Stumble or a Fall?

Charles Payne
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Posted: Jan 15, 2014 12:01 AM
Stumble or a Fall?

It's been a rough start so far this year, which got even rougher yesterday, when the market took its cue from the news and from the retail sector. This news dovetailed perfectly with the flaccid jobs report. It's clear the market will not suffer losers gladly, as any company posting disappointing earnings results and/or guidance can expect their underlying shares to take a serious drubbing. But, what of the broader market, as the bias shifts to the downside? A ten percent correction from the all-time high would mean the Dow pulls back to 14,930.

I don't see that happening, but a pullback to the 50-day moving average (exponential) would land the index at 16,050- a good place for the market to take a stand.

In recent years, the economy has shown promise early only to see it fizzle out as the weather got warmer. Many thought that would be the challenge for the Fed; but what if the economy cuts to the chase early, stumblingly out of the gate and staying unimpressive? Momentum looked solid and while there is general consensus, December's jobs numbers are revised much higher, and now all of a sudden the economy is a question mark- again. For now, the Fed will stick to its tepid tapering, hoping the economy actually justifies their retreat. (Of course, there shouldn't have been any accommodation in the first place, but that wine is firmly bottled for now.)

Small Promises Still to be Broken

On and on we laughed like kids
At all the silly things we did
You made me promises, promises
Knowing I'd believe promises, promises
You knew you'd never keep


Promises, Promises
-Naked Eyes

For decades before the economic crisis, local communities were transformed as jobs were sent overseas and middle-class Americans worked harder and harder, but found it more difficult to get ahead.
-President Obama

Last week, President Obama rolled out his "Promise Zone" initiative, aimed at leveling the playing field- again. The program will begin in five neighborhoods in different cities, eventually being applied to a total of twenty. I don't know if this means there are only twenty neighborhoods enduring economic crisis and hardship, or by then the plan would be so successful, all neighborhoods would demand the same treatment. The fact is that these kinds of programs will always have limited success, because it's not about the opportunity, but the ability to take advantage of the opportunity.

The initiative itself is disingenuous, but even more so when you read components that will somehow take areas of blight and make them shiny hills of prosperity. Bike lanes in poor Los Angeles neighborhoods will only expedite gentrification, which means the poor have to find somewhere else to look. (On paper, you could point to stats that say incomes improved, but it won't be the incomes of the people living there now.) In Kentucky, there's the promise of "sustainable economic effort," whatever that means. I guess this stuff dovetails with cries over income inequality, and the need to remake the entire economic system.

The fact is it's a public relations gimmick that will be more successful in securing votes, than changing lives. In the grand scheme of things, it's silly and uninspiring. It's a promise that will not be kept, because it speaks to an outcome that cannot be controlled by government, only by the individual. I like the idea of promoting (STEM), the Science, Technology, Engineering, and Mathematics program, and promoting education, but not when it's a ruse for paying-off political cronies and bolstering unions.

The fact of the matter is the entire country should be viewed and promoted as a "promise zone." The problem is every single initiative in the last few years, has tried to surgically help certain groups of Americans, while excluding or even punishing other groups. Not only is this unfair and unpatriotic, but it's dumb. The country should unleash the economic and intellectual might of its citizens, without worrying how much it will enrich the individual, as much as being gratified that the entire country is being enriched.

I found this to be an interesting component of the initiative:

Cutting Taxes for Businesses: Finally, President Obama has proposed, and called on Congress to act, to cut taxes on hiring and investment in areas designated as Promise Zones - based upon the proven model of Empowerment Zones for tax credits - to attract businesses and create jobs.

So, cutting taxes on hiring and investments are a proven model that attracts businesses and creates jobs. Then why not apply that to the entire country, rather than to just a few "zones?"