In Butch Cassidy and the Sundance Kid actor Smother Martin stole the show (just as he did when he hooked up with Newman in "Cool Hand Luke") with his character Percy Garris. Percy is an old school American mining boss in Bolivia who hires the outlaws to escort payroll up and down the mountains. His straightforward candor leads to a telling conversation with Butch and the Kid that maybe we should have had with Ben Bernanke and his team when he took over at the Federal Reserve. While we get the minutes from FOMC gatherings right after, the actual transcript of the entire meeting isn't released to the public until five years later (so much for transparency).

We are now getting a more rounded view of what the thinking was during that period. As it turns out the Fed was clueless. We already know the Fed was flatfooted and slow to act, perhaps displaying a swagger that continues to be the greatest risk to our economy. The players back then are still in charge with Tim Geithner now at the Treasury but back then he was head of the New York Fed. We've heard no mea culpa from the key players, but instead a lot of self-congratulations and backslapping about things like the magical mystery toolbox.

Percy Garris: I'm not crazy; I'm just colorful.

Percy Garris: [singing] Oh don't you remember sweet Betsy from Pike / Crossed the high mountains with her lover Ike / Two yoke of oxen and big yellow dog / Called Shanghai rooster and one spotted hog / Hoodle-dang-hootie-i-doh, hoodle-dang-hootie-ay, hoodle-dang-hootie-i-doh, hoodle-dang-hootie-ay / Shanghai ran off and the cattle all died / last piece of bacon that morning was fried...
Butch Cassidy: [interrupting] I think they're in the trees up ahead.
Sundance Kid: In the bushes on the left.
Butch Cassidy: I'm telling you they're in the trees up ahead.
Sundance Kid: You take the trees, I'll take the bushes.
Percy Garris: Will you two beginners cut it out.
Butch Cassidy: Well, we're just trying to spot an ambush, Mr. Garris.
Percy Garris: Morons. I've got morons on my team. Nobody is going to rob us going down the mountain. We have got no money going down the mountain. When we have got the money, on the way back, then you can sweat.
Percy Garris: Can you hit anything?
Sundance Kid: Sometimes.
Percy Garris: That's what happens when you live 10 years alone in Bolivia: you get colorful...

Seconds later Percy is shot dead.

Ben Bernanke could very well be the reincarnation of Percy Garris who takes over the Fed in March 2006 and seems clueless, but so too his team.

Not Crazy Just Colorful

By the time Bernanke wakes up it's emergency time and the Fed has to begin a series of rate hikes that includes 10 increases over a one year period where even 75bps moves were needed. It was too little, too late, and cemented doom already baked in through a complacent Alan Greenspan. Interestingly, even after the September gathering Tim Geithner said the housing collapse would have no collateral damage on the overall economy. Something tells me that after that meeting Bernanke walked away muttering:

"Morons, I've got morons on my team."

Downgrading Europe...So what or Now what?

America saw its AAA bond rating slashed and it remained the world's top destination for those seeking safety because there is no other viable choice. In some ways it's like being able to take a pill that allows you to imbue on alcohol all night without getting drunk but at the same time it doesn't protect your liver. We are drinking ourselves silly with the false protection of plunging yields and high demand for our Treasuries as proof there isn't a price to pay for excessive debt and political dysfunction. In many ways escaping a harsher initial reaction was the worst thing that could have happened to America but for now those that should know better are knocking them back because it's still happy hour.

Since it wasn't a big deal that our debt rating was lowered then why would it be such a big deal for European countries to suffer the same fate. Outside of Germany nobody considered European debt to be pristine even when some still carried a coveted AAA rating. So, now among its officials there's a collective yawn, but that's exactly how this situation evolved.
Once again what should be a crystal clear call to reform now is being interpreted by the markets as a non-event. Then there's the notion this too shall be papered over. While it's something of a medical marvel to be able to drink a bottle of vodka and not get drunk (marvel in much of the world...lunch in Russia) it requires serious engineering to shut off certain parts of the brain.

It stands to reason that just as engineering continues to advance in other human endeavors, there will be creative ways to hide problems or sweep them away, that would have seen past countries and empires crumble into civil wars or wars with neighbors. Each day more and more marvels of the past seem quaint compared to newer breakthroughs made possible by greater understanding and manipulation of engineering.

Yesterday the European rescue fund EFSF saw its bond rating downgraded. No big deal to the markets yet it really is a big deal, because no matter what kind of engineering feat the papered-over solution to Europe will be its not going to be a modern day marvel unless you consider the world's tallest house of cards something to be in awe of. We sadly were reminded that even modern day ships can crash, mostly through human error, so it is that one day Europe will run aground.

Today's Session

Those calling for China's demise continue to be wrong, at least for now, as the GDP report of 8.9% growth beat consensus and points to a perfect soft landing. It would be very embarrassing if this communist nation navigates a landing that America has botched time after time. The good news is this is good news for Wall Street. Of course, China has been great news for luxury sellers of everything with recent reports saying it was tops for sales of Rolls-Royces and Lamborghinis. Moreover Gucci sales +39% 1H11, and Bottega Ventea +80%, while Prada will open 50 stores over the next three years.

Sure, Chinatown in New York is still the place to get the best knock-offs of luxury handbags, but it appears in China they want and have the cash to pay for the real thing. So, should we really be so myopically focused on the hard landing that may or may not happen there when it's already happened in America?

Earnings reports are mixed but mostly disappointing this morning with Citi missing by a mile, posting $0.38 against consensus of $0.52.

The Empire State region economic data came in better than expected and that probably sealed the deal for a higher start to the session, although, futures are drifting after banks look sluggish.