Charles Payne's  Instablog

So, I'm rushing to take my son to Urban Outfitters before my hit on "Hannity" last night and we turn the corner and I hear a familiar sound. It was the sound of a plastic bucket turned oil drum, and it came from a block away. I could see a crowd, and even a barricade, and I'm wondering did the OWS movement head uptown. As I got closer I could see it was a bunch of kids in ratty clothes making a ruckus.

The beat was nice, and the crowd was friendly. As it turned out, however, these were a bunch of young kids worried about their future, but taking care of business today. I've seen this scene before, but it was a pleasant reminder that in the face of doubt we can try different things to address our concerns. None of the kids or their adult companions had graduate degrees from Columbia.

For these kids, yesterday will be about the same as tomorrow. It's a hell of a struggle that could be met with cowering fear, primal anger, or head on with aplomb. One option not available for these kids was to complain about how much others had or how unfair the world is. I've been trying to hustle (or as we called it back in my old neighborhood "scramble") since I was 12 or 13 years old, and while I've screamed about how unfair life is, and I've even joined a march or two, I always knew my destiny was in my own hands. There is a heavy beat of disenchantment in the land that has a hypnotic allure but can lead to an exhausting dance to nowhere.

The kids playing on 5th Avenue in New York, just a few blocks from Broadway and its array of movie stars, will not be hailed as heroes or make the cover of magazines. Those kids will not spark a revolution. Those kids aren't the result of an entitlement mentality. Those kids will just pick up the pieces of their lives by picking up drum sticks and old plastic buckets. Their beat will move the crowd in rhythm of joy and happiness. They will live, and maybe some will save enough money to do something else, but what they will not do is become someone else's liability or guilt trip.

What we are mostly seeing in New York, and now other cities, is like protests in Europe to austerity measures and realization that socialism ran out of other people's money and now the next generation has to roll up their sleeves and figure it out a different way. Many of those people would never consider straight hustling (scrambling) on the street as that is beneath them although the notion of taking something someone else has earned is viewed as noble.

Bernanke's Last Hope

The stock market rally from last Tuesday is Ben Bernanke's last hope and perhaps our last hope, too. That so-called Jobs Bill is a sham and will not work beyond temp jobs and more government crowding out of private capital. Ben Bernanke is hoping that a combination of a stock market rally and the housing market finally hitting terra firma will be the right elixir to unlock wealth otherwise too afraid to get off the dime. Moreover, a higher market could suggest the economy is getting better, and it's critical people believe things will get better. This is why I find it weird the Fed didn't make an even more aggressive move than rearranging the deck chairs because that iceberg called no-confidence lurks about.

Small Business

On the note of confidence, the NFIB Small Business index is out this morning with a tiny nudge higher, but with earnings dipping. While headlines scream about Occupy Wall Street and tax the rich, small businesses know they are the ultimate target to pay for massive government spending.

As unions and other left wing groups hijack the OWS protest the tactics will look familiar, like today's March on the homes of millionaires in Manhattan. In the meantime, there is a worrisome report from New York State Comptroller Thomas Di Napoli who sees another 10,000 financial sector job losses through 2012. This, coupled with the 22,000 jobs already lost, is going to be a devastating blow to the city which sees one out of eight jobs associated with mean old Wall Street. So the notion of confidence is going to be a lot tougher for those still losing their jobs three years after the crisis began.

The Market

Here's the next challenge for this nascent market rally, retesting the bottom. There are pure technicians out there that still say major indices must re-test 2008 lows, so it goes without saying most will argue the need for the market to test last Tuesday's intra-day low.

> Dow: 10,362
> S&P 500: 1,074
> NASDAQ: 2,298

The problem with this assumption is it cost a lot of people a lot of money in 2008/2009 as they waited and waited for the market to pullback and test the low. It's too early to say if last Tuesday was the low, but it was a critical inflection point. It's going to be very important for investors not to get so mired in self-doubt and frustration they throw in the towel or think somehow they are going to pinpoint the exact bottom. I've said before I don't think there will be classic capitulation because so many people have already been shaken out of the market.

The flip side of this is the breakout that I think occurs with the Dow closing above 11,600 (although there is a serious upside test around 12,000). For now, we are still range-bound, but I think the swift 1,000 point rally underscores the potential with this market if some of the dark clouds faded away.

Final Note

I wouldn't force the issue this morning but would pay close attention as the bias has shifted to the upside and a re-test isn't guaranteed.

