Introduction: Charles V. Payne is a Fox business analyst and Chief Executive Officer and Principal Analyst of Wall Street Strategies, Inc. (WSSI), which he founded in 1991. Today, WSSI provides information to over 30,000 subscribers, in more than 60 countries as well as several of the largest bank/brokerage firms. Charles Payne oversees a team of stock analysts that cover specific industry groups, in addition to monitoring the entire market and individual sectors on his own. He began his successful career with EF Hutton in 1985 and today is a regular contributor to the Fox Business and Fox News Networks. In addition, he continually provides opinions on the market to scores of news organizations such as Reuters, Wall Street Journal, and the New York Times and has been the keynote speaker at many investment conferences worldwide. His book, "Act Fast, Be Smart and Get Rich" debuted in April 2007. Charles attended Minot State College and Central Texas College during his time in the Air Force and majored in criminal justice.
Daily Bell: Thanks for spending some time with us.
Charles Payne: Fire away!
Daily Bell: Give our readers some background. Where did you grow up and go to school?
Charles Payne: I'm an Army brat so I lived all over the world including Japan and Germany. I went to a lot of schools. My high school is the only school I attended more than one year. It was in New York- the High School of Art & Design. I went to college at Minot State in North Dakota, Central Texas College and Baruch.
Daily Bell: Tell us about your military service.
Charles Payne: My military service was mixed. When I got to my first base, the dorm had about seven confederate flags covering windows, which scared and angered me at the same time. But I made a lot of friends including guys with those flags. Still, I didn't appreciate my military experience until later in life, especially after I started my own business. It was an honor to be in the military and I made great friends.
Daily Bell: How did you get involved with Fox? Give our readers a sense of your work there. You're a contributor.
Charles Payne: I began with Fox after Neil Cavuto moved over from CNBC. Initially, I thought he was crazy leaving a great job for a high-risk venture. But he's proved he knew what he was doing, and he's provided me with great support. After a while, I became a contributor to the Fox News Channel and I've been involved with the Fox Business Network from 'day one.' I'm also on Varney & Co each morning on FBN and I love it. The show has energy and passion and I have great input. I'm also getting opportunities to host shows as an anchor and that is a thrill.
Daily Bell: What is Neil Cavuto like? Any perspectives on the other Fox "talent?" Anyone especially impress you?
Charles Payne: Neil is the best. It's as simple as that. He is honest and loyal and smart. His staff is the best – they are attentive and want to be the best. The people at Fox have a lot of things in common, including passion. They really care about their viewers. I'm not close to everyone, but I admire all of them. Glenn Beck is very interesting in the sense that according to the mass media as a black man I'm supposed to hate him, and yet I like him a lot. I've never heard him say anything racist or out-of-bounds. I don't agree with everything he says, but he works hard and is on the money more often than not.
Daily Bell: Is Fox going to be a dominant player in business news? Where does it stand now? Is Fox committed for the long haul?
Charles Payne: I can't speak for Rupert Murdoch, but I think Fox is in business television for the long haul. I think it will be a dominant player. You watch Varney and then watch the rest and decide for yourself. Sure, they have underdog status, but look at the determination. I hope to play a larger role in the future.
Daily Bell: Give us some background on your financial history. What was it like working at EF Hutton? Did you ever feel at a disadvantage as a person of African-American descent?
Charles Payne: When you walk into any firm on Wall Street, even in 2010, a black person is going to stick out like a sore thumb – so there will be discomfort. At EF Hutton there were the cliches of ethnic tension, as well … German-Americans versus Italian-Americans. I ended up being more of a bystander. I think in business, the issue of race becomes more onerous as one climbs the ladder. That's where all the "isms" are at work from racism, to nepotism to cronyism to elitism etc. People were nice to me, but I didn't take my dreams and goals seriously. That was a problem. I never wanted to be patted on the head and I never wanted special treatment, just a real chance.
Daily Bell: How about some tougher prognostications. Is Wall Street – as we know it – dying? Are the big wirehouses dying as well? Is the Merrill model over?
Charles Payne: I don't think Wall Street is dying but there are hopes for its death from the media. There's an interesting article in the recent Wired that comes to mind. Ironically, Washington DC is making it more difficult as well. The SEC beat up smaller firms and made it easier for a handful of giants to rule. Wall Street is going to be okay I hope. If not, the entire country is in trouble.
Daily Bell: Yes we've mentioned that as well. The term of art within the industry is actually "regulatory capture." How did you come to form your own company Wall Street Strategies? That must have taken a lot of courage. Or did you see independent firms as the coming wave?
Charles Payne: I was flat broke, but knew I could not get to the top of the heap in firms where I had no contacts and lack of a certain pedigree. I always loved research and always wanted my own business. So I just did it! I had nothing to lose. I didn't see a wave like what we have today, but I knew the system was bogus. I knew firms didn't care about investors – only getting more and more money under management. Ironically I sold my work to brokers at first because many of them hated their firm's research (or lack thereof) and wanted something genuine and real.
Daily Bell: Did you foresee the PC revolution and the ability to do what you do on your own? Are you directly affiliated with an independent broker dealer or you are entirely independent? You must have a clearing affiliation?
