Charles Payne's  Instablog

I was on the board of a Charter school in the Bronx and volunteered to make the school's brochure, which would serve the dual purpose of appealing to the neighborhood and potential donors. I was very proud of the piece and asked other members of the board for feedback. One member, a professor at a New York University made an observation about a bunch of quotes on education. She asked if I could put in more quotes by minorities. She went on to suggest Nelson Mandela and as she was making her point it hit me-in his country Mandela is the majority. Did this term shift from a numeric meaning to something else?

I thought about that scene last week when it was announced that of all children one year old and younger, 50.4% are minorities.

While there are several narratives about this, I hardly heard anyone talk about the economic implications. The fact is the news should have sparked calls to unleash greatness among these would-be minorities. Instead, the powers that be still kind of treat this situation like Ralph Ellison's "The Invisible Man" published in 1952. The challenges and implications to the nation can be swept under the rug but are anything but invisible. Yet both political parties treat the situation with kid-gloves and apathy. On one hand is the notion of giving hand outs and placating, on the other hand is the notion of complete indifference.

In both cases, there must be greater demand for excellence.

Of course when the left says requirements to have identification are racist, we are dealing with the highest form of coddling imaginable. It's not unlike trying to make Ebonics an official language rather than insisting every American master English (at least our version of English). On the flip side, when Republicans argue against spending $1.5 billion for summer jobs and in the same breathe explain why trillions of dollars have to be spent to promote democracy and capitalism in foreign nations. It's time to drop the politically correct premise and understand it's time to demand more from everyone.

It's about more than money, especially welfare, but laptops in schools would be great. On that note, I would block certain websites because I don't think it's fair or smart to take taxpayer money to give people access to www.youtube.com all day. There has to be more accountability from parents and teachers and the students themselves. Instill pride, and remove woe-is-me by focusing on the past, but mostly on the future. Promote patriotism rather than anti-American programs and attitudes. And demand people do great and not let anyone give a half hearted effort because their great-great-great grandfather was a slave or their mother died while the family entered the nation.

There are a lot of narratives in the population story but there is also a clarion call that too many are afraid to scream or hear. It's time for government to stop promoting food stamps and start promoting business, engineering, and IT degrees. And it's time for so-called civil rights organizations to stop promoting victimization and look to the great promise of America. Summer jobs are a drop in the bucket against a backdrop of stupid spending-it can be a legit investment if coupled with education on how to handle money and a sense the program isn't owed to anyone but a great idea to help everyone.

Part of the decline of Western Europe and Japan is the fact their population is old and birth rates are low. It means they will depend on immigrants that in some cases refuse to assimilate or hold grudges and are still treated like second class citizens (see Japan). I checked the census for New Amsterdam and the thing is America has worked as a melting pot from the beginning, although there have been very painful periods.

It matters because the majority will still be the majority and will have to carry the heavy load of helping America remain the number one nation in the world.

It's time for everyone to step up to the plate and live up to individual potential because that's how the nation gets stronger and stays number one. This is a huge economic story.

Yesterday's Session

At least we got a dead cat bounce, and take my word for it, going into the weekend that wasn't a guarantee. Moreover, to see the market up as the Facebook meltdown continued was even more impressive. Yesterday was the best day of the year for the NASDAQ, led by Apple and other fan favorites that struggled in the vacuum of the Facebook hype. But a dead cat bounce is easy. The market needs to follow through today with something positive. By the way, I do find it interesting that while we are seeking growth through external demand (sort of ceding there is no clue how to spark domestic demand), America's two largest rivals are looking to stoke their domestic economies.

China announced it would provide some stimulus and focus on its domestic economy and Germany is ready to dance with inflation in its bid to reward its workers.

In Germany, the largest and most powerful union won a 4.3% wage increase over the next 13 months, the biggest increase since 1992. Coupled with a public sector wage increase of 6.3% and cabinet member hike of 5.7%, Germans are being rewarded for success. I'm not an advocate for dishing out goodies to union workers as a perk of the ruling class, but I think in Germany it goes beyond politics. The fact is in America we are pushing policies that reward people for not working while punishing people that attain a certain degree of success. Our stimulus plan was a payoff to unions. Now we need a payoff to the rest of the nation.

In order to make that happen, we must unlock the potential of the market.

And He who loseth wealth, loseth much
He who loseth a friend, loseth more
He who loseth his spirits, loseth all
Spanish Proverb

The Dow closed down Friday for the 12th time in 13 sessions, the first time that's happened since October 8, 1974. Obviously, it's a red flag and a negative sign. I think it's more an indictment of lack of leadership and its potential impact on the economy than current economic circumstances. The dollar continues to surge against the inept Euro, and the more the dollar moves up, the more money leaps out of stocks and other assets into US treasuries or the sidelines-both very crowded places and both losers to inflation. Of course there is an argument that deflation is back in play, which I don't believe, but pessimism could make deflation a self-fulfilling event.

One thing is for sure, the market is drowning in a sea of doubt. There are a bunch of leaders clinging to the idea of redistribution of wealth, more debt, and less discipline.

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If this is the end of the road, then it must be time to split the spoils. This has been part of the administration's goal from day one with redistribution policies that would be anything but mutually beneficial. Those who buy into the idea that taking the results of one person's hard work, sweat, and dreams and giving it to someone else that had nothing to do with the creation of that wealth have a misguided notion of how symbiotic relationships are supposed to work. In fact, it's not ideal, it's not fair, and it's not American.

There is a huge difference between helping unfortunate neighbors and simply taking money from one person that earned it and handing it to someone else in the notion of leveling the playing field.