I went down to visit the Occupy Wall Street protest yesterday and to do an interview with Geraldo Rivera. It was a beautiful day, a wild day, and an eye-opening day. My criticism of the protest was too harsh, but what's happening to any of the grassroots part is being commandeered by unions and even the very corporate titans that are supposed to be scorned by these young people that are afraid, angered, and disillusioned.

The mix of fear and anger has historically been the most toxic brew that any society could endure.

Down there yesterday I had an encounter with Russell Simmons, the uber-rich hip hop entrepreneur who has made hundreds of millions of dollars first through music (some social scientists claim he encouraged violence and crimes against women), then clothing, and now with a debit card business. I happen to think Simmons is the personification of the American dream, and it's a dream everyone should have a chance to realize. Sadly, the idea that profits should be capped or limited can only be championed by a few people making so much money that it doesn't matter or the other end of the spectrum of those that will never own a business, write a payroll check, or give another American a job.

Simmons bristled when I said he should simply write the government a check if he felt he was getting through loopholes (that he didn't have to take); he wants to write the extra check when everyone else does. This comment came after he told me he made $100.0 million and gave $10.0 million to charity. So I asked if a couple where the husband owns a small business and the wife is a school teacher with total household income of $400,000 should pay higher taxes. He was at a loss for words on that question. He moved on to say corporations have too much power in Washington.

This is the problem; some statements have some truth but when asked if unions have too much power he claimed they are for workers (I bet none of his businesses have union workers, certainly not the Chinese that made the Phat Farm clothes). When I told Russell he, Warren Buffett, and George Soros were hypocrites he was really pissed. But, that's the reality of it all.
The real problems in this country will not be solved by limiting corporate profits and taxing those rich households making more than $250,000 a year. Russell finally said maybe $250,000 was too low, but he was adamant that we should send the government more of our money.

The fact is our problems will become worse and less manageable. Yes, banks shouldn't get bailouts, and excessive debt is slavery. But, the idea that you can accumulate debt in the form of a student loan or home loan and then get others to pay for it is madness. This is the drama playing out in Europe right now. The hype is that everyone is scrambling looking for ways to bail out Greece, which lost its way, but lived a lie for decades to create the illusion socialism worked. Of course, what everyone is scrambling to do is to save European banks that actually made loans into that Utopian illusion.

Now, conventional wisdom is shifting to the idea that the scramble is focused on getting Greece out of the euro without triggering a domino effect. In the end, however, it will be working people that pay for the mistakes of bankers and a profligate nation that really thought two months of annual vacations and retirements at 50 to 55 was the path to prosperity. Of course, that means the onus is on German workers, but also taxpayers in less rich European nations like Malta and Slovakia. There is resistance there that echoes themes at Occupy Wall Street, but more so Tea Party gatherings I've attended.

Here's the rub. Slovakia, which gained its independence in January 1993, has worked diligently to embrace free markets with low taxes to become a player in the world. While it's the second poorest nation in the EU, it has enjoyed impressive GDP growth in recent years (8.9% in 2006 was highest in EU, and 10.0% in 2007) and strong foreign direct investment that climbed 600% from 2000 to 2006, reaching $22,000 per capita in 2008. The secret to this growth is the exact opposite of would-be economic cures in America, and already in place in older members of the EU.

Low Taxes
Low Wages
Relatively educated workforce

Over the next 24 hours pressure will come hard on Richard Sulik, leader of the SaS party in Slovakia, to accept the increase of the emergency fund set up ostensibly to save Greece but really being readied to save banks. His minority party is the crucial swing vote and has already rejected the notion of bailing out Greek pensions and fat cat banks in Germany and Spain. His beef is smart and realistic. Why the hell would Slovakia pay for its richer neighbors to enjoy an easier life?

In the end, I fear Slovakia and Malta will agree and make their own citizens foot the bill to save Greece and big banks. There should be riots in the streets of Bratislava, not Athens, where strikes have left piles of garbage rotting in the streets.

Excessive debt is slavery, but the notion that others should pay for debt that has already been enjoyed by debtors is preposterous.

Today's Session

Okay, so Merkel has at least mastered the art of the Monday promise, and that has got our market looking higher this morning. There isn't much economic data out this week until Friday, and the big earnings reports come in a week. Numbers from Scotts Miracle Grow (SMG) were mixed but a bounce in Netflix (NFLX), where management is getting the message on its new scheme, and also Apple (AAPL), seem to be providing just enough leadership for a decent open.

