Charles Payne's  Instablog

 I look on that man as happy, who, when there is question of success, looks into his work for a reply, not into the market, not into opinion, not into patronage. Ralph Waldo Emerson

I've taken to calling the recent run of the stock market the
Dirty Fingernails Rally" because companies like crane makers, earthmoving equipment makers, batteries for forklifts, coal, etc. have led the way. In fact many companies in this space had a string of earnings misses but seem to have decisively turned it around.

The irony to my observation and excitement about this possible turn of events is that over the weekend there was a lot said and written that suggests maybe we aren't capable of getting our fingernails dirty. Moreover, maybe we are simply too lazy these days.

The featured piece in Business Week whose cover asks why Americans don't do dirty jobs really hit home. It's about the new illegal immigration law in Alabama that has driven many illegal immigrants from jobs and their children from school. It's the kind of law states find themselves having to enforce since the federal government isn't willing to deal with this explosive issue.

The thing is the law is backfiring because Americans draw the line at certain jobs. In fact, the article focuses on troubles at the Harvest Select plant in Uniontown.

My family roots go back to Uniontown, and I have lots of relatives that still live there. When I was growing up, it was a town of very hardworking people doing backbreaking work. My grandparents owned a farm with chickens, pigs, okra, squash, and a few cows. It was a big spread and fed scores of people. I would try to pick okra, handle a hand-plow, and milk cows. It's almost a joke to hear people talk about hard work these days punching keyboards between infinite coffee and cigarette breaks.

Still, people need jobs, right? The president of Harvest Select can't fill 158 jobs, however, even with 211,000 people out of work. Recently, it was reported 36% of people in Alabama were receiving food stamps. But people in Uniontown just aren't going to deal with working in a chilled room, with humming machine noise, no windows, and the smell that comes from filleting fish all day long. Oh, and the pay is $7.25 an hour. Of course my grandparents would have thought that was a lot of money, and maybe they could have gotten in-door plumbing before the mid 1970s.

In this new world of fairness where people that achieved a certain modicum of success are being told they are greedy and must give more of their money to the government, which in turn will make it possible for unlimited unemployment benefits, record amounts of food stamps, and welfare benefits that includes free cell phones and 250 minutes of talk time each month, it's a lot easier to turn down work. I used to dislike so much going to Uniontown when I was a kid. It was hot, there were bugs, there was an outhouse, and the TV was outdated. I admired my grandparents but didn't revere them until later in life when I learned how amazing their humble existence was under the circumstances.

The last time I was in Uniontown I rode my bike around and saw scores of young people, unemployed but mostly chilling on porches. It's a sad sight indeed. When the law was passed, unemployed people in the state were going to get jobs, but they don't want those jobs. My mother reported to me the state would come apart - and she's not far off. Something is very wrong when people that can work will not work even when their skill sets are limited anyway. It's really amazing how things change.

As a globe-trotting Army brat, I thought of Alabama as being backward and slightly embarrassing when I was a kid. Now I know it was the essence of what made this country great. Today, the state is sinking like a rock because people can exist without putting any elbow grease into society. This is called fair but does nothing for them other than establish physical and mental sloths.

Even Lazy Hustling Money?

At the APEC summit President Obama remarked America has "been a bit lazy" over the last couple of decades in attracting money. There is no doubt American business put it in neutral for a long time but the idea of attracting money in this most hostile climate is ridiculous. In fact, it's disingenuous for the administration to voice frustration when we won't even make it easier for homegrown companies to bring profits home. It's outright bogus for the administration to talk about foreign investment in America while holding up the Keystone pipeline project that means 20,000 direct jobs and more than 50,000 indirect jobs.

It's time for the buck to start and stop at the White House.

The Market

We enter this week on the cusp of a major breakout as we have gotten through most of earnings season, and another round of disappointing jobs data market action will be a purer reflection of investor sentiment. There are no European issues expected as new leaders in Greece and Italy will be given a period to settle in, although I wouldn't call it a honeymoon, it's whatever comes after a bitter divorce. There are a lot of earnings from retailers including JC Penny (JCP) and Urban Outfitters (URBN) but also Wal-Mart (WMT), Target (TGT) and Sears (SHLD). This will give us a glimpse of department stores, hip retailers, discount stores and a beleaguered former giant in retailing. We will also get some technology earnings, housing and energy.

Thus far, it's been a good earning season with almost 62% of companies that have reported beating the Street's estimates, up from the first and second quarters. The biggest one-day reaction came from Harman (HAR), up 20% the day it reported, beating the street. On Friday Disney got the party started, but I still say it's been those dirty fingernail companies that have really carried this rally. There is some concern about oil breaking out through $100 a barrel, but I think oil and stocks will trade in tandem like they have for some time now - so, yes, you kind of have to root for higher oil.

