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The Day After By: Charles Payne

|Includes: The Walt Disney Company (DIS), M
Okay, the Fed has taken action, and although I'm confused, the gist is they care and want us to know they are in the wings ready to help some more. I remember during the throes of the stimulus bill debate emails started making the rounds that it would be easier for the government to just send checks directly to homes. Forget the middlemen and women at banks, they've been busy beavers damming up the joint, it's time for the Fed to send us checks. Not just people that don't pay federal income tax but people that pay taxes and own homes. It's not going to happen, but the idea isn't as farfetched as it seemed when those emails began hitting cyberspace a year and a half ago.

The Fed is worried, we got that much, and they are going to shift money from one pocket to another which in turn will spur demand for bank loans that banks are going to be eager to dish out. We'll see. The market pared earlier losses but lost steam into the closing bell. Confusion is the only way to explain what traders felt about the move. The market wasn't too convincing. I remember the days when the Dow would drop 100 points and then rally 200 points all in the two hours after the decision was made. Rates are what. I'm just not sure what the Fed could do, and I'm not sure I want them coming back full bore as it would mean the economy is in worse shape than I care to admit or anyone cares to endure.

Mo Spending Mo Problem for Pelosi No Problem

The notion that Nancy Pelosi & Company are going to pass a $26.0 billion spending bill that will see $10.0 billion go to save union jobs by punishing American companies that send American jobs overseas is preposterous. If KFC sells food in China it needs Chinese workers to facilitate that order. The anger routine designed to play on past grievances is the only page in the playbook of these people that simply have no qualms about destroying the nation at large. It's just more redistribution of wealth, a bald-faced move after the billions of dollars diverted from shovel-ready jobs into government and union workers pockets. I just can't believe there are people willing to cut businesses off at the knees and not expect our standing in the world not to diminish.

I think many of them want the power of American businesses to diminish, but think that even as they bring them down a peg or two, the remaining profits should be dispersed to government workers. This is what the 2008 presidential campaign was really all about when we heard over and over again how everything that ailed the nation emanated from the canyons of Wall Street. When the market was doing its best imitation of Icirius during the Clinton "boom years," nobody had a problem with reckless behavior, excessive risk, or the house of cards that the stock market was. Wall Street wasn't public enemy number one back then because Bush inherited the bubble and subsequent recession. This is all a game of misdirection designed to pit one American against another.

There must always be villains. While we are at each other's throats a great heist is occurring, and the vast majority of us are victims. And like any victim of a robbery it's not just the loss of financial wealth that's doing us in but the loss of dignity and self. Why do we want to punish businesses growing outside the borders of America? Isn't it about time we go beyond being the world's consumers? One of the first rules of any business is the closer production is to the end user, the better the margins. It's about profits. This latest round of spending will impact the deficit, even as Pelosi & Co. pledge to take money from food stamp recipients in the not too distant future to help pay for it. I just can't get over the idea of raiding corporate profits to pay union worker salaries. This is so dangerous, and so backwards.

By the way, states aren't getting this cash with any strings attached. They have to play the game, too. The game is let the White House run your budget to achieve its goals. This has Haley Barbour, Governor of Mississippi, so angry he says he doesn't want the cash. Just think about that, the poorest state in the Union says the strings attached means the White House is hijacking state budgets. That means Mississippi must spend up to $100.0 million of its own funds on teachers, forsaking funds intended for public safety, human services, and mental health workers. If they do this, the state qualifies for $98.0 million in cash presumably to go to teachers, too. This not only masks the size of the latest bailout, but it also underscores the notion President Obama and Nancy Pelosi want to pick winners in the private and public sectors.

We love our teachers, especially those that care (the majority), but they can't get raises and have to put more skin in the contributing to their own pensions.

Skin Tight

Speaking of skin in the game, I got an email last night with a picture of a home in San Pedro, California that went for $775,000 and the buyers got a mortgage for $742,500. It was a Bank of America (NYSE:BAC) mortgage backed by the FHA. The home is beautiful (I saw pictures) and you could see how people could be lured into these kinds of deals. It's amazing they exist as this home was closed on in March. Considering it could take two years to get booted for many, this kind of deal is much better than renting. There is going to have to be some kind of reform because there are people buying homes even while they haven't paid current mortgages and they are going to just walk away from the current obligation. With the government involved so heavily in housing, its motivations are not driven by prudent economic standards but are instead driven for political gains so look for abuses to continue.

Far East Signs

Interestingly, investors are reacting negatively to news out of China that actually was better than consensus. This underscores how important China has become to the success of the global rebound. We've come a long was from dismissing China's growth to actually rooting for them to continue to grow stronger and avoid even sensible slowdowns. Overnight data spoke to inflation, which came from food prices, which could be traced directly to recent massive flooding. The increase in CPI above the high-end of the government's comfort zone (3.0%), and higher month to month, is worrisome but hopefully a one-off.
It stands to reason China's economy is going to slow, but what would we do for 10.3% growth this quarter?

Earnings Parade

Disney (NYSE:DIS) and Macy (NYSE:M) posted pretty good numbers driven in part by smart business practices, but also a slight rebound in consumer spending.

Disclosure: None