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Wall Street Strategies has been providing independent stock market research since 1991 to individual, retail and institutional clients through a balanced approach to investing and trading. Charles Payne, our founder and chief analyst, is routinely sought after for his stock market, political,... More
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  • Thin Volume By Charles Payne 1 comment
    Mar 23, 2011 9:35 AM
    The market marked time with its lowest volume day of the year after a sharp rally that followed a sharp pullback. None of the issues that contributed to the pullback have been resolved, although it's safer to say Japan must be close to getting reactor number 3 under control (even though there was a fire this morning) and western nations will stop bickering long enough to lasso Qaddafi, even though that's not the mission (wink wink).

    I haven't been enamored with volume since this rally began, which is why periodic bouts of uncertainty lead to so much volatility. Neither bulls nor bears have an axe to grind. While the near-term clouds seem to be moving away in the distance, that dark cloud of worry about the Fed taking away the punch bowl could anchor any rally effort. Then again, if there is a notion the party could be over there could be a mad dash to party like it's the summer of 2007.

    The Dow is back above its 50-day moving average, and if it could stay there we could see the index rally back towards 12,391. Many investors believe the market crumbled after Japan, but the high for 2011 came on February 18, so this market was ready to digest gains. On the downside, the inability to hold the 50-day moving average on a closing basis leaves the Dow vulnerable to 11,600. I can't see much volume on the upside, but another leg lower could come on heightened selling volume.

    Limousine Liberals Hit Another Pothole

    Last year the founder and CEO of Wholefoods (WFMI), John Mackey shocked the liberal world when he not only said Obamacare was anti-business and dangerous to the country, but also suggested the best thing for this country is less government and more individual empowerment. He noted his company's own healthcare costs as a percentage of overall sales were up 60% in the previous ten-year period. In fact, the company spent more in the last three years on healthcare costs than it delivered to the bottom line. In 2010, the innovative grocer paid out $2.0 billion to provide quality care. Back then, there was talk of boycotts, but those elites are addicted to the store and with good reason as it's a great place to shop. (Ever try Wal-Mart's natural and organic groceries?)

    Those elites taken aback from Mackey's stance must have choked on their breakfast yesterday morning when it turned out Howard Schultz now thinks Obamacare will kill small businesses. Actually his exact words to a Seattle Times reporter: "...the pressure on small business, because of the mandate, is too great." The howls were heard from the Hamptons to Canary Wharf. This is a man whose support was pivotal in pushing for health insurance to all and now he says it's going to be too much for small businesses, and that means it's too much for America. Schultz has been very visible of late promoting his new book "Onward" and taking a victory lap from what looked like a near-death experience.

    I say onward and upward by jettisoning the weight of this flawed government plan to control one of the most important aspects of our lives. It's going to be too expensive to carry out and hurt more people than it helps, and that's without connecting the dots to lost jobs and opportunities. It's a grand scheme that really isn't even designed to help poor Americans.

    46.5 million uninsured
    * 12.3 million foreign born (2-million naturalized)
    * 17.8 million from households that earn $50,000 or more a year

    Up Against the Wall

    A big loser yesterday was Walgreens (WAG), which posted record revenue of $18.5 billion and in the process, actually beat Wall Street consensus. The problem was that gross margins were unchanged from a year ago as the company had to delve into heavy promotions to get people in the door and to open their pocketbooks. Costs are soaring, too. Yet, there was another issue that hampered the company's share price yesterday. Walgreens is losing money in the Medicaid program. The drugstore company has already announced that beginning on April 16, 2011 it will no longer fill new Medicaid prescriptions.

    Right now government reimbursement, according to Walgreens, is less than breakeven on 95% of brand name drugs. Officially, government reimbursement moved to 84% of the wholesale price for medications, down from 86% last July. Remember, the new healthcare law dumps a lot of patients off Medicare onto Medicaid, and the largest drug store chain in the nation (7,700 locations and 20.1% of prescriptions filled versus 7,100 CVS drugstores) doesn't want to service them. Yesterday management of Walgreens said government agencies are pressuring the company to change its mind.

    You get the feeling the Administration, like a giant baby Huey, is trying to hammer a square peg into a round hole. The problem is that inside that hole lives Americans and the American economy.

    Portuguese Love

    "On a starry winter night in Portugal
    Where the ocean kissed the southern shore
    There a dream I never thought would come to pass
    Came and went like time spent through and hourglass"
    - Teena Marie

    All eyes are on Portugal today as the nation decides if it's willing to suck in its belt once again in order to gain a bailout. Many believe what happens today will be the proverbial last straw that finally knocks over the (current) sick man of Europe. 37-years of socialism has run its course, but the Communist party and Social Democratic Party oppose austerity measures that come with a bailout from the European Financial Stability Facility (there will be $1.0 trillion in the European Financial Stability Facility (EFSF); I wrote $700 billion yesterday). It's the latest cautionary tale for America and those that kick back and cheer on more spending as if the day of reckoning is a million miles away.

    Already, Portugal has cut public sector pay by 5%, frozen hiring, and is selling $2.3 billion in state assets. In addition, the nation hiked its value added tax two percentage points to 23%. But, it's not enough. It's not enough by a long shot. The Portuguese are two minutes from hitting a brick wall that's also at the end of our road, too, unless drastic changes are made. The Portuguese dream is a full-fledged nightmare, but the question is if the country is so selfish it tries to take the entire continent into the ocean. It's not only a sick man walking, but it doesn't want to take its medicine. Where's the love?

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  • Bill Burtchaell
    , contributor
    Comments (413) | Send Message
    Charles, you are my hero, all the way back to Glick days on FBN. I enjoy your on air commentary as well as your articles here on SA.
    Interesting for Starbucks to come down on the side of small business FINALLY, the light comes on for a business man and Obama supporter. I'll buy in to his newfound love for free markets and less government when I see him replace the Gray lady with the WSJ in his coffee shops.
    29 Mar 2011, 10:29 AM Reply Like
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