Today's Session

News that Warren Buffett has made a huge investment in IBM seems to have stemmed an early morning drift. It's a great story on many fronts including IBM being able to withstand several problems in the past that came close to destroying the company. It's a reminder companies can rebound, which in turn serves as a reminder we can rebound as well. I guess in some ways a flat open would be akin to victory considering how many Mondays have seen total carnage since the summer.

Happy Veterans Day, and Thanks to all who served

The squeaky wheel gets the oil, but in the world of politics and finance it also gets the attention. Unless it's for something that brings in money and votes, attention in those realms is often the last thing wanted. On that note, it's fantastic when attention is elsewhere. In the world of politics, there is no doubt Herman Cain was a winner because of Rick Perry's gaffe, which will be played forever (really) and made everyone forget about those nasty allegations (Cain passed a lie detector test) against the pizza magnate. (On the other hand, Newt Gingrich was set up to be the big winner on Wednesday and he performed well, but again, there was only one thing anyone talked about yesterday.)

On the world economic stage, France has been able to scramble in anonymity as Greece, and then Italy, hogged headlines with their close calls, political ineptness and pending doom. Yet right behind them and just a little in front of America, France looms larger and larger as an issue that could spook/topple the world. It's kind of amazing considering France has played the role of would-be savior throughout the European debt crisis, especially this summer when tangles with Germany almost scuttled rescue attempts. Maybe France was, as they say on Wall Street, talking its book. Either way, France is a ticking time bomb, too.

To its credit, France has tried to get ahead of its problems and bond market vigilantes. Yesterday, however, the hounds caught the scent and it was a mix of fear with a dash of nervousness. France has its issues and tried to sweep them away before getting the treatment. Of course, many in America have wondered out loud since that S&P downgrade of US debt: "Hey what about France?" Beyond having our pride ruffled and seeing those guys beat us again (remember we couldn't hold out on the pledge to stop eating French Fries), it was clear to many that in the world of serious debt reduction France should take their medicine, too.

As it turns out, France is taking its medicine, but now the question is how much is needed or are they tiptoeing like Greece and Italy, where small sips haven't sufficed when large gulps are needed. Earlier this week, France took additional measures on top of those pledged in August as their own finance minister remarked that their budget had to reflect slowing growth or it would lead to "catastrophe."

> Raise its VAT on restaurants
> Create an exceptional tax
> Save on health insurance
> New savings of €7.0 billion during 2012
> New savings of €65.0 billion over next five years
> Extend ban on short selling bank and financial stocks

Yesterday, word leaked of a rating cut despite moves made this week and that knocked the bloom off our equity market rally sending bank stocks lower. The spread between France and Germany's 10 year bonds are at a euro-era record although only about half those of Italy's. Keep in mind the euro-zone economic outlook was revised yesterday, and it looks like next year will be tough. Just as the Fed lowered its outlook for 2012 growth in America, the ECB did the same for the euro-zone.

> 2011 growth is now expected at 1.5% from 1.6%
> 2012 growth is now expected at 0.5% from 1.8%

Under such slow growth can France meet its obligations or would it have to make more sacrifices? One thing is for sure, if their debt rating is lowered from AAA it would cost them more and create a negative cycle. France wouldn't get the benefit of the doubt that the United States has thus far received and it would cost them more to borrow, although with fewer and fewer nations commanding the gold-standard rating maybe AA wouldn't be as devastating as it once was. But make no mistake, it's all about appearances and trust these days and losing your credit rating doesn't help.

Anglo-Saxon back In Vogue

On that note, I see the new narrative in Europe that "Anglo-Saxon" style is desired and comforting. Remember when our banking crisis was at its peak and the rest of the world began to teeter? Government officials and bankers in France and Germany blamed America and Great Britain for "Anglo-Saxon" banking that included reckless risk-taking. Since then, cracks in Europe have deepened, and we find it's anything but actions from Wall Street or the City that's hurting Europe, but decades of profligate borrowing and spending. So guess who's coming to the rescue to head Greece and Italy during this very pivotal moment in history?

In Greece a banker is taking the helm, and in Italy an economist praised throughout the nation as a savior and lauded for his "Anglo-Saxon" style. One newspaper cheered the selection of Mario Monti, saying he was "one of the most Anglo-Saxon of Italy's public figures." Say what? So, now its Anglo-Saxons to the rescue, are they serious? It's amazing how things change.

Today's Session

Equity futures look solid this morning, due in part to strong earnings out of Disney (DIS) which saw a surge in theme parks and TV (ESPN made out big time on college bowl games) and reinforced the notion we avoided a double dip recession. There is still tons of resistance up to 12,600 but the bias is to the upside. Moreover, the market took a big gut shot which is the kind of test it must endure.

On the boats and on the planes
They're coming to America"- Neil Diamond

Power shifts, the cards change, and luck runs out in one place just as four-leaf clovers sprout somewhere else. And so, here we stand with the glow of a massive fire illuminating the skies from Rome to New York and from Athens to Washington. Our stock market melted from wave after wave of news that all said the same thing—there is a lack of leadership and a lack of will to do the right thing. Greeted with the news, Italian bond yields spiked over 7%, US equities opened under pressure, and it was a freefall from there.