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Today's Session

Facebook is an anchor and is mitigating news out of China that might have sent our shares soaring. Instead the early strength in futures trading is fading, so we aren't going to force the issue. There is also a nice deal this morning, with ETN buying CBE for a hefty premium, but again I'm not sure it's going to be enough to offset the FB fiasco. Add to the mix the G8 and NATO summit were just as big of duds as the world's most exciting IPO.

I think the best thing we can hope for is no more big events by people with ulterior motives.

You know I can understand why primitive societies once worshiped and feared active volcanoes, but we are being told to pay for sidewalks over and over again and to sacrifice our paychecks in the future as tribute.

Legitimate red flags from the market yesterday came from all angles.

Transportation stocks got crushed with names like Kansas City Southern (KSU) and Union Pacific (UNP) down big with tons of volume. The Dow Jones Transportation Average really took it on the chin, off 3.18% for the session. The index is nearing a very pivotal support point.

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Apple (AAPL) is collapsing when it could have become a safe haven; it's simply entered into a freefall.

Tech stocks in general are getting hammered even ahead of the much-hyped Facebook initial public offering. It is really remarkable that FB has no coattails whatsoever.

Advanced Auto Parts (AAP) issued a warning and took down names that have firing on all cylinders for a few years. In fact, AAP, Auto Zone (AZO), and O'Reilly (ORLY) have been perfect recession investments. Man it would be great if people were not going to those locations because they were buying new cars, but that may not be the case. Furthermore, high-end retailers Macy's (M), Nordstrom's (JWN), Saks (SKS), and Abercrombie and Fitch (ANF) have been crushed, but yesterday one of the top dollar stores took a kidney punch on earnings.

Then there's the record low yield on 10 year treasuries. That is the biggest red flag concerning confidence among deep-pocketed investors. The yield of 1.7% doesn't even keep up with inflation and yet billions continue to pour in. It's a statement that says less about the greatness of America and more about the weakness in the rest of the world. The dollar is soaring because the Euro is the Euro. But you must know that when they get a chance, and when there's a legitimate alternative the dollar and treasuries, investors will dump them with both hands.

For now, the influx is a reminder of how great we have been in the past and how great we could be in the future. But to accept such a paltry return speaks volumes about uncertainty.

Having said all of these things, good stocks are being taken to the woodshed with bad stocks as if someone yelled "fire" in a crowded theater. This is what makes being an investor challenging. The swoons are seen as a reason to take losses rather an opportunity to become owner of great businesses on the cheap. The problem is the market is hyper-sensitive, and panic is beginning to creep into the mix. This is a tough period, and I'm concerned. I'm more worried, about investors making mistakes they will regret a month, six months, or even a year from now.

The administration scares me a lot more than corporate America. This week we have witnessed the game plan expedited to the point where the money grab moves to lower income brackets. I felt a second term would see an aggressive attempt to redefine rich below a triple-digit annual income. In Maryland, that tax hike on people earning $100,000 will go to pay for union raises of 2%-an incentive to get the vote out even as schools remain closed, and the state will surely lose lots of talented folks. That's the price to be paid as out of control spending means higher taxes, and to be honest, there aren't enough rich people, really rich or $100,000 rich, to go around.

Another example that many people missed is the proposal to go after Eduardo Saverin of Facebook who gave up his citizenship in part to avoid paying more than $60.0 million in taxes. While I think these capital gains taxes are egregious, I don't like the wham-bam-thank-you ma'am style of Saverin who originally hails from Brazil. But for me, the real story is hidden in the fine print. This proposal is looking to punish expatriates that earned more than $148,000 over the years. That is not rich, although the effort to target this income bracket is rich in hubris.

Schumer and Casey's proposal is called the Ex-PATRIOT Act ("Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy" Act).

Under the proposal, any expatriate with either a net worth of $2 million or an average income tax liability of at least $148,000 over the last five years will be presumed to have renounced their citizenship for tax avoidance purposes.

The individual will then have an opportunity to demonstrate otherwise to the IRS by meeting specific IRS requirements. If the individual has a legitimate reason for renouncing his or her citizenship, no penalties will apply. But if the IRS finds that an individual gave up their passport for substantial tax purposes, then it will prospectively impose a tax on the individual's future investment gains, no matter where he or she resides. This would eliminate any tax benefit and financial incentive from renouncing one's citizenship. The rate of this capital gains tax will be 30 percent, in keeping with the rate that is already applied on non-resident aliens for dividends and interest earnings.

So, while the economy struggles, the war on success continues to seek more casualties. By the way, this is the main reason the economy is struggling. Yes, I'm worried about the market and the economy but I think it's a mistake to sell great companies in a huff. In fact my greatest fear is too many investors giving in to their fears - founded and unfounded.

When will the coast be completely clear? I'm not sure, but don't put your head in the sand and don't become too discouraged.

By the way, even though AAP got hit, AZO got an upgrade this morning at Credit Suisse and even though the rails got smacked KSU (my favorite) got an upgrade at Oppenheimer. These are smart upgrades, which isn't always the case on the Street which is often very late. Our economy isn't dead nor has it peaked; only faith in those that could and have attempted to derail and loot success. Again, a great reason for concern, but I don't think they'll win in the long run. As for the spark look for action real soon out of Europe with the ECB taking action to prop banks. Greece is belligerent and is trying to pull a fast one-not only not paying money they've borrowed and squandered but demanding more.

There could be big (positive) news over the weekend. In the meantime it's all about Facebook today, and I don't know how to play it other than to say it might be best to watch from afar unless you have the ability to watch and trade all session long.