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Swatting At Flies By: Charles Payne

|Includes:Apple Inc. (AAPL)
The rally held, and that is "man bites dog" stuff these days.
Volume, as I pointed out on yesterday's afternoon update, was light. Then again, why should that change? The masses aren't going to come running in and the professionals are happy trading up a storm, but reluctant to make bets with life expectancies greater that the common house fly. It's a very complicated time. We are witnessing firsthand the economic demise of nations that once boasted incredible economies and civilizations.

I guess they became too civilized as that barbaric relic called work became antithetical to the rest and relaxation that comes with six week vacations and five hour workdays. The American work ethic hasn't faltered, but we are being sold a philosophy that equates success with greed and urges limited personal goals for the benefit of the masses. The shared-sacrifice bit is waning as it has become abundantly clear regular, non-union folks are taking the overwhelming brunt of sacrifice while government workers and union workers get fatter.

Deficits and debts are ticking time bombs, and for a nation whose pool of taxpayers is shrinking, those bombs could blow sooner rather than later. But, those bombs are not going to blow tomorrow, and this is where a conflict comes in for so many investors. Millions of people missed the stock market rally over the past year simply out of anger with actions by the White House and the Federal Reserve. Of course, you should be angered, and you should be trying to do something about it, but avoiding stocks right now is tantamount to temper tantrums. Take out your frustration at the ballot box but don't give up on the nation or miss opportunities. That being said, the stock market has changed over the years. It's really nuts how volatile it has become, which is why doing your homework is more important than ever. If I could change a few things about the stock market one would be earnings announcements would come every six months, maybe once a year.

I'm tired of watching people sell low and buy high, shaken out largely by emotional swings based on very short-term news and trends. If the wild swings in the market got the attention of powers that be they would be easier to live with, but cries of the market are always ignored. (Of course, when the market is up the powers that be want credit, when it is freefalling those damn speculators must be locked up.) America is in a precarious pickle, but the good news is the masses are beginning to understand, and they want action. Yesterday, the state Senate and House of Illinois overturned a veto by Governor Quinn limiting strong-arming by unions at state conventions. The Senate voted 51-2 and House 93-19 on a bill that will allow exhibitors to set-up their own booths, limit union crews to two people, and pay straight salary for any eight hour period between 6am and 10pm.

The bill did increase the tax on taxis, which is a compromise we can't afford for the nation at large. The redistribution of wealth isn't working, and it will never work. In the meantime, it's full steam ahead on runaway spending, and that is suicidal. Reconciling all the seeds of destruction with potential opportunities and the country's history of overcoming wars, financial ruin, and poor leadership is difficult. Near-term talk of a double-dip recession is legitimate, and most economists and analysts talking about a strong second half of the year predicate it on the consumer. I think the consumer dipped into savings too soon. I'm also worried about recent news from retailers; a string of lackluster guidance makes me wonder what they know that Wall Street economists don't know? (Our retail sector analyst Brian Sozzi is working on this issue, and we will have comments on our website at

Without double-speaking any further I think we can survive current turmoil, but it probably will not be a smooth ride. However, it builds character and wealth when you resist the forces of crowds.

Real Concerns

In the meantime the market has held key support levels (on closing basis) and that will serve as a buy signal for many traders and trading programs. The Dow is on the cusp of climbing back above the 200-day moving average and that, too, would serve as a buy signal for many. I will say amongst all of the hoopla over China not selling the euro or the saga of Top Kill those economic reports were bothersome. The GDP report was really unnerving because it suggests that somehow consumers are going to have to do all of the heavy lifting for the rest of the year. If the dollar doesn't weaken, and oil begins to rebound (no offshore drilling and higher taxes on oil companies could trickle to the pump fast) look out. If jobs don't materialize and wages do not increase, those rosy assumptions will not be met. The second cut at GDP saw exports and imports increase but imports far outpaced exports, reversing the fourth quarter trend.
Real Personal Consumption Expenditures soared during the quarter to their highest monthly move since 1Q07. This would be okay news, maybe great, in some people's book but it is not great considering the rapid decrease in savings and the rate of savings. This is one of my top worries. I think the fix is in for next week's jobs report, but this Administration better wake up immediately, make financial regulatory reform less onerous and forget cap and trade. Hopefully, healthcare reform will be reversed and fixed down the road.
Today's Session

I guess they really took the money and ran because getting out of Manhattan yesterday was a nightmare. It seems like everyone is going to make this a four day weekend. If there is carry through from yesterday it would be great, but the moral victory would be not losing 100 plus Dow points. Equity futures were higher until the latest news on consumer income and spending. As it turns out, the former was lighter than expected, which is the point I've been making for weeks. The news sucked some air out of the market, although tech stocks look better and could ride Apple's (NASDAQ:AAPL) coattails as the hottest company in the world introduces the iPad abroad.

Disclosure: None
Stocks: AAPL