The fact is that this situation has existed for a long time as these nations that lived off their credit cards too long are tumbling so fast they hit terminal velocity a long time ago. As professional and amateur astronomers gazed out into the sky on Tuesday, little did professional and amateur investors know, a projectile would come barreling at the world? That asteroid and the Italian bond crisis have a lot in common.

By now everyone knows the problems, which can be seen with the naked eye, and its coming towards us at the speed of YU55—30,000 miles per hour. Yes, it's about debt, and it's about slowing economies, and it's about austerity; but more than anything, it's really about a lack of leadership. That's the interesting aspect of what's happening in Greece and Italy and of how the market is reacting. Nobody thinks underlying circumstances changed when Papandreou stepped down or when Berlusconi stepped down, yet there is a massive sigh of relief.

Sure, these guys did little to right the ship, but what were they going to do in supposedly good times... ask for austerity? Heck the curtain is dropping on these failed experiments, and austerity is the main sticking point. Nobody seemed to have wanted the job in Greece, and the lineup of potential new prime ministers was not such a pretty sight. Of course, as we now know, senior banker Lucas Papademos has been officially named as Greece's new prime minister, but will he do a better job than the prior prime minister, that remains to be seen.

Here at home, President Obama continues to chip away at powers of the Congress with a string of executive orders that now include all the pomp and circumstances of true bill-signings. And then, there's the Super Committee that looks more like a super nova ready to light the skies with its fantastic failure.

It's not Armageddon yet, but for sure there is a scramble on for leaders to articulate the need for drastic measures. Maybe Bruce Willis isn't too busy to divert the asteroid that's heading our way.

Hat in Hand and a Hard Luck Story

I continue to say while we have been so myopic about the rise and fall of the western world, the rest of the world is on fire. In fact, I'm sure there has never been a time in the history of the planet when this many people were on the march, improving their economic circumstances, trying to get to a point that we've enjoyed for a long time.

While our markets melt, while our well-fed citizens gripe about the luxury of having a college degree, while our politicians stop the private sector, the world is galloping fast. Yesterday, there were two news items that more or less underscore how we lost faith in free markets and how the rest of the world is embracing the notion. A report says Africa is the fastest growing mobile phone market in the world, with penetration second only to Asia. The continent has seen growth average 20% a year for the past five years. Soon 735 million people in Africa will have mobile phones. But, in America we heard about yet another plan for the government to get into the broadband business.

The administration wants to spend $4.0 billion to get broadband to people in rural areas. There is a so-called public-private component that would include a $9.95 a month fee and $150.00 refurbished laptop. I think the government doesn't need to be involved in this. If Africa, which has giant swathes of rural areas, can get 735 million people on mobile phones, then complete broadband coverage is possible here. Of course, this is the extension of an older program that pushed for everyone to have a telephone.

The idea, however, that broadband internet access is a birthright, along with cell phones with 250 minutes, shows how misguided the notion of fairness has become and how it's pushing out the private sector. Africa is on the march, and it's going to be a powerhouse in the future. But first, the powerhouses of tomorrow are marching so loudly we can hear their footsteps. While the PIIGS flop around in desperate disarray, the BRIC nations have become would-be saviors. Yesterday, IMF chief Christine Lagarde tried the old negative sale on China.

Winners Go To Disney World

Of course, fear tactics have worked so well in Europe and America that our youth are giving up without trying while everyone else waits around in a pool of self-loathing. Her warning of the world slipping into a "downward spiral" must have been laughable by her Chinese audience.

Of course China's largest trading partner is Europe, but it's amazing to me that China would be so moved to feel sorry after they spent decades working for a few dollars a day while still saving 40%, while the PIGS were retiring at age 50 with lavish benefits. The Chinese will not be moved with fear tactics.

Saying "If we do not act together" is how Christine Lagarde began her statement, later adding "we are all in it together and our fortunes rise or fall together." Was this a capitalist trying to sell socialism or communism to China? It's not going to work as China has made it clear it would consider investing in Europe based on likely returns. China has $3.0 trillion in the bank, and they aren't going to waste it to prop up Europe's most recent failed attempt at a utopian society. Of course the west is getting money from China and other BRIC nations the old fashion way.

A report out yesterday says America is struggling to keep up with demand for visa requests from Chinese and Brazilian tourists. The good news is that this problem will create 100 jobs as we meet demand that has grown 35% from China and 44% from Brazil. They are coming to America like the Neil Diamond classic but only to visit. There could be as many as 4 million visa applications from the two countries by 2013, and it means a lot of money for America. Thus far this year, Brazilians dropped $16.1 billion on foreign travel, up from $11.5 billion last year.

Brazil has record low unemployment and its currency hit a 12-year high. Maybe the race to the bottom is the wrong way to go after all.