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  • Predictions 2011 By: Charles Payne 1 comment
    Dec 31, 2010 9:48 AM
    "Human Rights for Ex- Offenders"

    Next year is going to be about several themes, many of which began in 2010.

    > Washington DC and the era of compromise.
    > Inflation and the rise of the rest of the world.
    > Housing market goes lower.

    The one theme that's going to stand out more and more is the state of states. The fact that municipalities have dug themselves into holes they can't escape without political moxie will mean bailouts and bankruptcies. One thing is for sure, the tide of public opinion has swayed from unions both in the public and private sectors. The lingering disgrace of the way the blizzard in New York was handled is just the latest in a series of miscues from unions that are acting like spoiled brats instead of would-be civil servants.

    In Baltimore, the Longshoremen's Union has gone on the offensive against the local newspaper that exposed embarrassing material on its membership. Apparently, of the Local 333 membership the majority have criminal convictions. There are 379 members, 219 have convictions, of which 194 are for serious crimes. 21 members were convicted of serious crimes in 2010 (all but one were repeat offenders) for offenses that include:

    Robbery
    Possession with intent to distribute drugs
    Drug dealing
    Drug possession
    Firearms
    Sex offense
    Theft
    Assault

    The union struck back with a protest where one sign read "Human Rights for Ex-Offenders" and "We Demand Van Smith's Resonation." Don't ask about the "resonation" as it's clear they meant "resignation", but this is a long ways off. But nothing is more off than the entitlement culture of public-sector unions. It's an experiment that has run its course in the private sector, and only bought and paid for Democrats to stay alive in government. Yet, even they understand that like Dr. Frankenstein, they've created an uncontrollable monster.

    Now, new governors of California and New York, typically friends of unions, are talking tough about making real changes. Changes that I guess will resonate. When it's all said and done there should be human rights for taxpayers, too.

    What Rain, Sleet, and Snow couldn't Do

    Sensing the moment just right with the national debate on spending, debt, and huge government salaries and pensions, UPS (NYSE:UPS) launches a bid for the U.S. Postal Service. It's an amazing gambit that catches everyone off guard, including the government. The knee-jerk reaction is the Post Office isn't for sale. Yet, the intrigue only intensifies with FedEx (NYSE:FDX) countering with an alternative bid. The bidding war stokes incredible excitement in the stock market, putting lawmakers on the spot.

    The U.S. Post Office is bleeding money, has retiree health benefit obligations of more than $50.0 billion, and its debt has soared from $4.2 billion in 2007 to more than $12.0 billion at the end of this year.

    Mail volume is decreasing rapidly, and revenue came in at its lowest level since 2002 ($66.46 billion); clearly the Post Office is in major trouble.
     
    UPS takes the lead in the takeover battle with a bid of $100.0 billion, and even gets grudging support from unions willing to accept stock to help fund retiree health obligations. While the Post Office is supposedly self-supporting, since 1982 it continues to borrow money from the Federal Financing Bank.

    Despite the notion of getting out of a money-losing venture the White House nixes the deal, citing in part national security. But, the victory goes to UPS and capitalism. The Post Office is on a collision course to ruin, standing as a clarion call for government to mend its ways, while UPS underscores the fact that free markets and the profit motive is the key to prosperity and American preeminence.

    The thing is there are buyers for the Post Office, but can America continue to sell its soul through Treasury auctions that only enable the spending ways and mentality of Washington? The answer is of course not. America has two choices.

    * Stop Spending.
    * Simply exist to pay debts while the rest of the world catches and then passes us by

    Right now, it's the former, and will be so until maybe there is no other choice except to take a page from California and sell assets like the Post Office and the Grand Canyon.

    Workers of the World Unite!

    Finally, workers of the world are going to really unite in 2011 and fight back against non-workers and the union-controlled governments that protect them. In the 1990s, we witnessed the collapse of failed communist countries resulting in the dismantling of the Soviet Union, Yugoslavia, and Czechoslovakia.

    The next wave of dismantling begins in 2011.

    Look for a wave of serious succession efforts in Europe, where decades of social welfare programs have left countries flat broke and in line for bailouts. The world is going to be shocked at just how close Italy comes to being dismantled. The Northern League under Umberto Bossi gained enormous power in its role to keep Silvio Berlusconi in power. In return, the Northern League wants the north, led by its "industrial triangle" of Milan, Turin, and Genoa to become a separate nation.

    There is no chance this movement slows in 2011. It goes beyond the fact that workers and producers desire more from their efforts, but also the fight against giving away rights to immigrants. Some will try to say the entire thing is about xenophobia and racism, but we are beyond that right now. Europe has been the model for liberal immigration policies, but it hasn't worked. There is no assimilation and amazing resentment from people that should be grateful.

