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Celebrating the Gift of a Good Fight By: Charles Payne

|Includes:Dell Inc. (DELL), HPQ
I'm Hosting "Varney & Co." on the Fox Business Network today from 9:20- 11:00AM EST.

Poland and Atlanta are 4,991 miles apart, but in many ways recent news from both shows a kindred bond. This week, citizens in Poland were up in arms after it was reported the government would cut its allowance for funerals to $1,300 from $2,100. I was taken aback because I didn't realize the government in Poland paid for funerals. Then, there was the amount, a lot of money when you consider per capita purchasing power is around $17,000 a year. But, here's the rub, people were outraged with one woman who was quoted as saying "births and deaths should be celebrated."

In an article in the FT, a maker of inexpensive coffins celebrated the news because he currently sells most of his 11,000 in annual production to neighboring Germany, where funerals are less conspicuous. His plain, old coffins just weren't opulent enough for Poles. I guess if someone else is paying for it then go full bore. That comes with the territory of entitlements. The recipient doesn't think, or care, where the money comes from but makes sure the check is there on time. The more of this kind of stuff that's given away by the government the less people will strive to get it on their own.

It gets back to the notion of mediocrity ruling. It gets back to the idea we should applaud mediocrity while voicing disdain for success. Qualifications for the former are being alive, while the latter is driven through hard work and sacrifice. The thing is you can't get the former without the latter. Poland is facing many issues that mirror the United States, including the battle over the cross in front of the presidential palace, and the rise of secularism accompanied by apathy among that nation's youth. Across the Atlantic, the offering of government assistance in housing created a mob scene.

The city of East Point, Georgia is a neighbor of Atlanta in Fulton County. Last week, the county offered applications for Section 8 housing assistance. In the U.S. Housing Code, and part of the Housing and Community Development Act of 1974, Section 8 is a housing allowance where the government assists tenants in paying their rent. Tenants pay up to 30% of the rent, and the taxpayers put up the rest of the dough. Hey, it's a heck of a deal if you can get it, but it's not a fair deal. Recently, there have been reports from across the country of people on Section 8 living in McMansions.

It's one of those things where you ask where the line is drawn, essentially who gets it and who doesn't. We're talking about an $18.0 billion program. As for those actually getting Section 8, it's unlikely they are going to be motivated to ever improve their standing in life so they are victims in the sense they will never taste the thrill of achievement beyond a minimum level. Last week in East Point, 30,000 people showed up for applications, and yet there are less than 40,000 people in the town.

The place became a mob scene, with people fleeing with children in tow. Once the dust settled, and everyone left, reports says the place was sprawling with empty water bottles, crushed soda cans, and cigarette butts and packs. When the government is paying for your funeral you don't think about who really pays, and when you are seeking government to pay most of your rent you don't consider who might have to clean up your mess, either. I'm sure many people feel like Section 8 is the reward for their vote in November 2008.

The tradeoffs are shackled dreams, ambitions, and pride.

Americans love helping Americans, and things like welfare and food stamps were set up to aide in times of need, but not to become permanent entitlements. Yet, not only are we being told they should come with citizenship, so, too housing, healthcare, and maybe at some point funerals. I agree with the Polish woman that birth and death should be celebrated. In America, we celebrate the fact that God allows us to begin life in the greatest nation in the world, and hopefully by the time we pass, we can say we had a chance to take advantage of that great gift.

The World Comes to the Rescue


There was a piece yesterday in the FT titled "Sharp upturn in use of shipping containers." It said the use of shipping containers has risen sharply this year and in the process, have surpassed the record levels of 2008.

One of the companies reporting a spike in containers is Moller-Maersk, which owns the Emma Maersk, along with sister ships, the largest container ship in the world. In fact, demand from Latin America is cited as having the largest spike, although all corners of the planet got better.

The ship theoretically could hold up to 528 million bananas. It makes trips around the world, delivering goods from China, and often brings stuff waste. (After the initial trip to England a couple months after going into service and saving Christmas for the UK, the waste cargo brought back drew howls in China, where some people said England was dumping its garbage.) The world is truly connected, with these ships able to haul 14,000 TEU (twenty-foot equivalent units) across oceans in days, and significantly faster than in the past.


Speaking of China, there is speculation the country is going to roll out a plan to spike imports and grow its domestic economy by removing quotas. The report in China Daily says part of the goal of dropping quotas and stoking imports is an attempt to play nice with trading partners.
The world is rocking, or at least parts of the world where people are being encouraged to pull themselves up by the bootstraps. This was once the mantra of America, and it made us the best. Maybe now it will save us again, although with a twist.

In the meantime...

That initial jobless claims report was an eye-opener. Gosh, it should mean fewer games, but it probably will mean more. More finger-pointing and blame. At the very least we've entered into a period that could mark a new reality. Massive unemployment could make us look like Europe used to look for so many years. Speaking of eye-opening, take a look at this...
What's Really Happening at Banks?

I posted a lot of data from the Federal Reserve's survey of senior loan officers yesterday, which hinted things are getting a little better, because of competition. Here's a replay from someone on the inside. I quote:

I read your newsletter this morning about bank lending and was surprised about some of the responses. I am the CFO of an $850 million bank in Mississippi and we are not seeing the same things that this survey reports.

What we are seeing is:

1. Commercial real estate transaction activity is dead, dead, dead. No one is buying commercial real estate regardless of the price.

2. Loan demand is the worst that I have ever seen in 32 years of banking. This goes across all loan classifications, and is not concentrated in one area. Consumers have cut back on their borrowing, apparently just waiting the current economic crisis out. Everyone is sure that their taxes are going up, but the uncertainty of how much has gotten everyone worried. They are concerned about the cost of healthcare and whether they will continue to get employer paid for insurance.

3. Regulatory oversight is increasing, and has a lot of effect on the lending practices of the banks. It is frustrating to hear the government complain about banks tightening standards when most of the tightening is brought about by the regulations that are being piled on banks. It is a shame that the sins of a few are impacting so many.

4. Customers are beginning to see the loss of freebies from the banks. Free checking, low cost accounts, and other programs will be the first to get the axe.

Lower rates on deposits and higher rates and fees on loans are here. Banks have to do this to survive in the current environment.

5. Banks are very liquid right now. Decreased loan demand and increased deposits have put banks in a very unprofitable situation of trying to make money by buying securities. For us banks that have a conservative investment portfolio, this is an additional drag on earnings. Currently, you have to go out 20 years to get 4% on a government agency bond. This is new territory for banks.

6. I read your newsletters every day and feel that you have a good sense of what's happening in the economy. My one suggestion is that you talk to someone at the ICBA or the ABA to get their take on how this current economy, and regulatory environment, is impacting community banks. We community banks are catching a lot of the bad press and regulation that was brought about by the actions of the largest banks.

Today's Session

Equity futures have been underwater all morning as the U.S. reacts to overseas markets, which are reacting to a slate of poor economic data from U.S. I don't know how they did it but neither Dell (NASDAQ:DELL) nor Hewlett Packard (NYSE:HPQ) impressed with their earnings last night; normally one is taking market share from the other. There is no news to spark the market, so if there is a move off the lows I would be immensely impressed. That being said, the backdrop gets more worrisome.

There is a new report that 63% of employers plan to raise premiums and 46% max out-of-pocket costs for employees. So much for the cost curve bending...or bending in a way that helps our wallets and economy. The best news this week has been takeover and merger news, and I think that's a theme that carries the market into the fall. But we need victories, even very small victories on the economy. It's sad, but at this point we need even mediocrity if we are to celebrate anything.

Disclosure: none
Stocks: DELL, HPQ