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The Champagne Life By Charles Payne

Question of the Day

Do you agree quarterly earnings have too much influence on business plans and the stock market, and if so what should be done?

Click here to post your answer and let Charles know what you think.

So if it's all about them fast car nights and them big boar days
Living this champagne life, everything's okay
Let's toast it up
Everybody, let's toast it up

Said because we play all night and we play all day
Living this champagne life and everything's okay
Let's toast it up
Baby, let's toast it up
Champagne life


In the aftermath of a full frontal assault from the White House to public parks, the rich and aspiring rich have decide to live life. It's the champagne life, and it's got the stock market rocking and Main Street dreaming of all the possibilities. Check out the moves in Ralph Lauren (NYSE:RL) and Whole Foods (WFM) this week ... let's toast it up!

People that haven't paid their mortgages in as much as two years are getting principle reductions if they bank with Bank of America, JP Morgan, Wells Fargo, Citibank or Ally and some that put no money down and couldn't even pay teaser rate mortgages are up for $2,000 checks. And then there are those folks that have become solely depended on Uncle Sam to foot the bill - for everything ... let's toast it up!

According to Heritage 67.3 million people in this country are depending on the government (not including government employees), this is up from 21.7 million in 1962. These recipients of federal government assistance receive $32,748 via health and welfare spending, college and housing aid, retirement and agriculture aid. It has to be noted that per capita income for all Americans is just $32,446. The math favors those that put their lives in the hands of the government ... let's toast it up!

This is simply amazing stuff, but making it beyond the pale stuff is the fact 49.5% of Americans pay no income tax. Moreover, 70.5% of federal government spending is on dependency programs. $59.4 billion on housing assistance represents the second year in a row the record was shattered - it's up 42% from 2006 to 2010. It must be great to wake up knowing all your bills are paid and there isn't a sense of urgency about changing your circumstances ... let's toast it up!

Last year the federal government paid out $1.6 billion to cover free cell phones and the monthly bills of 12.5 million wireless accounts. This is up from $772.0 million since 2008 and there is hardly any oversight. The Lifeline program provides low-income Americans with free cell phones and covers 250 free minutes each month. I understand there are efforts to reinterpret "pursuit of happiness" but is a cell phone an entitlement? This is really sweet if you can get it ... let's toast it up!

Bank Settlement Scam

Yes, banks did bad things and people did stupid things, and the nation was on fire like the old California gold rush when it came to the real estate market. People lost so much in stocks and were looking to keep intact that dream of retiring at 40 to a private island. The Federal Reserve made it possible, the federal government encouraged it, and of course without Fannie Mae and Freddie Mac it would have never happened. Be that as it may, there is only a single villain in the eyes of the White House. The $25 billion settlement for robo-signing is outrageous. The overwhelming majority of people that were foreclosed on were in the process and while rubber-stamping sped it up it was inevitable.

$17.0 billion for principle reduction to borrowers mostly behind on their mortgage payments
$3.0 billion refinancing for underwater but up to date borrowers
$1.5 billion in checks to people that already lost homes, up to 750,000 at $1,500 to $2,000 each
$2.75 billion to states for stuff like help lines
$750 million to federal government

This was a serious shakedown and huge for the president and his efforts to buy votes and push several aspects of his agenda, including first and foremost bypassing Congress and ignoring the Constitution. People that lost their homes do not have to prove any harm by banks and can still sue banks and servicers. The states got a backdoor bailout with California getting the bulk of the cash. This is a sweet deal and free money for so many, most that in all honesty do not deserve it but tonight they are saying ... let's toast it up!

We Are All Victims

Perhaps the biggest problem with all these shakedowns of industry, especially Wall Street, is the victory lap speeches. Yesterday, President Obama suggested everyone that bought and lost a home during the Bush years was victimized and he is meting out justice. People bought homes at the top, but they knew housing was rocking, and they thought their homes would increase in value, maybe very quickly. Now, we are all encouraged to feel sorry for ourselves. Losing a home is devastating. Accepting the blame is impossible. That's why the mantra: "no fault of your own" is being shouted over and over again and yet the vast majority of people that lost homes simply got in over their heads.

The same is true with credit card debt. The fine print has nothing to do with the inability to pass up a shoe store without peaking in to browse. People see their spending limits as a goal to reach, not a number to know just in case. Only victims would continue to blame credit cards for their lack of discipline. We have become a nation of victims and we look for justice in the form of a check to assuage our own angst and heal our wounds.
One of the saddest parts of this is when legitimate transgressions are there they get in the back of the line behind trivial and bogus issues.

Let's not toast it up!

I guess the deal is that rich people can be rich although they must pay a fine for it and those that want to mooch off the government, even to the detriment of pride and squandering innate gifts, can also have their world too.

Today's Session

We have been sending out a lot of alerts to take profits and close positions and now cash is back to 20%. This morning the market indicates a lower open over renewed angst over Greece and its ability to tighten its belt enough to get another giant tranche of cash from its stingy workaholic neighbors. I actually think the media is going to overplay the Greece part and miss the other part that the market has come too far too fast and is simply due for a pullback. The thing is we just don't know if the market can handle a simple pullback. That was the problem last year, where pullbacks became corrections those became bear markets.

I love individual sectors and names but would like to see stocks go on sale. We are winding down earning season which was mixed although some of the blue chips got the benefit of the doubt. The powers that be still must come to the realization that quarterly earnings are simply too often and ruin it for businesses and investors.

There is no way you can run an international business or even a lemonade stand when you have to make a number that may or may not truly reflect your company and its potential. I think we could have more participants in the market if they didn't fear waking up one day to find their favorite stock down 25% because of an earnings miss by a penny.

I've been saying don't panic and I still think that's the smart action but we aren't forcing it this morning and will close out a couple more positions to raise cash.