Charles Payne: I didn't see the PC revolution per se but was in the midst of it and felt its power at liberating individual investors. The power and independence was remarkable, but now people are licking their wounds and losing faith. We are negotiating several research deals with independent broker-dealers, but that would be a relationship to supply ideas and guidance. We remain entirely independent.
Daily Bell: Tell us about your book, "Be Smart, Act Fast, Get Rich," published in 2007.
Charles Payne: I tried to write the book in a way that would take away everyone's fear of the market. I think it's so sad the masses are afraid to buy $1,000 of Nike stock but will buy $1,000 of Nike stuff that at some point will be obsolete. They say "I don't want to lose money." Also, the market has always been shrouded in mystery but it's pretty simple. Sure, it's not always logical and there is manipulation from time to time but it's a great way to make money because buying and putting money under the mattress isn't going to be enough. I was at the airport last weekend and a guy yelled out my name. When I responded, he said he read my book. I asked how he liked it. He said he loved the book, that it was great. I could have flown home without the plane.
Daily Bell: Stock picking is the most difficult way to make a living on Wall Street. The market goes up and down and the only certainty is uncertainty. Why were you attracted to it? How have you accomplished it? Also, what do you think of buy-and-hold?
Charles Payne: I love competition and I love to win. I'm a worker. I went ten years without a vacation and I work seven days a week. There is an amazing thrill when you make people money. I take an approach that incorporates fundamental, technical and behavioral analysis. I think buy-and-hold is dead for now but not forever. The most important thing is to be a student of the market, always.
Daily Bell: What do you think of Austrian free-market analysts who maintain that business cycles are getting more extreme – and that it is these cycles, not intrinsic equity value, that drive the market generally in the US and abroad?
Charles Payne: I think business cycles are getting more extreme in part to government intrusion. Still I think they are real but can be detached from the stock market. Let's not forget the market was at an all-time high a month before the recession began. I still think the market looks ahead but there can be periods when business cycles and equities are not correlated.
Daily Bell: Are markets becoming more centralized? Will we end up with one global equity market?
Charles Payne: I don't think we will end up with a single market. It would ruin the world, as competition is the thing that keeps man evolving. I think a lot of political leaders including President Obama dream of a one-world society but recent struggles with EU countries prove it's a pipedream. When the chips are down, people fall back into the foxhole with their own flag flying above it. Then it's every person (country) for himself.
Daily Bell: Are the best companies in America now or overseas?
Charles Payne: Great question, as I think America is for sale. There are great companies all over the world. I like young companies with energy and determination and many of them are outside America in places like Russia, Brazil, India, China, Vietnam, and all four corners of the globe.
Daily Bell: Describe your basic approach. Is it bottom up? Top down? What do you take into account? Take us through an analysis.
Charles Payne: Top down, although peer-to-peer analysis plays a role in decision making. I'm looking for companies taking market share, growing the top line through demand and pricing power, expanding margins and executing. I like hot industries but also industries turning the corner.
Daily Bell: Give us a sense of your success over the past decades. How have you survived the terrific ups and downs of the market? Where does the market go from here?
Charles Payne: I've handled the years well, although my business model has put us on the edge of going out of business a couple of times – as we are pure research with no investment banking or order execution. Also, when dealing with individual investors, it's hard to get them to go short in down periods. I think the market goes up but threats like government interference and inflation loom large.
Daily Bell: Are you worried about the global financial turmoil? Is it ending?
Charles Payne: I'm always worried about something, but I'm naturally an optimist too. There will always be some global turmoil.
Daily Bell: What will happen to the EU? Will the European problems eventually die down?
Charles Payne: The EU will survive, but the euro might not. Still, the EU has to wake up to reality. I think they are going to raise retirement ages, and women are going to enter the work force in even greater numbers. But they need massive integration because the birth rate is low, and that means people will have different looks and religion. There are huge problems looming and the golden age of Europe is over, maybe never to return.
Daily Bell: Are currencies headed toward an inevitable consolidation similar to what took place in Europe? Will the dollar combine with other currencies such as the Canadian loonie and Mexican peso?
Charles Payne: I answer this the same as I answered the one world question – no consolidation.
Daily Bell: How have computers changed what you do, and how the investor makes decisions?
Charles Payne: Computers have made the job easier but the work longer, as there is so much stuff to use and read. I do not let computers make investment decisions however.
Daily Bell: Is the Internet a "game changer?" And how so?
Charles Payne: The Internet has leveled the playing field and democratized investing.
Daily Bell: What is your outlook for stocks? What sectors are you concentrating on?
Charles Payne: These sectors change, but … technology, energy, agriculture are some. I look at all industries for opportunities as there are always winners and losers in every space.
Daily Bell: What are some of your favorite picks and why?
Charles Payne: POT because there are an extra 75 million people on the planet each year and they all have to eat. MTL because Russia can grow big time if they keep Putin under wraps and IBM because it's a great company that has survived the test of time. There are many other names I like.
Daily Bell: Do you have an opinion on gold and silver? Will they enjoy another good decade?