    While the civil war is brewing in Italy, look for an even more intense succession battle in Belgium. There, Dutch-speaking Flanders have had enough of unfair social welfare policies that steal their hard work and redistribute their earnings to decidedly lazier French-speaking Wallonia. For years, Walloon socialists have fought tooth and nail to preserve one of the most outlandish welfare systems in the world. But, momentum has built to the point where workers and producers will no longer allow the sweat of their brow to be hijacked.

    You see, as of 2007, Wallonia was 33% of Belgium's population but 46% of that nation's unemployed, and responsible for only 27% of GDP. Wallonia only kicked in 13% of Belgium's exports, and unemployment is north of 20%. Of those that do work, 40% are employed in government. Government and unions turned a once prosperous Wallonia into a massive welfare state with an insatiable sense of entitlement. I suspect that France will suck up part of Wallonia while Germany takes the rest.

    This is going to be more than a victory for Flanders; it will be a victory for workers around the world. It will inspire movements around the globe, including the United States where workers realize their best interest isn't in taxing success and propping up bloated government, but in keeping more of the money they earn. This pro-worker, pro-profit wave will add a spark to the stock market and when the dust settles, accepting responsibility and ditching the welfare mentality will make the West more competitive and more prosperous.

    Workers of the world really united!

    Back to the USSR

    It's early spring and Vladimir Putin is lowered into a forest by helicopter Ted Nugent-style, shirtless and armed only with a net. His mission is to bring back an injured bird. It's not just any bird, it's a Steller's Eagle that has injured its wing. The real ruler of Russia triumphantly emerges from the forest with the bird, a cousin, the Bald Eagle. The symbolism is clear, Russia is prepared to take over a wounded United States but with care and cunningness, not violence. The spectacle sparks the Russian stock market to the best performance of any nation in 2011.

    Russia just got the best of the United States with a nuclear treaty that is flaccid at best, and gives our chief military rival amazing tactical advantages. Moreover, the treaty emboldens radical dictators and madmen, and probably also gives Russia more leverage over them. That role of powerbroker always creates economic advantages, too.

    Maybe I have the scenario incorrect, but I think 2011 will see Russia as the best-performing market in the world. It is highly undervalued, but a surge in oil will spark major interest in Russia. So despite corruption that's as ingrained as alcoholism, Russia will rock in 2011. As for Putin, his power grab derailed the Russian stock market a few years ago, and the continued imprisonment of certain foes from the business community remains a dark cloud. However, the country wants it badly. Every country wants to take down the United States, and it would be the toast of the rest of the world once the mission is accomplished.

    Here At Home

    I think the President will move to the center, but not as much as President Clinton because he has an ace-in-the-hole with agencies that have sucked power from Congress over the last couple of years. None of these looms as large as the EPA, which has been on a roll destroying American jobs. The only way Congress can deal with the EPA and Obamacare is to starve them until real changes can be made to make the former powerless and to radically repair the latter.

    In America, it's all about jobs and the lack of jobs. Although there isn't palpable outrage over the lack of jobs, or the fact the job market is well behind historic rebounds, almost all our problems emanate and persist because of weak improvement. The latest initial jobless claims report was a great way to end the year, but many dismiss the first report of first-time unemployment benefit filings under 400,000 in a couple years as a fluke. One thing is for sure, it has to improve before the overall jobs picture improves.
    The Street is looking for an average of 200,000 new jobs per month in 2011; it sounds great but in fact would be the minimum needed under normal circumstances considering the expanding population. I'm very worried about manufacturing, which has seen a decrease in jobs in each of the last four months. Remember, we are supposed to have a re-birth of building things in this nation. Construction is still a pit of despair, with the sector losing jobs now four years in a row.

    Cheers and Jeers

    I continue to say there will be a civil war based on the precarious economic conditions government unions have left the entire country vulnerable to.

    I still think the President is in love with the notion that Europe has it right and America has it wrong, but will reposition the way he articulates this message.

    I still think we need the Tea Party to force the issue and stay energized and engaged, because Republicans may or may not be ready to do the right thing, although the freshmen are eager to live up to their pledges.

    I still think America is the best country in the world, and can be THE best if we go back to what got us here; it wasn't self-loathing and self-defeating.

    Final Note

    There will be no afternoon market commentary. Happy New Year, be safe, be strong, and God Bless America.
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  • Voodoobozo
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    What kind of idiot make statements about the something like UPS & Fedex taking over the US Postal Service. I usually enjoy listening to Charles Payne, but I guess he needs to spend more than 2 minute analyzing the Postal Service.......
    2 Jan 2011, 10:41 AM Reply Like
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