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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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  • I Want my MTV...and other Entitlements By Charles Payne 1 comment
    Aug 16, 2011 9:24 AM
    "We gotta install microwave ovens
    Custom kitchens deliveries
    We gotta move these refrigerators
    We gotta move these color TVs

    That ain't workin that's the way you do it
    You play the guitar on your MTV
    That ain't workin that's the way you do it
    Money for mothin and your chicks for free
    Money for mothin and chicks for free" -Dire Straits

    When people get money for doing nothing for too long, it is hell trying to wean them off the lifestyle or make them actually earn that money. While the Administration keeps trying to convince us (and themselves) that welfare checks, food stamps, and unemployment benefits are great for moving microwave ovens, refrigerators, and color televisions, we beg to differ. Sure, a poor person from the 1970s would think a poor person from 2011 was living high on the hog due to funding for these programs, which are bankrupting the nation. It's not just an easy economic problem, but an easy moralistic problem to discuss and acknowledge as well.

    Now that England is smoldering and the embers of anger cooling, it's time to take a look at the roots of this welfare country and why it can't get all those jobless blokes off the dole.

    The mastermind of Great Britain's foray into a welfare state was economist and one time director of the London School of Economics, William Beveridge, whose 1942 report laid the groundwork.
    Social Insurance and Allied Services, also known as the Beveridge Report, laid out the five Giant Evils of society.

    > Squalor
    > Ignorance
    > Want
    > Idleness
    > Disease

    By 1945, the report became the basis of the Labor Party's government, and they pledged to eradicate these evils by providing for people from cradle to the grave. A series of acts, including the Family Allowance Act, Butler Act, National Insurance Act, and National Health Act ushered in the modern welfare state. More than 65 years later, it's hard to argue that any of the five evils have been eradicated. Moreover, some seem to have gotten worse, while ridding man of want seems like the direct challenge to our very essence. Just as necessity is the mother of invention, want is the father of achievement.
    I always felt that cradle to grave welfare and food stamps were an evil that usurped innate God-given abilities and wasted our unique greatness as human beings. It's not a coincidence that William Beveridge was deeply involved in Eugenics. The movement that felt it could improve the human race by controlling reproduction. In 1909, Beveridge advocated that men who could not work should be supported by the state, but with complete and permanent loss of all citizen rights, including civil freedoms and fatherhood. This is what a welfare society and welfare mentality achieves. In the 1970s, men in the United States were encouraged to leave the home that received welfare so female-led households could get larger checks.

    People born and raised on welfare without someone strong enough to warn of its evils, rather than tout it as some kind of right, find themselves set up to do things that will result in the permanent loss of civil freedoms. These young men have children, but far too many can't be called fathers. In the meantime, the five Giant Evils persist.

    Squalor - Is often used as a reason to give lower income Brits home ownership. In a report titled "Generation Squalor" in 2005, it was pointed out that 100,000 children in England and Wales were homeless and 1,000,000 suffered in bad housing. Moreover, 70% of social housing in Scotland failed to meet the Scottish Housing Quality Standard.

    Ignorance - There are many ways to measure ignorance, but if we chose the academic rout it's clear the UK has become a lot more ignorant than it was in 1945. In the most recent PISA report from the OECD that measures the educational prowess of 15 year olds around the world, England found itself ranked 25 in reading. It ranked in the middle of the pack in math and science, but certainly if such an exam was taken in 1945 it would have ranked first. Instead, today that top ranking belongs to Shanghai, China.

    Want - Is different than needs like food, water, and shelter. With respect to economic wants, it is said that everyone has unlimited wants but limited resources. If your basic wants, like for nice sneakers or video games, are being taken care of then what is the impetus to go out and do the things needed to get and fulfill those wants? In Buddhism, it is said desire and wanting is a cause for most of the suffering experienced in life.

    Idleness - 1/5 of the men in England do not work; this is the height of idleness. Talk about the devil's workshop, the thought of taking away the comfort of idleness fanned the flames of UK riots that morphed into looting and lawlessness. A year ago it was revealed that 264,000 homes in the UK have adults that have never worked for a living. 100,000 receive benefits higher than the average wage.

    Just as Social Security wasn't genuinely designed to help the elderly, the welfare society was never designed to help the poor, but rather imprison the poor. The same elitist minds that felt non-contributors to society or those with sub-par intellect should be stopped from reproducing found a Trojan horse that accomplished much in the name of limiting social mobility and basic rights of citizens. What percentage of people in prison spent time in the welfare system in the UK and America as children? It has to be a number around 80% to 90%.

    It's Not About Income Inequality

    I'm so sick of reports and commentary that compare how much the rich have versus how little the poor have. The notion that somehow innovators, job creators, and those that simply work harder should take a portion of their income and apply it to a general fund or it becomes part of the public domain is outrageous. We protected jobs that once required high skill levels to the point when they became mostly the function of pushing buttons. Those high wages created an entitlement that brought with it a false sense of financial security. It's understandable why someone caught in this quagmire would be frustrated or angry.

    But there are many people, some without even a high school diploma, that think they deserve more. It's a world turned upside down, but promoted by the Left, which has tried to point the blame for lawbreakers, looters, and those that suffer on those that actually are achieving. The current issue of Time Magazine does this with a piece on the London riots and the use of Gini coefficient measures. The higher the number the more unequal income distribution.

    In its efforts to promote politics of envy, Time Magazine underscores how socialism actually creates wider gaps between rich and poor and in the process, it costs nations more, resulting in untenable debt. Portugal and Spain bought into socialism in 1976 and 1975, respectively, while Italy has gone through a series of Left-leaning governments since WWII. Its archaic form of capitalism is shackled by high welfare payments, high taxes, and tax cheats.

    Germany and the Rest

    Yesterday, the Euro rallied and all was right with the world. This morning, the Euro is under pressure as economic growth in Europe looks sloppy based on GDP reports out this morning. Germany achieved GDP growth of just 0.1%; the estimate called for 0.5% growth - it was the slowest growth in three years. In addition, the first quarter was revised lower to 1.3%. The Czech Republic saw its GDP come in at 0.2% the slowest in two years, Hungary 1.5% (estimate 2.35%) and Slovakia +3.5% (estimate was 3.6%). The good news is Romania posted GDP growth of 1.4% well ahead of consensus of 0.8%. Of course, the rest of Europe can't hitch their economies to Romania.

    This puts extra onus on the Sarkozy-Merkel press conference today. Merkozy as the meeting is being called is set to commence at 12:30 Eastern. Look for the markets to have a big reaction to the headlines following the meeting.

    Today's Session

    Despite so-so initial responses to earnings reports from Wal-Mart (NYSE:WMT) and Home Depot (NYSE:HD), the market is poised to open lower. The game's back on this today, can the market take a hit to its jaw without finishing the session sprawled all over the canvass. I think so but not betting on it early - let's not force the issue.
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  • David Nelson, CFA
    , contributor
    Comments (120) | Send Message
     
    Charles,

     

    This is superb work. Already have read it 3 times today.

     

    Obviously a lot of effort and research went into this article. Keep it coming. Hope you get to talk about this on your show.

     

    David Nelson, CFA
    Chief Strategist
    Belpointe Asset Management
    16 Aug 2011, 01:22 PM Reply Like
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