Charles Payne's  Instablog

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.

Every now and then, The Economist magazine will write something that makes sense. In the current issue, there is a headline about the Tea Party's latest "victim" (Luger) and David Cameron's mid-term crisis, so I braced for the run of the mill attack on prosperity, independence and individual rights. But there it was, a piece on a page labeled Free Exchange-hope springs a trap titled "An absence of optimism plays a large role in keeping people trapped in poverty." My goodness, I could have written this for them from experience and study. The article discusses an MIT study of data from a microfinance program in West Bengal. The BRAC program made loans to locals stuck in deep poverty.

It was assumed the loans wouldn't be paid back.

These loans were in the form of a farm animal like a cow, or a couple of goats or chickens. There was a stipend as well to deter recipients from eating their assets. The folks were taught how to tend and manage their animals to produce a small income. Long after the program ended, the randomly selected recipients were still going very well:

> 15% eating more
> 20% earning more each month
> Skipping fewer meals
> Saving more money

The trick to this longer term success was A) these people worked 28% more hours B) their work goes beyond the assets they were given and C) researchers found mental health improvement. These were extremely poor people that are now seeking new opportunities. The very smart people at MIT came to the conclusion that the absence of hope kept these people in penury while BRAC injected a dose of optimism. I've argued the difference between hope and optimism is that the former relies on an outside force to save the day while the latter relies on the person in the mirror to make it happen. The article went on to discuss the fuel of self-belief.

I love that term...it makes for the perfect replacement for the notion we can only make it as a collective.

Of course, while there is an occasional positive surprise in liberal rags, the world of academia never fails to surprise in their efforts to strike the idea of accountability from human check list to a fulfilling life.

These MIT mavens could have saved a lot of time and money by just reading an old Chinese proverb: Give a man a fish and feed him for a day, teach him to fish and he eats every day.

My Brain Made Me Do it

I remember the skit Flip Wilson used to do on his eponymous named show where a female character named Geraldine's excuse for poor behavior was "the devil made me do it." As it turns out it's not the devil but it's also not you- not the conscience you. Now the experts say we are born a certain way and that's that. It's about the bad seed. More recently a piece from PNAS.org says that our genetic architecture plays a predetermined role in our political choices and economic decisions.

In other words, people that take risk are predetermined to do so and people that vote republican or democrat are also bending to the will of their DNA.

The bottom line is we can control our own destiny. The real truth is we do control our own destiny, even if it means we enter into that Faustian deal of letting government pay for all our stuff in return for our allegiance in voting booths and erasing chances of our children living a better life. The powers that be must promote fuel of self belief, even if it means they relinquish their princely relationship with common folk. I doubt politicians will do this from either side of the aisle (unless those evil Tea Party types collect more victims), so it's incumbent upon us to escape the grip of hope and embrace the freedom of optimism.

Mount Olympus

Of course, as an investor these days, it's harder and harder to embrace optimism as the market continues its version of the Bataan Death March. Interestingly, you can now toss out the charts and income statements, along with balance sheets, cash flow statements and Ouija boards. The market is taking its cue solely in response to worries about Europe and impatience about more money printing operations on both sides of the Atlantic. In the meantime, the US dollar gets stronger and the world continues to crowd into American treasuries. Sadly, a strong dollar hurts the stock market, which is counterintuitive, but a new fact of life. The reason for this is the fact that we have more faith in international economies (outside of Europe) than domestic growth.

The dollar in the meantime has no competition.

Individual names are more likely to move with the broad market than on great individual developments and potential. Then there are the market Gods- those hedge fund managers that are on television more than Ryan Seacrest. Perhaps the most influential these days is David Einhorn, whose observances on stocks have the power to move prices the way it was once thought Zeus could move the winds. Late yesterday, he didn't mention being short Herbalife (HLF) and the stock soared, but he said Dick's Sporting Goods (DKS) will ultimately lose against Amazon and investors forgot about that amazing earnings and outlook from the retailer just a day earlier.

As frustrating as this is for investors (unless you bought NUS or HLF yesterday), imagine being the CEO of a company Einhorn or other hedge fund gods don't like (see MLM). To a lesser extent Paulson, Soros, Lambert and Icahn have the same power, although their modus-operandi is more about shakedowns that actual trading.

I will say that I do agree with Steve Mandel of the Lone Pine fund who observed at the Ira Sohn conference yesterday's Mount Olympus that saw a parade of hedge fund guys pontificate on the subjects ranging from Marx to the Economy. Mandel spoke of fixed income having no value because of inflation. He is spot on but investors are motivated more out of fear than fundamentals. I know these guys are good, but I don't think they are so good stocks should move in double digit clips on their whims and words. Heck, they are grappling in many cases and relying on quant strategies, insider information and other edges and seem to be going for the quick buck just like everyone else.

I'd rather take my chances on self-belief based on good old fashion work that gets muffled from time to time in these hectic markets but never goes out of style or lets you down for long.

Today's Session

The Euro continues to crack on confusion, anxiety and impatience with the process that has newer rules and fewer scruples each day. At least the market isn't acting like it will be higher today, instead it's looking lower on a complete lack of enthusiasm. Investors continue to seek a catalyst beyond corporate earnings and economic data. On that note initial jobless claims of 370,000 are in line but nothing to cheer. I'm looking for the session that begins lower and ends strong so let's keep our powder dry at the moment.