union General Gordon Granger and 2,000 troops rode into Galveston Texas to take possession of the state and free the slaves. So on June 19th, 1865, almost three years after Lincoln's most famous speech and order, General Gordon stood on the balcony of the Ashton Villa and read "General Order no 3."

The people of Texas are informed that, in accordance with a proclamation from the Executive of the United States, all slaves are free. This involves an absolute equality of personal rights and rights of property between former masters and slaves, and the connection heretofore existing between them becomes that between employer and hired labor. The freedmen are advised to remain quietly at their present homes and work for wages. They are informed that they will not be allowed to collect at military posts and that they will not be supported in idleness either there or elsewhere.

That's what freedom was all about back then. The right to own property, to work and earn a living and not expect the government to pay you for not working - that was being a man.

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America has had its share of growing pains and continues to work towards a more perfect union. The battle shifted at the turn of the century and the industrial revolution. Commercialism and individual success created fortunes, and while self-made, sparked envy and anger. There are several nations around the world going through the same scenario these days.

Mo Money Mo Problems

What's we're seeing around the world the last couple of weeks are governments getting stung by their very own success. I've written and argued a lot about the amazing economic success being enjoyed around the world. It's not about western Europe or America or Japan anymore... what's moving the needle are economies like Indonesia, Turkey and Brazil. Yet those places have also proven to be tinderboxes ready to explode and the spark doesn't have to be much. Consider how these nations have gone up in flames:

Lowering fuel subsides
Announcement to build a museum - mall
Raising bus fare ten cents

Of course there would have to be much more than the events above to spark widespread violence in nations making major transitions into greater prosperity. Brazil was poised to have its coming out party showcasing the Confederations Cup this month, the Pope next month, then the World Cup and Olympics. Events like these cost lots of money, billions when you're building stadiums from scratch and that's got people with poor housing and public services wondering what it is all about. Protestors also complain about police brutality and government corruption.

It's that last point that seems to be the sticky, common thread around the planet. I still see anti-capitalism movements pulling lots of strings using what might otherwise be innocuous sparks by fanning the flames through social media and old media. There is no political system without corruption but democracy and capitalism are moving so swiftly in the emerging world while socialistic tendencies and polices sink the west a last stand has to happen. What it all reveals are hurdles. Growing pangs associated with rapid success that will obviously have stragglers.

It also points to problems with taking away freebies and subsidies.

An election was lost in America because of freebies and the only way Obamacare is not eventually overturned is if it becomes a giant welfare benefit ultimately seen as a birthright along with cell phones, high speed internet, food, shelter, clothing, and rights to other people's earnings. I've witnessed how free stuff can destroy wide swathes of people and communities and now we are seeing how it can derail fascinating growth and prosperity. This is how it started in Egypt last year and how it will start in other places this summer.

Make no mistake, these things will not be accidents. They haven't been accidents. They're designed to spin the world in a direction of communal sharing and limited self-interest.

Amazingly, the world has come a long way from the notion of being free - now idleness is rewarded and success is punished.

Emerging nations are going to have to figure out better ways to allow access to success without punishing achievers and limiting potential.

Today's Session

It's World Sauntering Day, coined at the Grand Hotel of Michigan which sports the world's longest porch. It's probably what Ben Bernanke would like to be able to do as he lays out policy agenda. The problem will be the hounds of Wall Street, chasing, barking, howling about anything that smacks of pulling up and yet this week reports say that's exactly what the message will be today. The last couple of weeks saw the market banged around on the whiff of less Fed accommodation, but this week it's reversed the bias to the upside even as conventional wisdom suggest less money printing is in the cards.

The thing is, Ben Bernanke has room to err on the side of being too accommodative using historic metrics and government measuring of things like inflation, currently at a 53 year low. Still, the Fed knows it will taper at some point. Now would be a great time to get that notion through the thick skulls of Wall Street, even if they whine the entire time. In the meantime we're missing the main point of all this nonsense - the flaccid recovery. I understand the White House keeps selling a counterfactual that they avoided catastrophe but in the real, non-hypothetical world the rest of us live in this has been a tough drudge.

The Fed isn't going away, even if they take a more pedestrian approach to money printing.

https://www.wstreet.com/user/register.asp?source=3

The world feels like it's going to the dogs, and this week will only add further proof. There's the Big Dog Ben Bernanke who plans to bark intentions to slow down on the money printing presses while at the same time letting Wall Street know in no uncertain terms he is their best friend.

Of course Bernanke would like to think he's in charge, and it's the Street that beckons to his voice, but it's a tug of war the Fed chairman is sure to lose if he bends over too much to appease the Street. Yesterday, the stock market swayed up and down on Fed scuttlebutt.

Even though it's been telegraphed, I think there's a chance the Street will not panic with news of tapering by the Fed, and even if there is a temper-tantrum, I suspect it would be short-lived. The real interesting aspect of all this drama is the Fed hasn't done anything but pump, pump, and pump some more. There's no way Bernanke is going to do anything significant with respect to policy because it would be admitting defeat, and that would render the Federal Reserve toothless. Right now it's all about barking back and forth with the Street and hoping the economy heals itself in the meantime.