Charles Payne: Gold/silver is a buy/hold. I don't think Bernanke is going to catch inflation in time and it's going to be a problem.
Daily Bell: Do you have any favorite books or articles you would like to recommend to readers?
Charles Payne: Against the Gods, On Ugly, Bible, Random Walk Down Wall Street and Happiness (a history).
Daily Bell: Interesting. Thank you for your time.
Charles Payne: You're welcome.
Daily Bell: On behalf of all of our readers we thank you for sharing your views with us – and for your important work and great books.
Charles Payne in this interview and in person (certainly on TV) comes across as someone both affable and acute – an unusual combination. Yet there is more to Charles, even – we are willing to wager – than what he is willing to commit to paper (though we believe readers will find the above interview an interesting and fulfilling one). What is undoubtedly true, and emerges most clearly from his statements, is that he makes a living doing something that is terrifically difficult and that, in our opinion, will only grow more so.
There is nothing wrong in the least with trying to figure out what companies might make one rich. That's at least as American as apple pie. But as Charles Payne himself admits, business cycles are elongating and deepening more than ever because of government interference. The resultant booms and busts make the task of those who want to find good companies evermore difficult.
From our point of view – and this is in fact a foundational principal of The Daily Bell – it is government push-back and power elite memes that make finding and investing in good companies continually more troublesome. You may for instance like Microsoft but if the European Union decides to sue the firm because it will not unbundle its browser, then some of Microsoft's allure is no doubt dissipated. The firm will doubtless become less attractive in direct proportion to the amount of pressure the EU puts it under.
On the other hand, the EU itself is under heavy attack itself these days. We're not predicting it will disappear entirely, but there is certainly the possibility that the union unravels or at least becomes far less influential than it is currently – especially if Greece and some bigger countries begin to default.
And what then? What of our fierce attack on Microsoft? We're in whiplash territory here, dear reader. It is always difficult to ascertain what companies may be the most successful, but now we can see that Western governments have grown so large and intrusive that they have become a factor at least as important as any other, and maybe moreso. There is market risk, country risk – and now there is, generally, government-intrusiveness risk. (Should it be termed "regulatory" risk?)
Here's an example: an engineer with access to some capital decides to build a next-generation super-car. As he begins, however, and performs his due diligence, he realizes it's not enough create a fast-performing auto with plenty of curves and down-force. No, today's breed of super-car and hyper-car are increasingly being built with several kinds of drive trains including electric options and run on all sorts of fuel, not merely oil-based energy. The considerations are manifold and go far beyond the product itself.
Is this a good trend? Possibly. But one gets the distinct feeling that the developers are responding to government insistence on "green" development more than they are to public demand. What of bigger car companies like GM? Such companies seem to have jumped into green technologies based on the idea that global warming is a carbon-based problem that can only be alleviated by removing the offensive gas from industry. But what if global warming is not man made and not nearly as bad as it has been made out to be? And what if removing man-made carbon from the air won't make a bit of difference anyway?
In America, in particular, this is not a hypothetical consideration but a conundrum that looms large. The opposition party has built a good deal of its opposition to the current administration based on confronting global warming "lies." Were the Republicans to regain power (as they well may) it is perfectly possible that global-warming and concerns over man-made carbon pollution will become less of a priority. If people are not clamoring for low-carbon, green vehicles and government itself is not prepared to insist on them generally, where does that leave GM? You see the difficulty? Big industry has been broken to the wheel of governance, but in democracies that sort of trend can produce instability and even jeopardize industrial success.
Such corollary considerations must drive stock-pickers mad. For this reason, we emphasize to our readers that understanding global elite promotions has never been more important than today. In the 20th century these promotions were almost invariably triumphant. Centralization of authority and the triumph of big, globalized companies over small, entrepreneurial ones, was nearly a given.
One could spot a trend and hop on board in the confidence that if one had picked well and wisely, the entire paraphernalia of the power-elite would be brought to bear on behalf of the opportunity and it would likely make a success in the West anyway if not the world over. (There were exceptions of course such as nuclear power, but on the whole the process worked well.)
The same could generally be said for the stock market itself. American stock markets especially were fairly predictable. While fiat money issuance caused collapses and market swoons, the mechanism itself remained reliable (though timing has always been an issue). Eventually the "market" would bounce back and another boom would come along lifting most if not all boats. Yes, there was at least an outside chance that, if one played the game with enough determination, one could make the "system" work.
Today, as we've indicated, the "game" has been infinitely complicated by the intrusion of the Internet and the increasing lack of belief in the sociopolitical and economic structure that the power elite has erected over the past 100 years or more. Gone is the certitude that the system evolved as it has due to market forces – and could have ended up no other way. Gone are the certainties that even the most well-publicized and scientifically accurate trends such as global warming or peak oil are anymore than a promotion.
It is indeed a conundrum. That Charles Payne has surmounted all this and more is a testimony to his determination and his business savvy. We have no doubt that his firm will continue to thrive for he is obviously a skilled navigator of stormy seas. But he has certainly chosen a tough profession and the next few years may tax the navigational skills of even the savviest captain. Good luck, Mr. Payne! Thanks for this insightful and significant interview.