"Putting Money in People's Pockets." -President Obama

In the full court press to get his jobs bill passed, President Obama gave another press conference yesterday, and made several telling comments. Among his observations, talking points, and overall sales pitch there were comments about putting money in people's pockets to trigger confidence. The more money a person has, typically the better they feel, but how that money got there is critical to the notion of real confidence or the sense of a temporary relief. If someone gets a check for a short period of time, and they know it's going to be a short period of time, in many respects it adds more anxiety than not having a job or check.

We must stoke confidence through the notion the best is yet to come. I realize President Obama has bet the ranch, not on his jobs bill, but on its failure whether passed or rejected. The fact that a long term plan must be enacted as soon as possible is not just beside the point, it's beside the grander plan. Despite all the warnings and rejection of collectivist policies over the last two and a half years, the Administration has come back swinging with the same program. Now they are aided with misguided youth, whose innocuous understanding of life has been commandeered by professional organizers, and muscled up with union thugs.

President Obama professes to not understand his creation, Occupy Wall Street, and maybe that's smart considering the violence, anger, and hatred that seem to pour out of more of its ever-growing pores. The White House has blamed Wall Street for all that's wrong with the nation such as exonerating high school drop outs, those that have to smoke a joint before leaving the house, and others that simply don't have the correct fortitude to make it in the mean old world of capitalism. It's really a dangerous game, but so obvious since this is the first revolt over a country's basic political system that hasn't targeted the government.

This is a sham revolt, a sham protest, and a shame in general. In the meantime, this battle has played out for eons. Europeans marveled at America and how its system of democracy enables not only the ability to achieve great wealth, but the ability for most all citizens to do so. Perhaps those envious Europeans like Tocqueville would be happy to know there is a movement where the only thing that haunts the mind is to confiscate fortunes and great possessions of others through force, not competition.

"When each citizen is constantly seeking to change station, when open competition is pursued by all, when wealth is amassed or frittered away in the space of a few moments amid turmoil of democracy, visions of sudden fortunes and great possessions easily acquired or lost and images of chance in every shape or form haunt men's minds. Social instability fosters the natural instability of man's desires." -Alexis de Tocqueville

At a time when we need dramatic near term solutions that unleash all our free market creativity, this is the final stretch in a move that would ultimately remove it from our DNA. That Jobs Bill is still dead on arrival even after President Obama grudgingly accepted the Buffett Tax instead of his levy on households earning north of $250,000. The bill is still dead on arrival because there are not enough Democrats to pass the bill. (By the way, it was made clear during the press conference that in the long run, "tax reform" must occur, and that means those greedy rich households at a quarter of a million dollars will have to pay.)

Let's get beyond gimmicks. Let's put pride in people's souls and determination in their minds and they will fill their own pockets.

The Market

Obviously recent intra-day reversals in the market have been fantastic as they point to possible money sitting on the sidelines for a long time can be pried loose. Of course, if it was all pried loose the Dow would be at 14,000. But, the problem isn't getting the market to that level; the smart money wants to know where buyers come from after they put their funds to work. Some would call this the greater fool theory, but it goes to the heart of the debate about a series of expensive Band-aids that prop up temp jobs and temp illusions. In the meantime, investors must contend with how to invest in a volatile market on meager economic data.

This summer recession was drilled into the market with a third quarter of devastating losses often on innocuous news or no developments at all. Now the question is how much can the market rally on good but not great news. This morning's report on jobs has sent equities higher but not to the extent one would have expected. The 103,000 number is well above the consensus of 60,000, but there are a lot of buts.

* 45,000 are returning strikers in the telecom industry
* Manufacturing lost 13,000
* Long term unemployed 27 weeks or longer climbed by 208,000 to 6.2 million

The Pursuit of Obscure
By: Brian Sozzi, Equity Research Analyst

I think I was a food processor in a former life because breaking down big things into small particles is the name of the game for me. In the pursuit of obscure messages in the September jobs report, I have found a couple of tidbits that will make a person reflect internally. Small stats, but big messages indeed.

Wondering about the quality of jobs in September given the below unemployment rate trends, though they do seem to tie in with the bump in temporary employment in the month. Clear downtrend in rate for less educated. Are those with a high school diploma now too expensive to hire? Or do employers want 17 year olds that are not about to head off to college?

In a weird way, I also wonder how gains in tech areas are inhibiting gains elsewhere in the jobs market. These are such skilled positions, and scarce I think, say like app development. So when people are getting back to work it's at a pretty nice wage.

"In September, employment growth continued in computer systems design and in management and technical consulting services."