Time To Unleash The Millionaires

March 10, 2010  |  

By Charles Payne, CEO & Principal Analyst

As much as success has been dogged and treated with disdain there is no doubt in my mind that the overwhelming majority of rich people have a different sort of will and determination than the masses. I think that it’s crazy when the crowd that runs home at 5:00:01 would have contempt for those that continue to work deep into the evening. According to the author of “The Millionaire Next Door”, 80% of wealth is first-generation affluent. The idea that every rich person in this country was born with a silver spoon is a myth driven by the envy of those that watch from afar in their Lazy Boy. I mention this because this nation needs its citizens that are currently wealthy and those that have the skill, guts, and luck to join their ranks to be able to operate without constraints. Those constraints range from harsh rhetoric by politicians and the tidal wave of new taxes, fees, and regulations on the horizon.

Now is the time to unleash our entrepreneurs and small businesses, and also to encourage big businesses to reverse job cuts and money-hoarding as they prepare to battle on the global stage. According to Chicago based marketing and research firm the Spectrom Group, U.S. millionaires increased in number by 16% to 7.8 million; households with net worth of $5.0 million or more increased by 17% to 980,000 in 2009. The thing is that these rebounds were powered by the bounce back in the stock market. Just about everyone I know that abhors the rich doesn’t “play” the stock market. Of course, they like to shop. That image of a security guard being trampled to death at a Wal-Mart (WMT) on Black Friday a couple of years ago proves trickle down is the only way wealth can really spread through our economy. When President Obama talks about a trickle up economy we are already there. The masses spend their money and send it to the top of the economic pyramid.

NFIB Observations

Yesterday, the National Federation of Independent Businesses released results from its latest survey. Most readings slipped month over month.

* Optimism fell 1.3 to 88; the low last March was 81.0 and the record low was 80.1 posted in 1980.
* Will increase employment: -1%.
* Will increase inventory: -7%
* Earnings expectations were less negative but abysmal still

We need small businesses to save the day, but that can’t happen until the coast is clear. The battle against business has to cease. I’m not sure why the White House doesn’t listen to any of the major organizations representing small businesses and yet claim to be friends to small businesses. Perhaps it’s because these organizations have been critical of policy proposals, but that shouldn’t matter. In fact, skepticism should be welcomed and there should be a willingness to learn from those that are in the trenches. NFIB on healthcare reform: http://www.nfib.com/tabid/565/Default.aspx?cmsid=50819.

The government really can’t create jobs unless they raise taxes on the shrinking pool of taxpayers, thereby negating any positive impact. The fact is that I think the government should abandon its ambitions to create jobs and instead find a way to extend an olive branch to the people that know how to create real jobs that generate economic prosperity. The government needs to fertilize the environment so businesses know they will not be railroaded and demonized. There aren’t many people out there that pay their bills, pay for their children’s education, and put cash away for retirement that don’t do this as part of riding the coattails of the wealthy.

The Market

It was summer like weather in New York yesterday, and summer like action in the market. Volume had already been anemic like a lazy, hazy week in late August. The bias is to the upside and that’s the good news. But, we are reminded of trepidation bubbling not so deep beneath the surface. Less visible is the angst of those that have missed the entire party. Yesterday was the anniversary of the market bottom and today is the anniversary of the new bull market. I don’t like to use these terms, by the way, bull and bear… who cares? It is only one more thing to fret about. You know that even though the market is significantly higher from the lows this is still the least celebrated rebound I’ve ever seen. The rally that began in 2003 was largely ignored by the media and was only mentioned by politicians as evidence the rich were detached from Main Street reality.

Yesterday, 1,072 stocks closed at their 52-week high or within 2% of that high water mark. Most are significantly lower than their all-time highs. By the way, there were only 20 new lows. In a way this only exacerbates the dilemma for fence-sitters. Keep in mind that bull markets don’t fizzle out quickly. I haven’t done in-depth research, but will; in the meantime Hays Advisory wrote a piece saying that the average bull market is 29 months. Also, Sam Stovall has published work stating that the average bull market is 3.7 years long with a median of 3.2 years. He actually breaks down bull market moves for each year: 1st year is 38%, 2nd year is 12%, 3rd year is 3%, and the 4th year is 14%.

We’ll see what happens this time around, but in the meantime we are focused on finding companies taking market share, expanding margins, and growing the top line organically. For the broad market, the next leg up could be powerful. The S&P 500 is holding above its 50-day moving average and clearing 1,200.0 would be significant, and without a doubt lure many of those fence-sitters into the game. Keep in mind that according to ICI in the week of February 24, $8.0 billion flowed into bond funds while Americans only invested $151.0 million in equities

Charles Payne is the CEO and Principal Analyst of Wall Street Strategies . This post was republished from his company’s column, WStreet Market Commentary.

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