I continue to marvel at all the fuss over the Fed's next move and the doom and gloom crowd predicting the end of the rally and maybe the end of mankind. The fear is palpable, but how much is organic is hard to tell as this stock market isn't up because of the Fed but because it was oversold and big companies are leading the charge. Sure, some money is finding a home in equities, but the kind of frenzy that typically accompanies Fed-induced rallies is nowhere in sight. I speak to would-be investors still sitting on the fence, still listening to the same folks that talked them out of investing when the Dow was below 7,000.

It's really bizarre that investors have been rooting for bad news for so long that they're afraid of the day the economy can hold itself aloft. Yet, the news has gotten incrementally better although the US economy is perhaps the weakest part of the stock market rally. I continue to say the Fed money printing top comes at least 1,000 points higher.

The Ugliest Dog

On Friday the world's ugliest dog will be crowned in Petaluma California. The probable winner could be a Chinese Crested Hairless named Ellie Mae currently leading online voting. Before then there's a dog and pony show going on in Ireland that will see lots of sniffing, barking and lots of fleas. The only question is how much stuff Putin will steal from his fellow leaders. More jackal, hyena and fox, the Russian leader will round circles around the whole shebang.

Of course the G8 Summit is a joke and has become such a farce even the anarchists seem unmotivated. How can there be a meeting of top economic powers without China, Brazil and India? It's just another dog and pony show.

Today's Session

The CPI report is out, and it reflects no inflation. While that may come as a shock to many of you, it gives the Fed a green light to keep the pedal to the metal or if they need to gun the engine after pulling back on the throttle- that's Bernanke's message.

Housing data was important as well because single family permits climbed at a faster pace than multi-family. I don't want Americans to be apartment-dwellers...I still love the idea of the house with the white picket fence. It's a positive sign that maybe the bounce in housing can get real, meaning Main Street is the driving force and not investors. I'm not putting down investors; they are brilliant in this case and did the nation a favor by coming in with money and not gimmicks to stop the housing freefall.

https://www.wstreet.com/user/register.asp?source=3

Headline shock may be fading as we head into Fed week. On the cover of this week's USA Today's is an article titled "Fed May Reduce Bond Buying." It's not a revelation and a long way from "man bites dog," but last week such a headline might have sent early morning futures down significantly. Instead, this morning equity futures have been noticeably higher. The mitigating factor in this particular article is the notion Ben Bernanke will assuage Wall Street concerns and make sure everyone understands monetary policy will be nimble and fluid-able to move in both directions depending on developments.

I continue to think this is a giant mistake. The Fed trying to keep Wall Street calm is akin to parents buying their fat child candy to stop him from whining. Let him whine and let the Street complain. These are the same smart guys that tipped the scales into disaster and the same smart guys playing catch up to an amazing rally that the experts should have seen coming based on history, valuation and other factors known as fundamental research. Now, the idea is to ignore Main Street and the end results of all the money printing to keep a bunch of crybabies happy?

Don't do it Ben!

On the flip side, we all must step back and consider all that accommodation to the US economy and how little it moved the needle. Our debt continues to pile up and the Fed's balance sheet has stretched well beyond limits many thought impossible just a few years ago. I think there are only two choices for the Fed at this point.

A) They stay the course and buy paper, and keep rates at almost zero until earlier targets including 6.5% unemployment rate are achieved. I sincerely think the Fed is prepared for their own version of new normal-a balance sheet of three trillion dollars. It's too early to drop this on the markets but not hard to imagine when being honest about fiscal policy and real risk to our economy-hint, it's not a risk the economy is prepared to gallop ahead with reckless abandon.

B) The Fed understands it must reduce its balance sheet, but waits for the right signals of an economy ready to handle day to day rigors and challenges without steroids. If that's the case, then it's too early but once the Fed makes its move it doesn't look back. Flip flopping would be a giant mistake eroding the already thin amount of credibility the Fed is holding onto now.

What the Fed ultimately does remains a mystery, but the good news is knee-jerk reactions to tapering of unprecedented asset purchasing might be fading, and that means we can focus on the right things-finding great companies that have undervalued stocks based on fundamentals and potential. I would say to Wall Street they should try this sometime.

Meet Real Gangsters

The G-8 gathering happens this week in Ireland and probably couldn't have come a minute too soon for President Obama, whose administration has been peppered with scandals and unanswered questions about spying on citizens and gathering information without warrants and without scruples. Many say it's just Chicago style politics, otherwise known as gangster politics. There's no doubt they are ruthless in Chicago, but this week the biggest gangsters in politics anywhere are going to be in Ireland pushing various agendas, and I doubt America will get anything it wants nor put the kibosh on those sitting in the room.

I just don't think President Obama is a match for Vladimir Putin who took a Super Bowl ring from Robert Kraft, owner of the New England Patriots during a visit to Russia. Here's Kraft's account of the encounter from today's New York Post:

Kraft explained the incident happened while Sandy Weill and other business execs were in St. Petersburg. "I took out the ring and showed it to [Putin], and he put it on and he goes, 'I can kill someone with this ring,' " Kraft told the crowd at Carnegie Hall's Medal of Excellence gala at the Waldorf-Astoria. "I put my hand out and he put it in his pocket, and three KGB guys got around him and walked out."

Today's Session

Futures were drifting a bit until the Empire State report was released, coming in better than expected. We'll have more details on the afternoon update, but the fact the market is edging higher on "good" economic news might be news in it of itself.

https://www.wstreet.com/user/register.asp?source=3